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TMI Blog2019 (10) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... ashier, acts as a contract agreeing that the property in the goods purchased from DFS passes to such outbound passenger only when such outbound passenger lands at the final destination. Section 2(5) of the IGST Act defines export to mean taking goods out of India to a place outside India . In view of the above we are satisfied that supply by the DFS of the Petitioner to the outbound passenger constitutes exports by the DFS. Consequently, in terms of section 16(1) of the IGST Act, it becomes a zero rated supply - the Respondent-Authority has erroneously held that the Petitioner does not satisfy the crucial test of sending of the goods to foreign destination where they would be received as imports , to deny the benefits of zero rated supply. The import of goods in terms of section 2(10) of the IGST Act means bringing the goods into India from a place outside India. As per Section 7(2) of the IGST Act, goods imported into the territory of India, till such time it crosses the customs frontier of India, shall be treated to be a supply of goods in the course of inter-State trade and commerce. As per Section 2(4) of the IGST Act, the customs frontier of India means the limits of a customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Unnikrishnan i/b Crawford Bayely Co., for the Petitioner. Mr. Jitendra Brijbhushan Mishra for Respondent No. 1. Mr V. A. Sonpal, Special counsel with Mr. Himanshu Takke, Ms. Jyoti Chavan AGP for the Respondent-State. Mr. Vijay Jain i/b Mr. Sriram Sridharan for Respondent No. 5. Judgment [Per Ranjit More, J.] : 1. The criminal application bearing No.8 of 2019 is filed by the original petitioner seeking review of the order passed by us on 6th February 2019 in Criminal Public Interest Litigation No.14 of 2019. By the said order, we have dismissed the said PIL. Review is sought by the Applicant-Petitioner placing heavy reliance on an adjudication order passed by the Deputy Commissioner of Sales Tax, being Order-in-Original No. DC-E-636 / LTU-3 / Order of GST Refund Application / 2018-19 / B-355 Mumbai dated 10th January 2019. By the said order, the Deputy Commissioner of Sales Tax has denied to refund the input tax credit (for short ITC ) pursuant to sale of duty free goods from the duty free shops (for short, DFS ) at the departure area of airport. 2. The Petitioners in Writ Petition No.1511 of 2019 have taken exception to the very same adjudication order passed by the Deputy Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services, CHA services, professional services, etc., from different service providers located inside or outside the DFS area. (c) There are three types of transactions which are in issue - (I) Sales by DFSs to departing passengers. (ii) Sales by DFSs to arriving passengers. (iii) Receipt of input services by DFSs. (d) The words import and export are defined in the Customs Act, 1962. These words are identically defined in the Integrated Goods and Services Tax Act, 2017 (for short, the CGST Act ). (e) DFSs are located in customs station as defined in section 2(13) of the Customs Act, 1962. The Petitioner DFS has been issued a special warehouse licence under section 58A of the Customs Act. Both DFS and special warehouse are part of the customs area as defined in the Customs Act. The special warehouse, wherein the warehoused goods are stored before its sale from the DFS is unique and different from the other normal warehouses wherein other importers store their goods. It is for this reason that the special warehouse license is granted to the Petitioner under section 58A of the Customs Act, which is unique to the DFS business in India. (f) Accordingly, when the goods are imported by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/2004 dated 22nd July 2004 relating to Customs Procedures for Operation of DFS, which reads as under- 4.3 Customs supervision over sales shall be to ensure that persons other than an International passenger do not purchase goods from the DFS and passengers who purchase goods from DFS either board the aircraft leaving India or are cleared duly in the usual manner by customs. This may also be with reference to sale voucher issued. (l) Since 1st July 2019, undisputedly no tax paid indigenous goods are being procured by the Petitioner and being supplied to outbound international tourist. Notifications issued under section 55 of the CGST/SGST Act are thus not applicable, which is an optional provision applicable only qua the indigenous goods, and not applicable to imported/ warehoused goods sold from or in the customs area. Hence, the provisions of Rule 89 would continue to apply to the refund of ITC for zero rated supplies of imported/ warehoused goods by the DFS. (m) Since the Petitioner primarily procures imported goods without payment of duty, question of claiming ITC on imported goods does not arise. (n) On the input services received by the Petitioner, different service providers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t extends to the whole of State of Maharashtra. The DFS is located in Maharashtra limits and within India, since the international Airport itself is in India, and, therefore, the operations of the Petitioner