1. Import of goods — Dispute over tariff value under Section 14(1) and 14(2) of Customs Act — Bank guarantees furnished as security — Subsequent encashment by revenue. (Para 4 , 5 , 6 , 10 , 12 )
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2025 Supreme(SC) 872
SUPREME COURT OF INDIA
Abhay S. Oka, Ujjal Bhuyan, JJ.
M/s Patanjali Foods Limited (Formerly Known As M/S Ruchi Soya Industries Ltd.) – Appellant
Versus
Union Of India & Ors. – Respondents
Civil Appeal Nos. 3833-3835 of 2025 (Arising Out of SLP(C) Nos. 22572-22574 of 2016)
Decided On : 19-05-2025
Advocates appeared:
For the Appellant(s) : Mr. Balbir Singh, Sr.Adv. Mr. Rajesh Rawal, Adv. Mr. Karan Sachdev, Adv. Mr. Ashwani Kumar, AOR
For the Respondent(s): Ms. Nisha Bagchi, Sr. Adv. Mr. Nalin Kohli, Sr. Adv. Mr. Sarthak karol, Adv. Mr. Abhishek Singh, Adv. Mr. Pratyush Srivastava, Adv. Mr. B. Krishna Prasad, AOR
For the Appellant(s) : Mr. Balbir Singh, Sr.Adv. Mr. Rajesh Rawal, Adv. Mr. Karan Sachdev, Adv. Mr. Ashwani Kumar, AOR
For the Respondent(s): Ms. Nisha Bagchi, Sr. Adv. Mr. Nalin Kohli, Sr. Adv. Mr. Sarthak karol, Adv. Mr. Abhishek Singh, Adv. Mr. Pratyush Srivastava, Adv. Mr. B. Krishna Prasad, AOR
The encashment of bank guarantees does not equate to payment of customs duty; thus, the doctrine of unjust enrichment is inapplicable.
Headnote:(A) CUSTOMS ACT, 1962 - Section 14(1) and 14(2) - Refund of customs duty - Appellant contested the encashment of bank guarantees as payment of duty, arguing it was not duty 'paid' under Section 27 - Court found encashment of guarantees does not equate to actual payment of duty and thus unjust enrichment principle does not apply - Respondents ordered to refund amounts. (Paras 11, 16, 30, 31)
(B) Unjust Enrichment - Doctrine - Applicable during refund claims where duty has been passed on to customers - Court clarified that mere encashment of bank guarantees is not payment of duty and unjust enrichment principles are not applicable in such scenarios. (Paras 19.2, 22)
Facts of the case:
Appellant imported crude degummed soybean oil, faced customs duty disputes, furnished bank guarantees, and ultimately sought refunds on the basis that encashment does not amount to payment of duty.
Findings of Court:
Appellant entitled to refund as encashment of bank guarantees cannot be considered payment of customs duty; unjust enrichment principles do not apply.
Issues: Whether the encashment of bank guarantees constituted payment of duty and applicability of unjust enrichment principles to the case.
Ratio Decidendi: Court ruled that encashment of bank guarantees is not equivalent to payment of customs duties, confirming the absence of unjust enrichment.
Result: Appeals allowed; respondents directed to refund amounts with interest.
Act Referred
CUSTOMS ACT: S.14(1), S.142, S.27
Legal Category Hierarchy
Table of Contents
2. Whether encashment of bank guarantees provided as security constitutes payment of duty attracting the doctrine of unjust enrichment under Section 27 of the Customs Act. (Para 19 , 20 )
3. Bank guarantees are security for revenue and their encashment does not equate to duty paid by the assessee, rendering the doctrine of unjust enrichment inapplicable. (Para 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 )
4. Encashment of bank guarantees offered as security does not constitute payment of duty under Section 27 of the Customs Act, thus excluding the doctrine of unjust enrichment. (Para 26 , 30 )
5. Impugned judgment set aside — Respondents directed to refund encashed amounts with interest. (Para 31 , 32 )
6. Does the doctrine of unjust enrichment apply to refunds of amounts recovered via encashment of bank guarantees provided as security?
