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TMI Blog2024 (3) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... ties proposed to be undertaken by the Appellant are covered by entry 8(a), 8(b) or any other entry in Schedule III of CGST Act, 2017 or otherwise. All aspects of the matter are kept open for decision by the AAR. X X X X Extracts X X X X X X X X Extracts X X X X ..... process so as to expedite project execution. The Applicant submits that FTWZ is a Special Economic Zone wherein trading, warehousing and other activities related thereto are carried out. The Appellant submitted that the operation flow of the proposed transaction would be as follows: * The Appellant secures space in the FTWZ for a fee to store the imported goods from a unit holder. The Appellant executes required lease agreement with the FTWZ unit holder and deposits the goods from the port by filing Bill of Entry (BOE). FTWZ, owned and operated by independent third party merely clears and warehouses the goods imported. The FTWZ shall collect warehousing charges from the Appellant. * On receipt of purchase order from the customer, the Appellant places an order with the overseas supplier for required goods. Once the goods are shipped, the Applicant intimates the FTWZ unit holder and provides copy of the purchase order and other documents for clearance of goods from the port and storage of the same in FTWZ. The FTWZ unit clears the goods from the port by filing Bill of Entry on behalf of the Appellant and stores the same in the warehouse. The FTWZ unit hands over the import invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 are the legal framework, for FTWZ. Instructions are also issued by the Ministry of Commerce & Industries from time to time to clarify various operational aspects of FTWZ. Even though the day to day activities like warehousing and clearing of goods for home consumption on payment of applicable custom duties are supervised/ monitored by Customs officials posted in the FTWZ in accordance with SEZ Act, 2005 read with Customs Act, 1962, the approval/license/administrative control for FTWZ are fully governed under the provisions of SEZ Act, 2005. Therefore, FTWZ is not a warehouse licensed under Customs Act, 1962. Therefore, paragraph 8(a) in the Schedule III is specific to the warehoused goods lying in the warehouses licensed under Customs Act, 1962. 7.4.5. Whereas the transactions narrated in the application are in FTWG, which are warehouses governed under the provisions of SEZ Act, 2005 and not licensed under Customs Act, 1962. Therefore, the transactions in the FTWG narrated in question no.1 of the ARA , will not be covered under Schedule III of CGST Act, 2017 readwith CGST Amendment Act, 2018." 3. Aggri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions under customs. * Both bonded warehouse and FTWZ is required to execute bond with the customs in order to import and store the goods in warehouse without payment of any duty; Although the provisions of bonding by a bonded warehouse and bonding by an SEZ/ FTWZ is governed by different laws with differing obligations, the rationale of bonding imported goods remains the same, viz. to avail duty benefit under the Customs Act, 1962 and therefore, it is submitted that every SEZ becomes a bonded premises under the Customs Act, 1962 by virtue of the deeming fiction created by Section 53(2) of SEZ Act and Rules mentioned thereunder; In support of the submission that the FTWZ are custom bonded warehouses, reliance was placed on M/s AIE Fiber Resource and Trading (India) P. Ltd., 2021 (12) TMI 1265 - AAR, Telengana. * Reliance was placed on the following Advance Rulings passed by Tamil Nadu Advance Ruling Authority in case of: - The Bank of Nova Scotia - Order No. 23/AAR/2018 dated 31.12.2018 - Sadesa Commercial Offshore De Macau Limited - Order No. 24/AAR/2018 dated 31.12.2018 * The above Rulings were rendered in favour of the Appellant, wherein it was held that transfer of ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition is not defined in the SEZ Act, 2005 reference is required to be made to Sec 2(zd) which reads as follows: 2(zd) - all other words and expressions used and not defined in this Act but defined in the Central Excise Act, 1944, the Industries (Development and Regulation) Act, 1951, the Income-tax Act, 1961, the Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992 shall have the meanings respectively assigned to them in those Acts. * Sec 2(zd) of the SEZ Act, 2005 by way of referential legislation has adopted the meaning of "warehousing" from the Customs Act, 1962 for purpose of the said Act. * Sec 2(44) of the Customs Act, 1962 defines "warehoused goods" as follows: 2(44) "warehoused goods" means goods deposited in a warehouse * Provisions of the SEZ Act, 2005 read with relevant SEZ Rules, 2006 provides as under a) Sec 7 provides for exemption from duties, taxes and cesses; b) Sec 26 provides for exemptions from Customs Duties to FTWZ; c) Sec 51 has an overriding effect that notwithstanding anything inconsistent therewith contained in any other law for the time being in force ; d) Rule 27(10) of the SEZ R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the warehouse. * This accords with the reason for the treatment for "warehoused goods" under Sch III which is so as to avoid double taxation (a theme addressed in the GST Council Meetings recommending the above amendment to Sch III in 2019); This interpretation is also recognized by the Hon'ble CESTAT in a Customs matter where the interplay of Sec 5(2) of the IGST Act and Sec 3(7) of the CTA were examined in Interglobe Aviation Ltd 2020 (11) TMI 151 - CESTAT NEW DELHI. * Therefore, it is to be held that the goods stored in the FTWZ under the SEZ Act, 2005 will be covered within the scope of Sch III of the CGST Act. Hence, the Appellant prayed that the Appellate Authority may pass orders to set aside impugned order under Appeal and pass such other orders, as deemed fit. PERSONAL HEARING: 5. The Appellant was given an opportunity to be heard vide virtual hearing on 11.12.2023. The Authorized Representative (AR), Shri S Thirumalai, Advocate, appeared for the virtual hearing and reiterated the submissions made in their grounds of appeal as well as in their additional submissions submitted on 11.12.2023. DISCUSSION AND FINDINGS: 6.1 We have carefully consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AAR held that therefore, the transactions in the FTWG narrated in question raised in the application, will not be covered under Schedule III of CGST Act, 2017 read with CGST Amendment Act, 2018. 6.4. We find that the Appellant, in their Grounds of Appeal, for the first question, has mainly contended that their proposed transaction would be squarely covered under paragraph 8(b) of Schedule III to the Act ibid, which states that "8(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption." Further, the Appellant in their additional submissions, has stated inter alia that, specifically mentioning that SEZ Act, 2005 by way of referential legislation has adopted the meaning of "warehousing" from the Customs Act, 1962 for purpose of the said Act. The Appellant has also placed reliance on the ruling No. 30/2021 dated 24.12.2021 passed by the AAR, Telengana in the case of M/s AIE Fiber Resource and Trading (India) Private Limited, wherein it was held that the transactions proposed to be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me consumption does not amount to supply u/s 7 of the CGST Act, 2017 r/w CGST Amendment Act, 2018. c. Advance ruling pronounced by Tamil Nadu Advance Ruling Authority which are in their favour, in the case of: i. The Bank of Nova Scotia-Order No. 23/AAR/2018 dated 31.12.2018. ii. Sadesa Commercial Offshore De Macau Limited-Order No. 24/AAR/2018 dated 31.12.2018. 6.8. We observe that the AAR has not answered the question raised by the Appellant in its entirety, by restricting their findings to only para 8(a) of the said Schedule. The AAR ought to have discussed the para 8(b) of said Schedule, which is also relevant provision of law to the activity proposed to be undertaken by the Appellant, when the Appellant had raised the question in general as to whether their proposed activity would be covered under Schedule III of the CGST Act, 2017. Further, we find that the Appellant has brought in points regarding FTWZ to be treated as Customs bonded warehouse in their original application which were not discussed in the ruling passed by the AAR. Also, the AAR has not discussed about the Advance rulings pronounced by the TN AAR in similar issues, which were cited by the Appellant in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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