2024 (8) TMI 1523 - AT - Customs

Effect of Notification - applicability of integrated tax - whether N/N. 36/2021-Customs dated 19.07.2021 the Amendment Notification issued under section 25(1) of the Customs Act 1962 the Customs Act amending N/N. 45/2017-Customs dated 30.06.2017 the Exemption Notification would have retrospective effect from the date the Exemption Notification was issued on 30.06.2017? - HELD THAT - Section 25(1) of the Customs Act empowers the Central Government to grant exemption from payment of duty by issuing a Notification in the Official Gazette. It is in exercise of the powers conferred under section 25(1) of the Customs Act that the Exemption Notification dated 30.06.2017 was issued by the Central Government. The said Exemption Notification exempts the goods falling within any Chapter of the First Schedule to the Tariff Act and specified in column (2) of the Table when re-imported into India from so much at the duty of customs leviable thereon which is specified in the First Schedule and the integrated tax compensation cess leviable thereon respectively under sub-sections (7) and (9) of section 3 of the Tariff Act as is in excess of the amount indicated in the corresponding entry in column (3) of the said Table. The main body of the Exemption Notification refers not only to duty of customs leviable thereon which is specified in the First Schedule to the Tariff Act but also to integrated tax and compensation cess but column (3) of the Table accompanying the main Notification against serial number 2 refers to only duty of customs on the fair cost of repairs carried out with insurance and freight charges. The decision of the Tribunal in InterGlobe Aviation 2020 (11) TMI 151 - CESTAT NEW DELHI resulted in the issuance of the Amendment Notification dated 19.07.2021 by the Central Government. This Amendment Notification specifically mentions that it was being issued under section 25(1) of the Customs Act. As noticed above two amendments were made; the first amendment is that against serial numbers 2 and 3 in column (3) for the words Duty of customs the words Said duty tax or cess be substituted; and the second amendment is by way of insertion of clause (d) in the Explanation which provides that on recommendation of the GST Council for removal of doubt it is clarified that the goods mentioned at serial numbers 2 and 3 of the Table are leviable to integrated tax and cess and the exemption under said serial numbers is only from the amount of said tax cess and duty over and above the amount so calculated. Whether the Exemption Notification dated 19.07.2021 that was issued under subsection (1) of section 25 of the Customs Act can have retrospective effect? - HELD THAT - In the present case the Exemption Notification before its amendment on 19.07.2019 provided for payment of duty of customs on the repair value of the re-imported goods. The Tribunal in the decision rendered on 02.11.2020 in InterGlobe Aviation held in very clear terms that the phrase duty of customs referred to in the condition against serial number 2 would not include integrated tax. By the Amendment Notification dated 19.07.2021 the phrase duty of customs has been substituted with the phrase Said duty tax or cess . The effect of the amendment would be that basic customs duty integrated tax and cess would be required to be paid on the repair value of the re-imported goods as a condition of grant of exemption. It is therefore clear that the requirement to pay customs duty and integrated tax on the repair value of re-imported goods preamendment and post amendment is not the same - It cannot therefore be urged that despite the creation of a new liability to pay integrated tax under the Amendment Notification the amendment would still be retrospective in nature. What follows from the aforesaid judgments of the Supreme Court and the High Courts is that an Explanation to a provision may either clear the ambiguity in the main provision or it may add and widen the scope of the main provision. A provision is said to be clarificatory if a consideration of the meaning of the provision to which the Explanation has been added when compared to the meaning given by the added Explanation remains the same. However if the meaning changes it cannot be said to be clarificatory in nature. If the Explanation is clarificatory in nature it may be given retrospective operation but if it changes the law and alters or widens the scope of the main provision it cannot be given retrospective operation. In the present case though Explanation (d) inserted by the Amendment Notification dated 19.07.2021 proceeds to state that for removal of doubts it is clarified but the fact is that it imposes integrated tax which otherwise prior to the introduction of the Explanation was not leviable under the unamended Exemption Notification dated 31.06.2017. It cannot therefore be said to be retrospective in nature more so when neither clause (i) nor clause (ii) specifically mentions that it is retrospective in nature - in terms of section 25(4) of the Customs Act it would come into force on the date of its issue by the Central Government for publication in the Official Gazette. Though it is correct that for the period upto 30.06.2017 the Exemption Notification No. 94/96 dated 16.12.1996 levied basic customs duty and countervailing duty and the Amendment Notification dated 19.07.2017 levied both basic customs duty and integrated tax but it is equally true that Exemption Notification dated 30.06.2017 which operated from 01.07.2017 to 18.07.2021 merely levied duty of customs and did not levy integrated tax. It is not possible to accept the contention of the learned authorized representative of the department that the Exemption Notification for the intervening period therefore should be interpreted in such a manner so as to included integrated tax in the duty of customs. Conclusion - The Amendment Notification dated 19.07.2021 cannot be said to be retrospective in nature. Findings to the contrary recorded by the Commissioner (Appeals) in the impugned orders on the basis of the Circular dated 19.07.2021 issued by CBIC basis the minutes of the meeting of the GST Council cannot therefore be sustained. Appeal allowed.

Summary

The core issue in these appeals was whether Notification No. 36/2021-Customs, dated 19.07.2021, which amended Notification No. 45/2017-Customs, dated 30.06.2017, should have retrospective effect from the date the original Exemption Notification was issued. The original notification exempted certain goods from integrated tax upon re-import after repairs, but the amendment sought to clarify that integrated tax was indeed applicable.

The appellants, airline operators, argued that the term "duty of customs" in the original notification did not include integrated tax, based on a previous Tribunal decision in InterGlobe Aviation, which had ruled in their favor. They contended that the amendment was substantive and could not be applied retrospectively, as it imposed a new liability. The appellants further argued that retrospective amendments could only be made under section 25(2A) of the Customs Act, which was not the case here.

The Department, however, argued that the amendment was clarificatory, intended to resolve any ambiguity, and should thus be applied retrospectively. They cited the GST Council's recommendations and the consistent policy of levying integrated tax on such imports, even prior to GST implementation.

The Tribunal analyzed the legal framework, including sections 25(1), (2A), and (4) of the Customs Act, which govern the issuance and effect of notifications. It noted that the amendment was issued under section 25(1) and lacked any express provision for retrospective application. The Tribunal emphasized that a clarificatory amendment must not alter the original provision's meaning and should only clear ambiguities, which was not the case here.

The Tribunal also referenced multiple judgments, including those from the Supreme Court, which held that an amendment introducing a new liability cannot be presumed retrospective merely because it uses phrases like "for removal of doubts." The Tribunal concluded that the amendment was substantive, as it imposed integrated tax, which was not previously required, and therefore could not be applied retrospectively.

The Tribunal further highlighted that the original notification's language was clear and unambiguous, and the intention of the government or GST Council could not override the text. It referred to the Constitution Bench judgment in Hemraj Gordhandas, affirming that in taxation, the language of the notification is paramount, not the intent behind it.

Ultimately, the Tribunal set aside the impugned orders that had applied the amendment retrospectively, ruling that the amendment could only take effect from its issuance date, 19.07.2021, and not retroactively from 30.06.2017. All 1714 appeals were allowed, affirming the appellants' exemption from integrated tax for the period before the amendment's issuance.