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2021 (1) TMI 726 - AT - CustomsAvailability of IGST exemption - aircrafts and parts thereof that are re-imported into India after repairs - serial no. 2 in the General Exemption Notification No. 45/2017 dated June 30, 2017, as amended by Corrigendum Notification dated July 22, 2017 - HELD THAT - It is in exercise of the power conferred by sub-section (1) of section 25 of the Customs Act that the Exemption Notification has been issued. The Central Government exempted 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 of 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 Table - The Exemption Notification makes reference to the Tariff Act. Section 12 of the Customs Act also provides that duties of customs on goods imported into India shall be levied at such rates as may be specified under the Tariff Act. Section 2 of the Tariff Act provides that the rates at which duties of customs shall be levied under the Customs Act are specified in the First and the Second Schedules. Section 3 of the Tariff Act deals with levy of additional duty equal to excise duty, sales tax, local taxes and other charges. 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. It is clear that 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. Integrated Tax has been defined under section 2(12) of the Integrated Tax Act to mean the integrated goods and services tax levied under the Integrated Tax Act. Section 5 of the Integrated Tax Act deals with levy and collection. It provides that there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both on the value as determined under section 15 of the Central Goods and Services Act and at such rates, not exceeding 40 per cent as may be notified by the Government. The proviso stipulates that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Tariff Act on the value as determined under the Tariff Act at the point when duties of customs are levied on the said goods under section 12 of 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 for this reason that it has been contended by the learned Authorised Representative of the Department that omission to mention specified in the said First Schedule in the conditions set out in column (3) of the Table for serial no. 2 after Duty of customs , would mean that the Government intended to include integrated tax and compensation cess in the expression duty of customs . 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 - the additional duty leviable thereon under Section 3 of the Tariff Act and special duty of customs leviable under section 68(1) of the Finance Act have been replaced by the integrated tax under section 3(7) and compensation cess under section 3(9) of the Tariff Act. It cannot, therefore, be contended that duty of customs referred to in the condition against serial no. 2 of the Exemption Notification would include integrated tax. The inevitable conclusion that follows from the aforesaid discussion is 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 415 orders passed by the Commissioner (Appeals) are, accordingly, set aside and it is held that 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.
Issues Involved:
1. Availability of Integrated Goods and Service Tax (Integrated Tax) exemption under General Exemption Notification No. 45/2017 for re-imported aircraft parts after repairs. 2. Interpretation of "duty of customs" in the context of the Exemption Notification. 3. Applicability of integrated tax as a part of "duty of customs." Issue-wise Detailed Analysis: 1. Availability of Integrated Goods and Service Tax (Integrated Tax) Exemption: The Appellant, a scheduled airline operator, re-imports aircraft parts after repairs and claims exemption from integrated tax under Exemption Notification No. 45/2017. The Customs Authorities denied this exemption, arguing that "duty of customs" includes both basic customs duty and integrated tax. The Tribunal examined the relevant sections of The Customs Tariff Act 1975 and the Exemption Notification, concluding that "duty of customs" does not encompass integrated tax. The Tribunal held that the Appellant is entitled to exemption from integrated tax on re-imported repaired parts/aircrafts. 2. Interpretation of "Duty of Customs": The Tribunal analyzed the definition of "duty" under Section 2(15) of the Customs Act, which refers to "duty of customs" leviable under the Customs Act. It was concluded that integrated tax, levied under Section 5 of the Integrated Goods and Service Tax Act, is not included in the "duty of customs" as per the Customs Act. The Tribunal emphasized that the Exemption Notification specifically distinguishes between "duty of customs" and "integrated tax," indicating they are separate entities. 3. Applicability of Integrated Tax as Part of "Duty of Customs": The Tribunal considered various judicial precedents and the structure of the Exemption Notification. It was noted that the Notification refers to "duty of customs" and "integrated tax" separately, implying that integrated tax is not part of "duty of customs." The Tribunal also referenced past judgments, which supported the interpretation that "duty of customs" does not include additional duties or taxes like integrated tax. Consequently, the Tribunal concluded that the Appellant is exempt from integrated tax on re-imported repaired parts/aircrafts. Conclusion: The Tribunal set aside the 415 orders passed by the Commissioner (Appeals), ruling that the Appellant is entitled to exemption from integrated tax under the Exemption Notification. The Tribunal allowed all 415 appeals, emphasizing that "duty of customs" does not include integrated tax, and the Appellant should not be liable for integrated tax on re-imported repaired parts/aircrafts.
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