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M/s Patanjali Foods Limited (Formerly Ruchi Soya Industries Ltd.) v. Union of India

Civil Appeal · 2025 INSC 733Decided 19 May 2025
C.A. No.-003833-003835 - 2025
Justice Abhay S. Oka · Justice Ujjal Bhuyan

Background

The appellant (then M.P. Glychem Industries, later merged into Ruchi Soya/Patanjali Foods) imported crude degummed soyabean oil and was asked to pay extra customs duty based on a tariff-value notification it argued was not yet in force. It furnished bank guarantees for the disputed differential duty to get its goods released, and challenged the notification in the Gujarat High Court. While its appeal on this point was pending in the Supreme Court, the customs department encashed the bank guarantees. The Supreme Court later ruled in a companion case (Union of India v. Param Industries) that the notification could not be applied as claimed, but when the appellant sought a refund of the encashed amounts, the department refused, and the High Court dismissed its refund claim.

Decision Breakdown

The Supreme Court held that encashing a bank guarantee furnished only as security is not the same as "payment" of duty under Section 27 of the Customs Act, so the refund provisions and the doctrine of unjust enrichment did not apply to bar the claim. Since the underlying demand for differential duty had already been held unlawful in Param Industries, the department had no authority to keep the encashed amounts. The Court set aside the High Court's judgment, allowed the appeals, and directed the department to refund the full amounts with 6% interest from the dates of encashment within four months.

Lesson Learnt

Money recovered by a government authority through encashing a security like a bank guarantee is not the same as "duty paid," and once the underlying demand is found unlawful, the authority must return the money with interest rather than treating refund rules as a shield to retain it.

Official source (sci.gov.in)View Judgment (PDF)

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