2022 (10) TMI 471 - HC - Customs

Exemption from payment of any additional duty under Section 3 of the Customs Tariff Act - import of capital goods under the valid authorisation under the Export Promotion Capital Goods Scheme (EPCG Scheme) - HELD THAT - The intention of the Central Government while framing EPCG Scheme was to permit import at zero customs duty. Accordingly, by Notification No. 16/2015-Cus dated 1st April 2015 goods covered by valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy were exempted from the whole of the additional duty leviable under Section 3 of the Customs Tariff Act. When the GST regime came into force, Section 3 of the Customs Tariff Act came to be amended by insertion of Sub Section (7) and Sub Section (9) that provided for levy of Integrated Tax and Goods and Services Compensation Cess - It is petitioner s case that during this period, i.e., from 1st July 2017 when Notification No. 16/2015-Cus came into effect and the fresh amendment dated 13th October 2017 came into effect, petitioner paid Integrated Goods and Service Tax (IGST) amounting to Rs.24,94,53,580/- on the capital goods imported by petitioner. The details of the bills of entries are provided in the petition. It would also assist the court if respondents place on record the Minutes of Meeting recorded alongwith discussion notes, file notings, representations received and the agenda placed before the Central Board of Indirect Taxes and Customs (CBI C) that resulted in issuance of Notification No.79/2017 dated 13th October 2017 - Stand over to 20th October 2022.

Summary

Issues:
1. Interpretation of the Export Promotion Capital Goods Scheme (EPCG Scheme) and its exemption from additional duty under the Customs Tariff Act.
2. Impact of the Goods and Services Tax (GST) regime on the exemption under the EPCG Scheme.
3. Allegation of inadvertence in the amendment of Notification No. 16/2015-Cus.
4. Request for clarification on the nature of Notification No. 79/2017-Cus.
5. Requirement for respondents to provide relevant documentation regarding the issuance of Notification No. 79/2017-Cus.

Analysis:
1. The case involves the interpretation of the EPCG Scheme and its exemption from additional duty under the Customs Tariff Act. The petitioner availed of this scheme for the import of capital goods, which were initially exempted from payment of additional duty. However, amendments made under the GST regime led to confusion regarding the applicability of the exemption.

2. The Central Government's intention behind the EPCG Scheme was to allow imports at zero customs duty. Amendments in the Customs Tariff Act introduced under the GST regime affected the exemption status. The petitioner claimed to have paid Integrated Goods and Service Tax (IGST) during a specific period due to the ambiguity created by the amendments.

3. The petitioner argued that the subsequent amendments to Notification No. 16/2015-Cus were a result of inadvertence or oversight. The absence of specific language in the amendments caused confusion regarding the exemption of imports under the EPCG Scheme from additional duty. The petitioner sought clarification based on the alleged original intent of the Central Government.

4. The petitioner contended that the customs duty exemption was always in place, and the amendments should be viewed as clarificatory or curative. Reference was made to a judgment by the Gujarat High Court to support this argument. The petitioner emphasized the need for a broader interpretation to prevent leaving a class of importers uncovered during the transitional period.

5. The Court directed the respondents to provide detailed documentation, including Minutes of Meeting, discussion notes, file notings, and representations before the Central Board of Indirect Taxes and Customs (CBIC) that led to the issuance of Notification No. 79/2017. This information was deemed necessary to understand the decision-making process behind the amendments and clarify the intent of the notifications.

In conclusion, the judgment delves into the complexities arising from the interaction between the EPCG Scheme, Customs Tariff Act, and GST regime. The Court's focus on clarifying the intent behind the notifications and seeking relevant documentation highlights the importance of ensuring consistency and transparency in the application of tax laws and schemes.