SC rules in favour of Patanjali in two-decade-old customs duty dispute
In 2019, Patanjali Ayurved acquired the company for ₹4,350 crore through an NCLT-approved resolution plan, reviving its operations and integrating it as a flagship arm of the Patanjali consumer goods business.
ADVERTISEMENT
The Supreme Court on Monday allowed an appeal filed by Ruchi Soya Industries Ltd., now owned by Patanjali Ayurved, challenging a Gujarat High Court decision that denied the company a refund of customs duty recovered through the encashment of a bank guarantee, reports Bar and Bench.
A Bench comprising Justices Abhay S. Oka and Ujjal Bhuyan ruled that the custom department's claim was barred by the doctrine of unjust enrichment and held that the recovery was made through coercive means, without legal authority.
"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 observed.
The case dates back to 2002, when Ruchi soya, then one of India's top edible oil importers, brought in a consignment of crude, degummed soyabean oil through the Jamnagar port. A dispute arose when customs officials demanded duty based on a tariff value notification under Section 14(2) of the Customs Act, 1962, rather than the actual transaction value under Section 14(1).
Read More: Baba Ramdev's Patanjali Foods spends Rs 325 crore on marketing, promotional activities in Q4 FY25
Although the Gujarat High Court initially allowed provisional clearance against a bank guarantee, it later dismissed the company's writ petition in 2012. Following this, customs authorities encashed the guarantee and recovered Rs 9.19 lakh, the report added.
The legal landscape shifted in 2015 when the Supreme Court, in Union of India v. Param Industries Ltd, held that tariff value notifications must be in the public domain to be valid. Ruchi Soya used this ruling to seek a refund. However, customs denied the request, invoking the doctrine of unjust enrichment.
Ruchi Soya then filed fresh writ petitions challenging the denial, but in 2016, the Gujarat High Court ruled against the company again. It held that the encashed bank guarantee amounted to duty payment and was thus subject to refund rules including the bar on unjust enrichment.
Now, with the Supreme Court setting aside that decision, Ruchi Soya stands to recover the amount with interest. A copy of the apex court’s detailed judgment is awaited.
The verdict also holds potential financial relevance for Ruchi Soya’s current owner, Patanjali Ayurved, which acquired the debt-laden firm in 2019 for ₹4,350 crore through a National Company Law Tribunal (NCLT)-approved resolution plan. The resolution revived Ruchi Soya’s operations and positioned it as a key entity within the Patanjali consumer goods portfolio.
