2018 (12) TMI 1352 - HC - GST

Exemption from payment of tax - duty free shop - territorial limits - petitioner made a prayer for directing the respondents to treat the goods supplied to the petitioner as an export without payment of CGST and IGST, only on the ground that Duty Free Shop at international airport are located beyond the customs frontier of India and any transaction that takes place in a Duty Free Shop is said to have taken place outside India. Held that - No provision of law has been brought to the notice of this Court under the Central Goods and Services Tax Act, 2017, which grants exemption from payment of taxes. A taxing statute has to be strictly construed. In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used - The statute governing the field does not provide any such exemption as prayed by the petitioner. Undisputedly, the petitioner is supplying goods to Duty Free Shops and as per Section 2(5) of IGST Act, 2017 export of goods takes place only when goods are taken out to a place outside India. India is defined under Section 2(27) of Customs Act,1962 as India includes territorial waters of India . Similarly under the CGST Act, 2017 under Section 2(56) India means the territory of India including its territorial waters and the air-space above its territory and territorial waters and therefore, the goods can be said to be exported only when they cross territorial waters of India and the goods cannot be called to be exported merely on crossing customs frontier of India - The petitioner's contention is that no GST is payable on such supply taking place beyond the customs frontiers of India as the same should be considered as export of goods under Section 2(5) of the IGST Act, 2017 and should be zero rated supply under Section 2(23) read with Section 15(1) of the IGST Act, 2017 is misconceived. The location of the DFS, whether within customs frontier or beyond, shall be within India as long as it is not beyond EEZ (200 nautical miles). Therefore, DFS cannot be said to be located outside India. Instead, the DFS is located within India. As the supply to a DFS by an Indian supplier is not to 'a place outside India', therefore, such supplies do not qualify as 'export of goods' under GST. Consequently, such supplies cannot be made without payment of duty by furnishing a bond/letter of undertaking (LUT) under rule 96-A of the CGST Rules, 2017. The petitioner is liable to pay GST on supply of indigenous goods to DFS - Whether, transaction under taken at a DFS (i.e. sale of goods to outgoing passengers) are to be treated as export of goods or services does not form part of the instant writ petition - petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Entitlement to GST exemption for supplies to Duty Free Shops (DFSs).
2. Legal interpretation of "export" under GST laws.
3. Applicability of previous exemptions under the GST regime.
4. Jurisdiction and power of the court to grant exemptions or direct legislative action.

Issue-wise Detailed Analysis:

1. Entitlement to GST exemption for supplies to Duty Free Shops (DFSs):
The petitioner, a manufacturer and exporter of garments, argued that supplies to DFSs at international airports should be exempt from GST, as such shops are considered beyond the customs frontier of India. The petitioner sought a writ of mandamus to treat these supplies as exports without payment of CGST and IGST. The court examined the statutory provisions and previous notifications but found no provision under the Central Goods and Services Tax Act, 2017, granting such an exemption. The court emphasized that a taxing statute must be strictly construed, and exemptions cannot be implied or inferred.

2. Legal interpretation of "export" under GST laws:
The court analyzed the definitions under the IGST Act, 2017, and the CGST Act, 2017. According to Section 2(5) of the IGST Act, "export of goods" means taking goods out of India to a place outside India. Section 2(56) of the CGST Act defines "India" to include its territorial waters, seabed, continental shelf, and air-space. The court concluded that DFSs, even if located within customs frontiers, are still within the territory of India. Therefore, supplies to DFSs do not qualify as exports under GST laws, and such supplies cannot be made without payment of GST.

3. Applicability of previous exemptions under the GST regime:
The petitioner referred to various notifications and exemptions available under the pre-GST regime, such as those under the Central Excise Act and Customs Act. The court noted that the GST regime introduced a new statutory framework, and previous exemptions do not automatically apply. The court cited the principle that there is no estoppel against law, and concessions granted under earlier laws cannot be claimed as a matter of right under the new regime. The court emphasized that the GST Act does not provide for the exemptions sought by the petitioner.

4. Jurisdiction and power of the court to grant exemptions or direct legislative action:
The respondents argued that the court cannot issue a writ to enact subordinate legislation or grant exemptions, as these are policy matters within the exclusive domain of the legislature. The court agreed, stating that it does not have the power to legislate or grant exemptions in the absence of statutory provisions. The court emphasized that its role is to interpret statutes, not to create or amend them. Consequently, the court dismissed the petition, affirming that the petitioner must comply with the GST laws as enacted.

Conclusion:
The court dismissed the petition, ruling that the petitioner is liable to pay GST on supplies to DFSs. The court held that DFSs are within the territory of India, and supplies to them do not qualify as exports under GST laws. The court also stated that it cannot grant exemptions or direct legislative action, as these are policy matters for the legislature. The petitioner's reliance on previous exemptions was found to be inapplicable under the new GST regime.