2021 (9) TMI 777 - HC - Customs

Exemption from the payment of SAD - Applicability of Advance ruling - N/N. 45/2005 Customs dated 16.05.2005 - Validity of the Circular No.44/203-Customs dated 30.12.2013 - Wind Operated Electricity Generators - clearance of goods to units located in the Domestic Tariff Area (DTA) as stock transfers for the purpose of trading as well as carrying out certain manufacturing activities - HELD THAT - No doubt, the said Notification is relied on by the petitioner in this writ petition also. However, the stock transfer made with reference to the Maharashtra Value Added Tax Act, is also to be taken note of. With reference to the said issue, the Advance Ruling Authority made a finding that when such goods are sold in Domestic Tariff Area (DTA), are exempted by the State Government from payment of Sales Tax or Value Added Tax. Such an exemption is not available and this finding would be applicable with reference to the State of Maharashtra under the Tax Law in force in the State of Maharashtra. That was further clarified under Serials 82 and 103 of the Schedule C of Maharashtra Value Added Tax Act (MAVT Act) the parts and components of wind operated electricity generators are subject to tax @ 5%. Therefore, it was considered as not a sale as defined under Section 2(24) of the MAVT Act. The present Advance Ruling relied on being rendered by treating the transaction on the factual scenario as projected by the applicant and not on analysis of the factual position. It is significant to note that Section 6(A) of the Central Sales Tax Act deals with the burden of proof etc., in case of transfer of goods claimed otherwise than by way of sale. To put it differently, Section 6A of the Central Sales Tax Act, mandates that stock transfer of goods is not covered within the definition of 'sale' and as such Central Sales Tax is not levied on stock transfer of goods. The binding nature is to be decided with reference to the nature of decisions by the Advance Ruling Authority. It is not as if that every finding of the Advance Ruling Authority is binding on all the Authorities across the country. The application of mind by the Competent Authority is the scope under the Customs Act in each and every case and the binding nature is undoubtedly confined in certain circumstances and more specifically, based on the nature of the decision rendered by the Advance Ruling Authority - application of Notification requires an adjudication of facts and on such adjudication if the applicant is entitled for exemption or not, is to be decided based on the Notification and on connected provisions. The Competent Authority is bound to conduct adjudication by following the procedures as contemplated and in accordance with law - Petition disposed off.

Summary

Issues Involved:
1. Validity of Circular No. 44/203-Customs dated 30.12.2013.
2. Validity of the consequential letter No. JMFTWZ/DHL/MISC/GE-214 dated 03.02.2014.
3. Binding nature of Advance Ruling dated 27.05.2013.
4. Applicability of Section 28J of the Customs Act, 1962.
5. Exemption eligibility under Notification No. 45/2005-Customs dated 16.05.2005.
6. Scope of adjudication by Customs Authorities.

Detailed Analysis:

1. Validity of Circular No. 44/203-Customs dated 30.12.2013:
The petitioner challenged the circular on the grounds that it contradicted the Advance Ruling dated 27.05.2013, which granted exemption. The court noted that the circular aimed to avoid double taxation and clarified that the benefit of exemption from Special Additional Duty (SAD) under Notification No. 45/2005-Customs would not be available for goods routed through SEZ/FTWZ for self-consumption. The court found no infirmity in the circular as it did not contravene the notification but required adjudication based on facts.

2. Validity of the consequential letter No. JMFTWZ/DHL/MISC/GE-214 dated 03.02.2014:
The petitioner argued that the letter ignored the binding Advance Ruling. The court observed that the letter was issued based on the petitioner’s complaint and noted that the issues were pending adjudication. The court held that the competent authority must adjudicate the disputed facts and make a decision on merits, following the procedures contemplated by law.

3. Binding nature of Advance Ruling dated 27.05.2013:
The petitioner contended that the Advance Ruling was binding on the respondents. The court referred to Section 28J of the Customs Act, which limits the binding nature of Advance Rulings to the applicant and the specific matter referred. The court clarified that the ruling was based on the Maharashtra Value Added Tax Act and was not intended to have general implications across all Customs Authorities. The ruling was confined to the facts presented by the applicant and did not preclude further adjudication.

4. Applicability of Section 28J of the Customs Act, 1962:
The court analyzed Section 28J, which states that Advance Rulings are binding only on the applicant, the matter referred, and the Principal Commissioner or Commissioner of Customs in respect of the applicant. The court emphasized that the ruling’s applicability could not be expanded beyond this scope and was not binding on all authorities nationwide. The court noted that the ruling had persuasive value but required independent adjudication based on local tax laws and specific facts.

5. Exemption eligibility under Notification No. 45/2005-Customs dated 16.05.2005:
The petitioner claimed exemption based on the Advance Ruling and the notification. The court noted that the notification exempts goods cleared from SEZ to DTA from additional duty of customs, subject to conditions. The court found that the exemption was not applicable when goods were sold in DTA and exempted from state taxes. The court held that the petitioner’s claim required factual adjudication to determine eligibility for exemption.

6. Scope of adjudication by Customs Authorities:
The court stressed the importance of adjudication by competent authorities to resolve disputed facts. It noted that the petitioner’s transactions required examination under local tax laws and specific circumstances. The court held that the authorities must conduct adjudication following legal procedures and make decisions based on merits.

Conclusion:
The court dismissed the writ petition, upholding the validity of the circular and the consequential letter. It directed the competent authorities to adjudicate the petitioner’s claims following legal procedures and clarified that the bonds furnished by the petitioner were subject to final orders. The court emphasized that the Advance Ruling’s binding nature was limited and required independent adjudication based on specific facts and local tax laws.