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TMI Blog2024 (6) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... n of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as an Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s. Sunwoda Electronic India (P) Ltd., No. 199, 200/2, C/o Snowman Logistics Limited, Nayapakkam Main Road, Near ETA Apartments, Irrungattukottai, Sriperumbudur Taluk, Mevalurkuppam, Kancheepuram, Tamil Nadu, 602105 (hereinafter called as 'the Applicant*) who are engaged in the business of importing and trading Portable Lithium System Batteries classifiable under 85076000, are registered under GST with GSTIN 33AAXCS8681F1ZN. 2 The Applicant enters into a contract with an Original Equipment Manufacturer (OEM in short) licensed under Section 65 of the Customs Act, 1956, read with Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 (MOOWR in shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where is" basis to OEM's MOOWR unit * The applicant negotiates and executes the sale of said goods on "as is where is" basis to OEM's MOOWR unit through a formal contract of sale. * In this step of transaction, the Commercial Invoice and Packing list carry Bill From' party as M/s. Sunwoda (the Applicant), and the 'Ship From' party as DHL (the 3P FTWZ). * Further, the Bill to' party would be OEM customer name and address, and the 'Ship to' party would be the OEM Customer's MOOWR unit and its address, which does not alter the fact that the Applicant sell the goods lying in FTWZ warehouse to OEM's MOOWR unit by transfer of title. STEP 3 - Clearance/movement of goods from 3P FTWZ to MOOWR Warehouse * For effecting the movement of goods, the OEM's MOOWR unit provides the authorization to file Bill of Entry, IEC/GST/AD Code, Warehouse license and WH code to DHL. * This type of movement is permissible in terms of CBIC's Circular No. 48/2020-Customs dated 27.10.2020 which has clarified that a Section 65 unit (a MOOWR Warehouse) may source capital goods and inputs from a SEZ/FTWZ, following the applicable procedures, and that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the contract, the said goods are imported by the applicant from abroad to a third-party Free Trade Warehousing Zone ("3P FTWZ") in India. The goods are sold to the OEM's MOOWR unit while lying in the 3P FTWZ and are cleared under bond by the OEM's MOOWR unit, on need basis. * The applicant stated that this type of movement is permissible in terms of CBIC Circular No. 48/2020-Customs dated 27.10.2020 which has classified that a Section 65 unit (a MOOWR Warehouse) may source capital goods or inputs from a SEZ/FTWZ unit, following the applicable procedures. They further stated that this type of movement of goods from FTWZ to bonded warehouse is governed by Rule 46 (13) of the SEZ Rules, 2006 read with Instructions No. 63 dated 10.08.2010 (No. C.3/21/2009-SEZ). The applicant and its customers i.e., OEM's MOOWR unit duly comply with the said provisions. * Under GST, the taxable event is 'supply'. Section 7 (1) (a) of the CGST Act explains the scope of the term 'supply' in an expansive manner to include all forms of supply of goods. However, Section 7 (2) (a) of the CGST Act provides that notwithstanding anything contained in sub-section (1), activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arehousing and other activities related thereto are carried on. Further, as per Section 53 of the SEZ Act, 2005 a Special Economic Zone is deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. Resultantly, it is submitted that when the goods are warehoused in an FTWZ (SEZ), the said goods have not entered home consumption as the goods are stored in an area which is beyond the customs frontiers of India. In this regard, reliance is placed on the decision of Covema Wood Blast Vs. State of Kerala [2006 (334) E.L.T. 649 (Ker.)] Thus, as far as the sale by the applicant and the movement of the same to the MOOWR warehouse is concerned, it is submitted that the same is covered by Para 8 (a) of Schedule III to the CGST Act. In this regard, the applicant place reliance on the decision of the Authority of Advance Ruling, Tamil Nadu in the case of M/s. The Bank of Nova Scotia., 2019 (2) TMI 195 - AUTHORITY FOR ADVANCE RULING, TAMILNADU, M/s Sadesa Commercial Offshore De Macau Limited, 2019 (2) TMI 194-AUTHORITY FOR ADVANCE RULING, TAMILNADU, and M/s AIE Fiber Resource and Trading (India) Private Limited, 2021 (12) TMI 1265 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a territory outside the customs territory of India in terms of Section 53 and Section 2 (za) of the SEZ Act. Further, in terms of Section 51, said deeming fiction is given an overriding effect over any other law. Consequently, it is submitted that supply of goods lying in FTWZ on "as is where is basis" which is cleared by the customer to its MOOWR Warehouse would be a transaction falling under Para 7 of Schedule III on account of the deeming fiction treating the FTWZ to be outside the customs territory of India. * Therefore, in view of the above submissions, the applicant has submitted that GST is not leviable on the sale of applicant's goods warehoused in a third-party Free Trade Warehousing Zone ("3P FTWZ") on "as is where is" basis to customer who clears the same to bonded warehouse under MOOWR Scheme. PERSONAL HEARING 8.1 The Applicant, was given an opportunity to be heard in person on 10.01.2024. Ms. Sahana, Advocate and the Authorised Representative (AR), Mr. Pavan Varshiney, Sr. Manager (Customs 8s Logistics), and Mr. Randhir Yadav, Sr. Manager (Finance & Taxation) of M/s. Sunwoda Electronics India (P) Ltd., appeared for the personal hearing. The AR reiterated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehousing agreement, happens to be M/s. DHL Supply Chain India (P) Ltd., (DHL in short). On perusal of the "Warehousing, Logistics and Customs Clearance Services Agreement" dated 21.06.2023, it is seen that the said agreement has been entered into by the applicant with DHL for the purpose of provision of FTWZ warehousing, storage, safekeeping, customs clearance, transportation and other subsidiary services by DHL to the applicant. Further, as per 'Article 4 Customs Clearance' of the agreement, DHL acts for the applicant in processing the declaration of inbound/outbound FTWZ warehouse, and as per 'Article 5 Transportation', DHL is responsible for the safe transportation of the applicant's goods. 