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2021 (1) TMI 577 - AT - CustomsLevy of IGST on re-import of aircrafts and parts thereof after repairs - Exemption from IGST - Availability of Integrated Goods and Service Tax exemption provided at serial no. 2 in the General Exemption Notification No. 45/2017 dated June 30 2017 as amended by Corrigendum Notification dated July 22 2017 - Validity of order that upholds the orders of assessment of Bills of Entry as a result of which all the appeals have been dismissed by the Commissioner (Appeals) - HELD THAT - There is no dispute that it is serial no. 2 of the Exemption Notification that is applicable to aircrafts/ parts re-imported into India after repairs. What would therefore be payable in terms of serial no. 2 would be the duty of customs on the fair cost of repairs carried out including cost of materials used in repairs insurance and freight charges both ways. The Exemption Notification does not define the phrase duty of customs. However section 2(15) of the Customs Act defines duty to mean duty of customs leviable under the Customs Act - 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 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 levaible 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. 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. 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. It also needs to be noted that the term integrated tax has not been defined either under the Customs Act or the Customs Tariff Act or under the Exemption Notification. As integrated tax is not levied under section 12 of the Customs Act it cannot be called duty of customs . The charging section for integrated tax in terms of which it is levied is section 5 of the Integrated Tax Act and not section 3(7) of the Tariff Act. Section 3 (7) of the Tariff Act only provides for the manner of collection of the said integrated tax to be done by the Customs Authorities in case of import of goods - This is what was observed by the Madras High Court in M/S. VEDANTA LIMITED VERSUS UNION OF INDIA THE DIRECTORATE GENERAL OF FOREIGN TRADE THE DEPARTMENT OF REVENUE INTELLIGENCE AND THE CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS 2019 (1) TMI 85 - MADRAS HIGH COURT . It would also be appropriate to refer to the judgment of Bombay High Court in DEVIDAYAL ELECTRONICS WIRES LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER 1981 (1) TMI 78 - HIGH COURT OF JUDICATURE AT BOMBAY - The Bombay High Court held that since the Notification used the word factory and also the word industrial unit in the same Notification it has to be assumed that the said two words were intended to bear different meanings. The Court therefore held that the words industrial unit must mean something other than factory . It can be concluded that 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. The Appellant is thus entitled to exemption from payment of integrated tax under the Exemption Notification on reimport of repaired parts/ aircrafts into India - appeals are accordingly allowed.
Issues Involved:
1. Availability of Integrated Goods and Service Tax (IGST) exemption on re-imported aircrafts and parts after repairs under Exemption Notification No. 45/2017. 2. Interpretation of "duty of customs" in the context of the Exemption Notification. 3. Whether integrated tax is included in "duty of customs" for the purpose of the Exemption Notification. Detailed Analysis: 1. Availability of IGST Exemption on Re-imported Aircrafts and Parts: The central issue in these appeals was whether the appellant, a scheduled airline operator, was entitled to claim exemption from IGST on re-imported aircrafts and parts after repairs under Exemption Notification No. 45/2017. The Commissioner of Customs (Appeals) had upheld the assessment orders which levied IGST on the fair cost of repairs and the cost of insurance and freight charges, both ways, rejecting the appellant's claim for exemption. 2. Interpretation of "Duty of Customs": The Appellant argued that the term "duty of customs" in the Exemption Notification should not include IGST. They contended that the notification clearly separates "duty of customs" from "integrated tax," implying that IGST is wholly exempted under the notification. The Customs Authorities, however, interpreted "duty of customs" to include both basic customs duty and IGST, thus rejecting the appellant's claim for full exemption from IGST. 3. Whether Integrated Tax is Included in "Duty of Customs": The Tribunal examined various sections of the Customs Tariff Act, 1975, and the Customs Act, 1962, to determine the correct interpretation. It was noted that: - Section 2(15) of the Customs Act defines "duty" as a duty of customs leviable under the Customs Act. - Section 12 of the Customs Act specifies that duties of customs shall be levied at rates specified under the Customs Tariff Act or any other law. - Section 3 of the Customs Tariff Act deals with additional duties, including IGST, but does not refer to them as "duties of customs." The Tribunal concluded that "duty of customs" as mentioned in the Exemption Notification refers only to the basic customs duty and not to IGST. This interpretation was supported by various judicial precedents, including the Supreme Court's rulings in Prestige Engineering (India) Limited vs. Collector of C. Excise, Meerut, and Collector of Customs, Madras vs. Indian Organic Chemicals Limited, which clarified that additional duties under section 3 of the Tariff Act are not considered "duty of customs" for the purposes of notifications issued under the Customs Act. Conclusion: The Tribunal held that the appellant was entitled to exemption from payment of IGST under the Exemption Notification on re-import of repaired parts/aircrafts into India. The order dated September 12, 2018, passed by the Commissioner (Appeals) was set aside, and the appeals were allowed. The Tribunal emphasized that the term "duty of customs" in the Exemption Notification does not include IGST, which is levied under the Integrated Goods and Services Tax Act, 2017. Additional Observations: - The Tribunal noted that the appellant is undergoing a corporate insolvency resolution process as directed by the National Company Law Tribunal at Mumbai. - The Tribunal did not find it necessary to address the remaining contentions regarding the nature of the repair activity as a supply of service or its classification under the Integrated Tax Act. Order dictated and pronounced on January 13, 2021.
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