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2020 (9) TMI 1237 - AAAR - GSTRequirement of two separate Essentiality Certificates (EC) or not - import of drill bits into India under serial no.404 of Notification No.50/2017- Customs dated 30.06.2017 - indigenous movement under Notification No.3/2017- Central Tax (Rate) dated 28.06.2017 - HELD THAT - EC issued that e import is allowed only for the purpose of consequent supply to ONGC for the purpose of use in specified operations. The goods cannot be put to any other use without seeking necessary permissions and payment of taxes - Unlike, in the case of any other transaction, the import and subsequent supply of impugned goods viz. drill bits, is inextricably linked till the goods are ultimately put to its intended purpose. It can be seen from the EC issued by DGH that it certifies that the goods being imported are required for petroleum operations of execution of projects under Petroleum Exploration Licenses or Mining Leases granted by the Government to ONGC. This certification is given qua the goods and EC is given clearly identifying the goods for which exemption is given. It is also a practice followed by DGH to issue only one EC per consignment. The Appellant imports the goods only for the purpose of supplying to ONGC. The EC is issued on the application / recommendation of ONGC. The said EC clearly identifies the goods for which the exemption is granted with added obligation of specified use. The condition of specified use and obtaining certificate to this effect is a common condition under the customs and the GST law. Thus, when the exemption is attached to the goods and once, for the purpose of Customs law, it is established that the goods are eligible for exemption, thus the very same goods when put to very same use in another but continuing limb of the transaction, should be eligible for exemption on the basis of same EC without insisting on a separate EC, especially since DGH follows the practice of issuing single EC per consignment. The Appellant cannot be put to detriment for the things which heir control. It is also worthwhile to note that both the notifications do not require EC to be addressed to any entity or require it to be obtained by any specific person. The relevant condition is to produce the EC before a particular officer certifying the specific goods for the specific use. So long as the EC certifies the intended use as envisaged under the GST notification, the other details on the EC should not come in way to disallow the benefit of the GST exemption notification - the Certificate available on record which certifies the specified use of the goods should be sufficient compliance of the Notification under the GST law. Once the Customs EC carries the same certification that is needed to claim exemption under the GST law, insistence of separate EC for GST exemption purpose is futile and not warranted in law. It is settled position in law that once the Appellant has demonstrated that the goods in question are entitled for exemption, then merely based on the template of the EC, exemption cannot be denied. Once the Appellant establishes their eligibility to the exemption, then the other conditions of the notification have to be liberally interpreted - In the present case, therefore, once it is admitted that the condition under the Customs Act and the GST law are the same, and the Appellant is granted valid exemption under the Customs law, the GST Authorities should not insist on separate EC for GST purpose. The present issue relates to requirement of Essentiality Certificate for claiming concessional rate of Tax /exemption under different Tax Authorities for distinct and different supplies involved i.e. one at the time of import under Customs and another during the course of local sale/supply under Central and state enactments - In the case of INNAMURI GOPALAM AND MADDALA NAGENDRUDU AND OTHERS VERSUS THE STATE OF ANDHRA PRADESH AND ANOTHER 1963 (4) TMI 18 - SUPREME COURT the Honourable Supreme Court held that the State was possibly right in the submission that the object behind the framers of the notification was to avoid double taxation but the operation of an enactment or of a notification has to be judged not by the object which the legislature or the notifying authority, as the case may be, may have had in mind but by the words which it has employed to effectuate the legislative intent . Thus, it is concluded that The Essentiality certificates prescribed under the said two notifications have to be furnished separately to avail the benefit of the said notifications.
Issues Involved:
1. Whether the import of drill bits for supply to ONGC involves two supplies. 2. Whether two separate Essentiality Certificates (ECs) are required for the import and indigenous movement of drill bits. 3. Whether the supply of drill bits to ONGC in India can be covered by a single EC under Notification No. 50/2017-Customs. Issue-wise Detailed Analysis: Issue 1: Whether the import of drill bits for supply to ONGC involves two supplies. The appellant is engaged in supplying oilfield services and imports drill bits to supply to ONGC on a consignment basis. The Authority for Advance Ruling (AAR) held that the import and subsequent supply to ONGC are two distinct supplies as per the Customs Act and GST Acts. The appellant imports drill bits and avails benefits under Sr.404 of Notification No.50/2017-Cus, paying customs duty at 5%. The Central Government issued Notification No.3/2017-Central Tax (Rate) which taxes intra-state supply of goods to licensees at 2.5% if an EC from DGH is produced. The appellant charged and deposited GST at 18% under HSN 82071900 for the supply of imported bits. Issue 2: Whether two separate Essentiality Certificates (ECs) are required for the import and indigenous movement of drill bits. The AAR ruled that since the import and supply to ONGC are distinct supplies, the appellant needs to furnish different ECs: one at the time of import to the Custom Authorities and another at the time of supply to ONGC to the GST Authorities. The appellant contended that the import of drill bits is inextricably linked to the contract with ONGC and only one EC should suffice. The appellant argued that the EC issued by DGH certifies that the goods are required for petroleum operations and should be valid for both customs and GST purposes. Issue 3: Whether the supply of drill bits to ONGC in India can be covered by a single EC under Notification No. 50/2017-Customs. The appellant argued that the EC issued by DGH should be sufficient for both customs and GST notifications as they are identically worded. The appellant cited various judgments to support the argument that once an EC is issued for goods required for petroleum operations, it should be valid for all related transactions. The appellant emphasized that the EC certifies the goods for specific use, and obtaining a separate EC for GST purposes is unnecessary and burdensome. Discussion and Conclusion: The appellate authority upheld the AAR's decision, stating that the import and subsequent supply to ONGC are two distinct transactions requiring separate ECs. The authority noted that the appellant's reliance on previous judgments was misplaced as those cases dealt with different issues such as classification and applicability of exemption notifications. The authority emphasized that the operation of an enactment or notification must be judged by the words employed, not the object behind it. Therefore, separate ECs are required to avail the benefits under the respective notifications. Order: The appellate authority found no reason to interfere with the ruling pronounced by the Authority for Advance Ruling, Andhra Pradesh, and upheld the decision that separate ECs are required for the import and indigenous movement of drill bits to avail the concessional rate of tax under both customs and GST laws.
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