are in taxable territory , where supplier and receiver are located in India at the time of supply. The taxable territory is defined in Section 2(109) of the Act as a territory to which the provisions of the Act apply. The non-taxable territory is defined in section 2(79) of the Act, as a territory outside the taxable territory. (v) It was contended on behalf of the Respondents that though under the Customs Act, 1962, the sale by DFS is treated as export , and the bills issued by DFS are treated as shipping bills, the same can not be ipso facto applicable under the GST laws. The CGST Act, the MGST Act, the IGST Act, Articles 246A and 279A of the Constitution of India are collectively Code in themselves, and there is no warrant to refer to any past or present statutes or other provisions of the Constitution; the DFS and passengers receiving goods, are located at airport within India. It was urged that In view of Section 19 of the Sale of Goods Act, 1930, the outbound passenger im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Respondents pressed into service following decisions / cases : (a) M/s. Deepmani vs. State of Maharashtra (Sale Tax Reference No.9 of 2002); (b) Burmah Shell Oil Storage and distributing Co. of India Ltd. vs. CTO [(1961) 1 SCR 902]; (c) Madras Marine Co. vs. State of Madras [(1986) 63 STC 0169 (SC)]; (d) Narang Hotels and Resorts Pvt. Ltd. vs. State of Maharashtra [(2004) 135 STC 289 (Bom)]; (e) Commissioner of Sales Tax vs. M/s. Pure Helium (India) limited [(2012) 49 VST 17]; (f) Commissioner of Sales Tax Maharashtra State vs. Radhasons International (Reference Application No. 46 of 2008); (g) K. Gopinath Nair vs State of Kerala 1992(4) SCC701, and (h) Decision of Authority for Advance Rulings in the matter of Rod Retail Private Limited dated 27th March 2018 vide AR No. 01/DAAR/2018 in Application No. 01/DAAR/2017. 8. Before we proceed further, it would be apposite to have a look of Article 286 of the Constitution of India, which reads thus : Article 286 Restrictions as to imposition of tax on the sale or purchase of goods (1) No law of a State shall impose, or authorize the imposition of a tax on the supply of goods or of services of both, where such supply takes place- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil appeal there-against was entertained by the Supreme Court, inter alia, on finding that when the legal position is very clear and the law is also in favour of appellant, it would not be in the interest of justice to relegate the appellant to the statutory authorities. Then, the Supreme Court has observed thus : 11. So as to substantiate his submission, the learned counsel relied upon several judgments including the judgments delivered in State of Travancore-Cochin v. Bombay Co. Ltd.-AIR 1952 SC 366, State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory AIR 1953 SC 533, J. V. Gokal Co. (p) Ltd. v. CST AIR 1960 SC 595 and Kiran Spg. Mills v. Collector of Customs-AIR 2000 SC 3448. 17. In our opinion, the facts stated by the counsel are not much in dispute. It is an admitted fact that the goods which had been brought from foreign countries by the appellant had been kept in bonded warehouses and they were transferred to duty-free shops situated at the International Airport of Bengaluru as and when the stock of goods lying at the duty-free shops was exhausted. It is also an admitted fact that the appellant had executed bonds and the goods, which had been brought from fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely by showing the aforestated factual aspects and legal provisions to the authority concerned, the appellant could have convinced the authority concerned that the sale effected at the duty-free shops of the appellant could not have been taxed by the State of Karnataka. 26. The learned counsel again submitted that in the course of import means the transaction ought to have taken place beyond the territories of India and not within the geographical territory of India . We do not agree with the said submission. When any transaction takes place outside the customs frontiers of India, the transaction would be said to have taken place outside India. Though the transaction might take place within India but technically, looking to the provisions of Section 2(11) of the Customs Act and Article 286 of the Constitution, the said transaction would be said to have taken place outside India. In other words, it cannot be said that the goods are imported into territory of India till the goods or the documents of title to the goods are brought into India. Admittedly, in the instant case, the goods had not been brought into the customs frontiers of India before the transaction of sales had taken pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Hotel Ashoka (Indian Tourism Development Corporation Limited) (supra). 