2017 (9) TMI 674 - HC - GST

Additional Levy of IGST - Advance Authorization scheme - The grievance of the Petitioner is that it holds export orders placed on it prior to 1st July 2017 for the fulfilment of which it has to undertake imports of inputs. The Petitioner seeks to explain that, with the change brought about by the GST regime, the Petitioner would have no option but to pay IGST out of its sources causing a working capital blockage. Held that - The exporter prices the export commodity on the basis of the extant FTP. The Indian exporters, in order to remain competitive in the global market, account for the exemptions/concessions given to such exporter under the FTP. Export orders are usually placed several months in advance and the price fixed is not variable beyond a point - If an additional levy is imposed, after the acceptance of such export orders, the resultant burden cannot possibly be passed on by the exporter to the buyers outside India. This might lead to the cancellation of such export orders placing the exporter in a piquant situation. The Petitioner-Exporter is not questioning the legislative competence to levy the additional IGST. It is only questioning the applicability of such levy even to imports that are made for fulfilment of export orders that have been placed on and accepted by the Petitioner prior to 1st July, 2017. Also, the Petitioner is seeking to only avail the credit outstanding in respect of advance authorizations issued to the Petitioner prior to 1st July 2017. The Court is of the view that the Petitioner has made out a prima facie case for grant of Prayer in the writ petition, i.e. a direction to the Respondents to allow the Petitioner to continue making the imports under the Advance Authorization licenses issued prior to 1st July, 2017 in terms of their quantity and value subject to terms - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Interpretation of the Advance Authorization Scheme under the Foreign Trade Policy 2015-2020.
2. Impact of the Goods and Service Tax (GST) regime on duty exemptions for exporters.
3. Challenge regarding the additional levy of Integrated Goods and Service Tax (IGST) on imports for fulfilling export orders placed before 1st July 2017.
4. Legal recourse sought by the Petitioner to avoid payment of additional IGST and liquidity concerns.
5. Response of the Customs Department and the Ministry of Commerce to the Petitioner's grievance.
6. Court's analysis of the situation and grant of interim relief to the Petitioner.

Analysis:
The judgment dealt with the interpretation of the Advance Authorization Scheme (AAS) under the Foreign Trade Policy 2015-2020, which allowed duty-free import of inputs for export products. The petitioner, an exporter, raised concerns over the impact of the Goods and Service Tax (GST) regime, specifically the additional levy of Integrated Goods and Service Tax (IGST) on imports post 1st July 2017. The petitioner faced liquidity issues due to the IGST payment requirement for fulfilling export orders placed before the GST regime. The court acknowledged the petitioner's plight and granted interim relief, allowing imports without additional IGST for pre-GST export orders, subject to specified conditions.

The Customs Department contended that the exemptions under the earlier Notification continued, but post-GST imports attracted mandatory IGST payment. The Ministry of Commerce did not provide significant comments on the matter. The petitioner sought relief from the additional IGST levy on imports for pre-GST export orders, emphasizing the financial strain and working capital blockage. The court found merit in the petitioner's case, granting permission for duty-free imports under Advance Authorizations issued before 1st July 2017, subject to verification and compliance with terms.

The court's interim direction required the petitioner to submit an affidavit undertaking to pay IGST if the petition failed, along with lists of valid Advance Authorizations and pre-GST export orders. The relief applied only to imports for pre-GST export orders. The judgment highlighted the exporter's inability to pass on additional costs to overseas buyers post-acceptance of export orders, potentially jeopardizing contracts. The court set a date for final hearing to address the broader legal aspects of the case, allowing the petitioner to file a rejoinder to the counter-affidavit submitted by the Respondents.