Interest cannot be levied on delayed IGST payments absent specific statutory authority.

Gujarat Craft Industries Limited had imported goods under the Advance Authorisation Scheme and availed exemption from IGST under Notification No. 79/2017-Cus dated 13 October 2017.

It later surrendered the exemption and paid IGST of ₹55,41,245, together with interest of ₹30,62,310 on nine bills.

By applications dated 12 February 2024 under Section 27(1)(a) of the Customs Act, 1962, it sought refund of the interest paid for the period July 2017 to March 2020.

The refund claims were rejected by the respective Commissioners of Customs.

The Tribunal noted conflicting decisions in Mayur Unicoaters and Chiripal Poly Films and a pending Larger Bench reference in Meghmani Organics.

In the meantime, the Bombay High Court had decided A.R. Sulphonates Private Limited v. Union of India on the same interest issue.

Whether interest was payable on delayed payment of IGST for the relevant pre-amendment period, when the Tribunal noted that no specific statutory provision for such interest applied.

Whether the two-year limitation period for refund claims under Section 27 applied to the claimed refund of interest, or whether the payment was in the nature of a deposit.

Section 27(1)(a) of the Customs Act, 1962, provides for claims for refund, while the Tribunal treated the two-year limitation as inapplicable where the amount sought to be returned is a deposit rather than duty.

For the relevant pre-amendment period, the Tribunal applied the Bombay High Court’s ruling in A.R. Sulphonates Private Limited v. Union of India, which held that interest could not be levied in the absence of a specific statutory provision.

It also relied on UPL Limited v. Union of India, 2022 (379) E.L.T. 183 (Guj.), on the distinction between a refund of duty and return of a deposit, and noted that the view in UPL had been upheld in G.B. Engineering v. Union of India, 2025 (10) TMI 1027.

The Tribunal considered that although a Larger Bench reference had been made to resolve conflicting Tribunal decisions, the Bombay High Court’s subsequent decision in A.R. Sulphonates addressed the same legal question and was binding as the ruling of a higher court.

The Larger Bench had heard the reference, but its decision remained pending; the Tribunal therefore followed the High Court rather than await the Larger Bench ruling.

As the disputed interest related to a period before the relevant legislative amendment and there was then no specific statutory provision authorising it, the Tribunal found the interest unsustainable.

It further held that the claim was for return of a deposit, not refund of duty, so the two-year limitation did not bar it.

It allowed both appeals with consequential relief.