2018 (11) TMI 104 - HC - Customs

Advance Authorization Scheme - imposition of restrictive Pre-Import condition - Sl. No. 2(c) of Notification No 79/2017-Customs dated 13th October, 2017 and Notification No 33/2015-20 dated 13th October, 2017 - exemption to IGST/ Compensation cess. Held that - In the instant case, it appears that the petitioner fulfils Export obligation (EO) and then obtained AA for duty free import of inputs - Therefore the import is actually a replenishment of inputs used in the already exported goods. As such, it was averred that complying with condition No.1 cannot be fulfilled by the petitioner at the time of import of inputs. Similarly, the petitioner expresses difficulty in fulfilment of pre- import conditions in the absence of explicit definition for prehttp // import condition. Para 4.13 of FTP and Appendix 4J of HBP deals with pre import conditions. What is disallowed to the petitioner and allowed to others of the same class should be demonstrated by the petitioner. That is the test for arbitrariness. The petitioners had no occasion to demonstrate their case in the test of arbitrariness. Needless to mention, GST laws are a self contained legislations. The laws were promulgated after necessary constitutional amendments. The preposition that the GST levy subsumes the erstwhile levies of CVD and SAD in lieu of Excise duty and VAT can be of no avail to the petitioner. More so, the petitioner is estopped from claiming relief in view of Para 4.02 of the FTP that AAs are issued in accordance with the policies and procedures in force as on the date of the issue of Advance Authorization. The petitioner s plea of vagueness in the definition of pre-import condition is hollow - The principles of Lex Non Cogitadimpossibilia does not apply in this case as the scheme is an option and not a compulsion. The principles of Lex Non Cogitadimpossibilia does not apply in this case as the scheme is an option and not a compulsion - petitioner is directed to cooperate with the enquiry and DRI is directed to complete the enquiry at the earliest possible time - petition disposed off.

Summary

Issues:
Challenge to conditions in Notifications related to customs duties and GST exemptions, interpretation of Foreign Trade Policy provisions, impact of GST regime on duty exemptions, compliance with pre-import conditions, deferment of IGST exemption, legality of government policies, challenge to Directorate of Revenue Intelligence notice.

Analysis:
1. Challenge to Conditions in Notifications: The petitions sought to challenge specific conditions in Notifications related to customs duties and GST exemptions. The petitioners argued that these conditions were arbitrary, unconstitutional, and violated Article 14 of the Constitution of India. The court examined the legality and implications of these conditions in detail.

2. Interpretation of Foreign Trade Policy Provisions: The court analyzed the provisions of the Foreign Trade Policy (FTP) 2015-20, particularly regarding Advance Authorizations (AA) and Duty-Free Import Authorization (DFIA) schemes. The court considered the compatibility of these schemes with the new GST regime and the implications for duty exemptions under different export operations.

3. Impact of GST Regime on Duty Exemptions: The judgment discussed how the introduction of the GST regime affected duty exemptions under AA schemes. It highlighted the changes in exemptions for Integrated Goods and Services Tax (IGST) and Compensation Cess, emphasizing the deferment of IGST exemption and its impact on cash flow and interest liabilities for AA holders.

4. Compliance with Pre-Import Conditions: The court examined the concept of pre-import conditions in the context of fulfilling export obligations and the physical incorporation of inputs in exported goods. It analyzed the necessity of these conditions to prevent revenue risks and ensure compliance with FTP provisions.

5. Deferment of IGST Exemption: The judgment addressed the temporary restoration of IGST exemption for AA holders under specific conditions and sunset clauses. It discussed the rationale behind the deferment of IGST exemption and the government's policy considerations in implementing these changes.

6. Legality of Government Policies: The court deliberated on the legality and rationality of government policies related to duty exemptions, IGST deferment, and compliance with FTP provisions. It emphasized the government's authority in making policy decisions concerning revenue risks and export operations.

7. Challenge to Directorate of Revenue Intelligence Notice: In one of the petitions, the challenge was against a notice issued by the Directorate of Revenue Intelligence. The court directed the petitioner to cooperate with the enquiry and instructed the DRI to complete the investigation promptly, considering the complexities of GST laws and the deferment of exemptions.

8. Conclusion: Ultimately, the court dismissed the writ petitions while providing specific directions to the petitioners and the Directorate of Revenue Intelligence. It emphasized the nascent nature of GST legislation, the deferment of exemptions, and the need for cooperation in investigations. The judgment highlighted the government's policy decisions in the context of duty exemptions and export operations, underscoring the importance of compliance with legal provisions and policy frameworks.