14. Moreover, the decision of Authority for Advance Rulings in the matter of Rod Retail Private Limited dated 27th March 2018 vide AR no. 01/DAAR/2018 in Application No. 01/ DAAR/2017 which is relied upon by the Respondents was thereafter explained by the Central Board of Indirect Taxes Customs ( CBIC ) by issuing a clarification dated 29th May 2018 stating that advance ruling in the matter of Rod Retail Private Limited is not applicable to DFS and that the dispensation allowed to the DFS will not be effected in any manner. Further, CBIC also clarified that as per section 103 of Central Goods and Service Tax Act, 2017, this advance ruling applies only to the applicant, i.e. Rod Retail Private Limited, which was not a Duty-Free Shop but a Duty Paid Shop. 15. There is no merit in the submission of the Respondents that although the Customs Act treats the sale at DFS as export, the same cannot be ipso facto applicable under the GST Laws. Paragraph 4 of Circular No. 106/245/2019-GST dated 29th June 2019 issued by the Central Board of Indirect Taxes and Customs . GST Policy Wing of ministry of Finance, Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. 19. Property passes when intended to pass- (1) Where there is a contract for the sale of specific or ascertained goods the Property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. 19. In this context, in fact the judgment of this Court in the matter of Narang Hotels and Resort Pvt. Ltd. (supra), which has been relied upon by the Respondents actually supports the case of Petitioner, as seen from the following observations contained therein- 115. We may at this stage proceed to consider and find out the place of appropriation of contract in the light of the provisions of the Sale of Goods Act, 1930. It may be noted that exactly when property in goods passes from the seller to the buyer to the buyer depends on the intention of the parties. This intention may, at times, be clearly expressed. ...A contract of sale, like any other contract, is a consensual act in as much as parties are at liberty to settle, amongst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods before clearance for home consumption have been notified/ classified as activities or transactions which shall not be treated as a supply of goods. Accordingly, effective from 1st February 2019, sale of goods from arrival DFS falls under entry 8(a) of Schedule III to CGST/SGST Act; and further, section 17(2) of the CGST Act is amended according to which reversal of ITC pertaining to activity specified in Schedule-III is not required. Accordingly, the Petitioner is to claim ITC pertaining to arrival FS also. Once this ITC is eligible, refund of entire ITC pertaining to departure and arrival DFS is eligible, based on formula of refund prescribed in Rule 89. 24. It was pointed out on behalf of the Petitioner having DFSs, that the same Petitioner is getting refund of ITC pursuant to sales from their other DFSs in the departure area of other international airports within India. The said contention was not disputed by the Respondents. The GST regime is based on One nation, one tax theory . The authorities in the State of Maharashtra cannot give a discriminatory treatment, particularly when the refund has been and is being granted in several other States. 25. The impugned show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted tax in view of the Customs Notification No. 43/2017-Cus dated 30th June 2017 and IGST Notification No. 2/2017 IGST (rate) dated 28th June 2017. In view of the above exemption read with the duty free allowance available under the Baggage Rules applicable to arriving passengers, neither customs duty (upto the permitted baggage allowance) nor IGST is levied on such goods. Such import of goods by arriving passengers across custom frontier as passenger baggage is therefore an exempt supply under the GST, hence no IGST is payable by either the DFS on its imports, or on supply to arriving passengers. The arriving passengers are also not required to pay any IGST on crossing the custom frontiers, in view of the above exemption read with the duty free allowance under the Baggage Rules. 30. In the backdrop above, in our view, consequently, the charging provision that will get attracted is only the proviso to section 5 of the IGST Act, which again mandates two aspects: (a) the IGST will be levied only at the points when the duties of customs are levied on such goods under section 12 of the Customs Act read with Section 3 of the Customs Tariff Act, 1975; and (b) the point of levy under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. 34. Needless to say that if the duty free shop, which caters to the outgoing or incoming international passengers, is subjected to local taxes by the State, the tax burden will increase and the price of the goods, which are supposed to be free of taxes and duties, will go up, and the same would prevent the duty free shops in India from competing with DFSs at international airports elsewhere in the world. This will also hamper and prejudicially affect our foreign trade, and augmentation and conservation of foreign exchange. In our opinion, this will also negate the intent and purpose of Article 286 of the Constitution of India. 35. We are bound by the judgment of Constitution Bench in J. V. Gokal Co. (supra) which was followed by the Supreme Court in the matter of duty free shops in Hotel Ashoka ( supra), and also in the matter of Kiran Spinning Mills (supra). 36. In the backdrop of above, we are of the view that impugned order and the impugned show cause notice dated 10th January 2019 are manifestly arbitrary and in the teeth of the purpose and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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