No. Bank guarantees are security to ensure collection of dues and their encashment is not equivalent to the payment of duty by the assessee. Therefore, Section 27 of the Customs Act and the doctrine of unjust enrichment are not attracted. (Para 26 , 30 )
7. What is the legal distinction between levy and collect in the context of taxing statutes?
Levy refers to the assessment, charging, or imposing of a tax, whereas collect refers to the physical realization of the tax that has been levied. Collection is normally a stage subsequent to the levy. (Para 27 )
8. When is a refund claim for indirect taxes subject to the requirement of proving that the burden of duty was not passed to a third party?
Such a requirement applies when a refund is claimed under the provisions of the Central Excise Act or Customs Act for duty actually paid by the claimant, as the state retains funds to avoid unjust enrichment of the claimant. (Para 24 )
JUDGMENT :
UJJAL BHUYAN, J.
The present civil appeals by special leave are directed against the judgment and order dated 28.04.2016 passed by the Division Bench of the High Court of Gujarat at Ahmedabad (briefly ‘the High Court’ hereinafter) in Special Civil Application Nos. 14540, 14541 and 14542 of 2015 (Ruchi Soya Industries Limited Vs. Union of India & Ors.).
2. Subject-matter of all the three appeals is identical and parties to the proceedings are common. Therefore, all the appeals were heard together and are being disposed of by this common judgment and order. In fact, facts in all the appeals are similar except the quantity of refund involved.
3. For a proper perspective, relevant facts may be noted.
4. M/s M.P. Glychem Industries Limited (‘M.P. Glychem’ for short) imported certain quantity of crude degummed soyabean oil of edible grade in bulk at Jamnagar and filed bill of entry on 02.09.2002 seeking clearance of the imported goods for home consumption. Customs department (department) did not clear the goods on the ground that appellant was required to pay higher customs duty on the basis of tariff value fixed for the imported goods in terms of Section 14(2) of the CUSTOMS ACT , 1962 (referred to hereinafter as ‘the CUSTOMS ACT ’). Contention of the appellant was that at the time of the import of the goods the concerned notification issued by Government of India fixing tariff value under Section 14(2) of the CUSTOMS ACT had not come into effect. Therefore, appellant was liable to pay duty only in terms of the provisions contained in Section 14(1) of the CUSTOMS ACT .
5. Since there was an impasse with the imported goods being held up, appellant filed Special Civil Application No. 9308 of 2002 before the High Court challenging the validity of the notification issued by the Government of India fixing the tariff value of the imported goods i.e. crude degummed soyabean oil (also referred to hereinafter as the ‘subject goods’) as also the date of coming into effect of the said notification. One of the grounds of challenge was that the notification was not available for sale and was, therefore, not in the public domain. High Court passed an order dated 07.10.2002 admitting the writ petition and granted interim relief to the effect that for clearance of the goods in question, appellant should furnish a bank guarantee for the difference of duty of customs under Sections 14(1) and 14(2) of the CUSTOMS ACT , clarifying that this arrangement would be subject to order of final assessment.
6. On 09.10.2002, appellant had furnished bank guarantee for the differential amount of Rs. 9,19,801.00 through its banker in favour of the department. In two other writ petitions, on the same issue, bank guarantees to the extent of Rs. 45,99,006.00 and Rs. 22,25,052.00 being the differential amounts of duty were furnished. Upon furnishing the bank guarantees as above by the appellant, the subject goods were allowed to be cleared by paying customs duty payable under Section 14(1) of the CUSTOMS ACT .
7. In the meanwhile, M/s M.P. Glychem Industries Limited stood merged with M/s Ruchi Soya Industries Limited in terms of the order of the Bombay High Court dated 30.06.2006 and thereafter came to be known as M/s. Ruchi Soya Industries Limited.
8. Special Civil Application No. 9308 of 2002 alongwith the other two writ petitions were finally decided by the High Court vide the judgment and order dated 13.09.2012. All the three writ petitions were dismissed. Consequently, the interim relief granted earlier stood vacated.
9. Against the aforesaid judgment and order dated 13.09.2012, appellant approached this Court in Civil Appeal Nos. 1808-1813 of 2013.
10. While the civil appeals were pending before this Court, the department on 28.01.2013 encashed the bank guarantees and appropriated the sums covered by the bank guarantees.
11. Civil Appeal Nos. 1808-1813 of 2013 were heard alongwith other similar civil appeals by this Court and were disposed of by the common order