9.4.1 Moving on to the legalities impacting the instant case, it is seen that as per Section 2 (n) of the Special Economic Zones Act, 2005 (SEZ Act in short), "(n) "Free Trade and Warehousing Zone" means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on;" And as per Section 2 (za) of the SEZ Act, "(za) "Special Economic Zone" means each Special Economic Zone notified under the proviso to sub-section (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lineated duly free enclave which is deemed to be a foreign territory for the purposes of trade operations and duties and tariffs. Normally, the applicant imports goods and stores them in FTWZ till he finds a local customer who will purchase the goods and such purchaser clears the goods under the Customs Act. In other words, the goods would become exigible to tax under the domestic enactments only when they are released for home consumption. 9.4.5 This fact was reiterated in the CBIC Circular No. 3/1/2018-IGST dated 25.05.2018, the excerpts of which are reproduced below: "3. It is seen that the "transfer/sale of goods while being deposited in a customs bonded warehouse" is a common trade practice whereby the importer files an into-bond bill of entry and stores the goods in a customs bonded warehouse and thereafter, supplies such goods to another person who then files an ex-bond bill of entry for clearing the said goods from the customs bonded warehouse for home consumption. 4. It may be noted that as per sub-section (2) of section 7 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the "IGST Act"), the supply of goods imported into the territory of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood rescinded by way of another Circular No. 04/01/2019-GST dated 01.02.2019, which read as below: "The provisions of the CGST (Amendment) Act, 2018 and SGST Amendment Acts of the respective States have been brought into force w.e.f 01.02.2019. Schedule III of the CGST Act, 2017 has been amended vide section 32 of the CGST (Amendment) Act, 2018 so as to provide that the "supply of warehoused goods to any person before clearance for home consumption" shall be neither a supply of goods nor a supply of services. 2. Accordingly, Circular No. 03/01/2019-IGST dated 25th May, 2018 is hereby rescinded." 9.5 It may be noted that though the IGST Act, 2017 has self-containing provisions relating to 'Levy and collection of Tax', it does not contain the provisions relating to 'Scope of supply', 'time and value of supply', 'input tax credit', 'demand and recovery', etc. The provisions of Central Goods and Services Tax Act, 2017 applies mutatis mutandis in relation to integrated tax in respect of such provisions, as provided under Section 20 of the IGST Act, 2017. Therefore, with the amendment to Schedule III of the CGST Act, 2017 with effect from 01.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der other Acts are also borrowed, as the case may be, as specified under Section 2 (zd) of the SEZ Act, which reads as, "(zd) all other words and expressions used and not defined in this Act but de fined in the Central Excise Act, 1944 (1 of 1944), the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Income-tax Act, 1961 (43 of 1961), the Customs Act, 1962 (52 of 1962) and the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) shall have the meanings respectively assigned to them in those Acts." Therefore, the 'warehoused goods', as specified in clause 8 (a) of the Schedule III, covers the warehouses/warehoused goods in respect of the FTWZ/SEZ, being discussed in the instant case, as well. 9.8 On perusal of the documents towards import of the goods in question, furnished by the applicant, it is seen that apart from the Invoice, Packing list and the Airway Bill, the Bill of Entry vide Sl.No. 1005705 dated 07.07.2023 in the instant case has been filed as "Bill of Entry for Warehousing" where under the importer's details, the SEZ Entity has been referred as M/s. DHL Supply Chain India (P) Ltd., and the client (Indian) has been referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to transfer goods to a bonded warehouse without payment of duty, and it runs as below: "(13) The Authorized Officer may permit a Unit to transfer goods to an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio-technology Park Unit or to a bonded warehouse, without payment of duty subject to following conditions, namely." On perusal of the documents furnished by the applicant in relation to the execution of sale of said goods on "as is where is" basis to OEM's MOOWR unit, it is seen that M/s. Foxconn Hon Hai Technology India Mega Development (P) Ltd., has entered into a Purchase Agreement dated 22.07.2019 with the applicant, and the Bill of Entry vide Sl. No. 2006353 dated 15.07.2023 in the instant case has been filed as "Bill of Entry for Warehousing (SEZ to Bonded Warehouse [Rule 46 (13)])" where the importer's name has been referred as M/s. Foxconn Hon Hai Technology India Mega Development (P) Ltd., and under the supplier details, SEZ Entity has been referred as M/s. DHL Supply Chain India (P) Ltd., and the client (Indian) has been referred as M/s. Sunwoda Electronic India (P) Ltd. It is also seen that the said BOE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exported, the duty on the imported inputs (both BCD and IGST) stands remitted i.e. they will not be payable. The duty deferment is without any time limitation." 9.14 In fine, we find that when the imported goods are warehoused, as long as the said goods are not cleared for home consumption, duties under Customs including IGST are not required to be discharged. Specifically, the legal position of such cases became much clearer, after the amendment whereby clauses 7 and 8 were added with effect from 01.02.2019 to Schedule III of the CGST Act, 2017, which talks about 'Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services'. 9.15 We therefore hold that the instant case of the applicant, where the imported goods stored in a 3P FTWZ warehouse, is being moved to the Bonded Warehouse (MOOWR) on effecting a sale to an OEM's MOOWR unit, taxes under GST are not leviable, as the transaction gets squarely covered under clause 8 (a) of the Schedule III of the CGST Act, 2017, which reads as "Supply of warehoused goods to any person before clearance for home consumption". 10. Based on the above discussions, we rule as under: RULING ..... X X X X Extracts X X X X X X X X Extracts X X X X
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