2020 (11) TMI 151 - AT - Customs

Exemption from IGST - Re-import of aircrafts and parts thereof after repairs - Availability of Integrated Goods and Service Tax the Integrated Tax exemption provided at serial no. 2 in the General Exemption Notification No. 45/2017 dated June 30, 2017 - HELD THAT - A bare perusal of section 12(1) of the Customs Act shows that duties of customs shall be levied at such rates as are specified under the Tariff Act or any other law for the time being in force, on goods imported into, or exported from India. The contention of the learned Authorized Representatives of the Department is that section 12(1) of the Customs Act leaves no manner of doubt that duties of customs are levied not only under the provisions of the Customs Act and the Tariff Act but also under any other law for the time being in force . Thus, the integrated tax leviable on imported goods by the Integrated Tax Act would also be a duty of customs and, therefore, the Appellant was correctly denied exemption from integrated tax leviable under section 3(7) of the Tariff Act - even the levy of additional duty under section 3 of the Tariff Act, which is in addition to the duty of customs under section 2 of the Tariff Act, would not be duty of customs for the purpose of Notifications issued under the Customs Act. It is, therefore, clear that though integrated tax is levied under section 5 of the Integrated Tax Act, but it is collected in accordance with the provisions of section 3 of the Tariff Act on the value as determined under the Tariff Act and at the point when duties of customs are levied under section 12 of the Customs Act. Thus, integrated tax is levied under section 5(1) of the Integrated Tax Act and only the procedure for collection has been provided under section 3 of the Tariff Act. A perusal of the main body of the Exemption Notification would indicate that it 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 which are leviable thereon respectively under sub-sections (7) and (9) of section 3 of the Tariff Act. However, column (3) of the Table accompanying the main Notification for serial no. 2 refers to only duty of customs (without mentioning leviable thereon which is specified in the First Schedule ), on the fair cost of repairs carried out with insurance and freight charges - It is not possible to accept this reasoning advanced by the learned Authorised Representatives of the Department. In the first instance, the meaning assigned to duty of customs, as discussed above, is the meaning assigned to duty under section 2(15) of the Customs Act, which would be the duty leviable under section 12 of the Customs Act. Mere omission to mention specified in the First Schedule to the Tariff Act after Duty of customs in the conditions set out in column (3) of the Table for Serial No. 2 cannot lead to an inference that duty of customs would include integrated tax and compensation cess. It would also be relevant to refer to the entries at serial no. 1 of the Exemption Notification. Serial no. 1 specifically refers to what types of duties or taxes are leviable under different situations. There is a specific reference to integrated tax in column (3) in connection with serial no. 1 (d) and to integrated tax and compensation cess in connection with serial no. 1(e). There is, therefore, enough intrinsic evidence in the Exemption Notification itself to show that integrated tax cannot be understood as duty of customs in the Exemption Notification. Thus, the absence of mention of integrated tax and compensation cess in column (3) under serial no. 2 of the Exemption Notification would mean that only the basic customs duty on the fair cost of repair charges, freight and insurance charges are payable and integrated tax and compensation cess are wholly exempted - It would, therefore, not be necessary to examine the contention of learned Authorised Representatives of the Department that in case of any ambiguity in an Exemption Notification, the benefit should go to the Revenue. It would also not be necessary to examine the remaining contentions advanced by the learned Counsel for the Appellant that the activity of repairs is supply of service or that the said activity would not fall under the category of import of service under the Integrated Tax Act since the necessary ingredients mentioned therein have not been fulfilled. The Appellant is entitled to exemption from payment of integrated tax under the Exemption Notification on re-import of repaired parts/ aircrafts into India - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Availability of Integrated Goods and Service Tax (Integrated Tax) exemption under General Exemption Notification No. 45/2017 for re-imported aircrafts and parts after repairs.
2. Interpretation of "duty of customs" in the context of the Exemption Notification.
3. Whether integrated tax is included within the scope of "duty of customs" under the Exemption Notification.
4. Applicability of integrated tax on re-imported repaired parts/aircrafts.

Detailed Analysis:

Issue 1: Availability of Integrated Tax Exemption

The primary issue in these appeals is the availability of Integrated Tax exemption under serial no. 2 of the General Exemption Notification No. 45/2017, as amended, for aircrafts and parts re-imported into India after repairs. The Appellant, a scheduled airline operator, claimed exemption from integrated tax on re-imported repaired parts/aircrafts. The Customs Authorities, however, contended that the Appellant was not entitled to full exemption from integrated tax, interpreting "duty of customs" to include both basic customs duty and integrated tax.

Issue 2: Interpretation of "Duty of Customs"

The Exemption Notification exempts goods re-imported into India from so much of the duty of customs specified in the First Schedule and integrated tax and compensation cess under section 3(7) and (9) of the Tariff Act. The Appellant argued that "duty of customs" should not include integrated tax, relying on the definition provided in section 2(15) of the Customs Act, which defines "duty" as duty of customs leviable under the Customs Act.

Issue 3: Inclusion of Integrated Tax in "Duty of Customs"

The Customs Authorities argued that the term "duty of customs" in the Exemption Notification includes integrated tax, as integrated tax is also collected under section 3 of the Tariff Act. However, the Tribunal held that "duty of customs" refers only to basic customs duty as specified under section 12 of the Customs Act and does not include integrated tax, which is levied under section 5 of the Integrated Tax Act.

Issue 4: Applicability of Integrated Tax

The Tribunal examined the relevant sections of the Customs Tariff Act, the Customs Act, and the Integrated Tax Act, concluding that integrated tax is not a duty of customs but a separate levy under the Integrated Tax Act. The Tribunal noted that integrated tax is collected by Customs Authorities for convenience but is not a part of the "duty of customs" as defined under the Customs Act.

Conclusion:

The Tribunal concluded that the expression "duty of customs" in the Exemption Notification does not include integrated tax. Therefore, the Appellant is entitled to exemption from integrated tax on re-imported repaired parts/aircrafts under the Exemption Notification. The Tribunal set aside the 346 orders passed by the Commissioner (Appeals) and allowed the appeals, granting the Appellant the claimed exemption from integrated tax.