Supreme Court rules in favour of Patanjali in 23-year customs dispute
The Supreme Court on Monday allowed an appeal filed by Patanjali-owned Ruchi Soya Industries Ltd. challenging a Gujarat High Court, which had denied the company a refund of customs duty recovered by the customs authorities through the encashment of a bank guarantee [M/S Patanjali Foods Limited (formerly Ruchi Soya) v. Union of India and ors].
A Bench of Justices Abhay Oka and Ujjal Bhuyan delivered the verdict, holding that the customs' claim was barred by the doctrine of unjust enrichment.
"Respondents (customs) had recovered the duty amount by using coercive method. In the facts of the case, encashment of bank guarantee cannot be treated as (recovery 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). Respondents have no authority in law to hold the money. Retention of such amount will carry 6%. Let the amount be released in 4 months from today," the Court ordered.
However, in 2012, the High Court dismissed Ruchi Soya’s petition and vacated the interim relief. The customs department promptly encashed the bank guarantee and recovered an amount of Rs.9.19 lakh.
The legal tide turned in 2015 when the Supreme Court in Union of India v. Param Industries Ltd held that such tariff value notifications must be made available to the public to be effective. Relying on this ruling, Ruchi Soya applied for a refund of the amount recovered through the encashed bank guarantee.
The customs department objected, citing the doctrine of unjust enrichment under Section 27 of the Customs Act, which bars the refund of duty if the importer has passed on the tax burden to another party. Ruchi Soya filed fresh writ petitions in 2015, challenging this denial and sought directions to process the refund without insisting on compliance with the unjust enrichment requirement.
