Since retention of such amounts is “unjust and unlawful,” the same would be refunded within four months, a Bench of Justices Abhay Oka and Ujjal Bhuyan ordered, while holding that the customs’ claim was barred by the “doctrine of unjust enrichment.”
It said that the department had recovered the duty amount from Patanjali Foods -owned Ruchi Soya Industries by “using coercive method. In the facts of the case, encashment of BGs offered as security cannot be treated as payment of customs duty. They could have waited for the outcome by this court (in a case that had a bearing on such custom duty demands). Retention of such amount will carry 6% interest from the dates of encashment till repayment,” the judgment stated.
The apex court said that the customs department resorted to “arbitrary” encashment of bank guarantee. “It is evidently clear that respondents are holding on to money of the appellant which they are not authorized to do…” said the court.
In 2019, Patanjali Foods had acquired Ruchi Soya Industries through a corporate insolvency resolution process.
The case has its genesis from Glychem Industries importing a certain quantity of crude degummed soybean oil of edible grade in bulk at Jamnagar, Gujarat. The customs authorities did not clear the goods on the ground that the company 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. Contesting this, Glychem said that the government’s notification to fix tariff value had not come into effect at the time of import, thus it was required to pay lower customs duty under Section 14(1) of the 1962 Act.The HC, on appeal, passed an interim order in 2002 for clearance of the goods subject to Glychem furnishing a BG for the difference of duty of customs under Sections 14(1) and 14(2). After Glychem Industries furnished the bank guarantee, its goods were allowed to be cleared.Meanwhile, in 2006 Glychem Industries merged with Ruchi Soya Industries, which also challenged the higher customs duty issue. The HC also dismissed the Ruchi Soya Industries’ petition and also vacated the interim order. While the appeal by Ruchi Soya Industries was pending before the SC, the customs department encashed the BG towards the payment of differential duty in 2013. In 2015, the top court ruled that it was not justified and lawful on the part of the department to claim the differential amount of duty on the basis of its notification.
As Ruchi Soya Industries was unsuccessful in getting the refund from the customs department, it moved the HC and then the Supreme Court.
