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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 ..... at the supply of goods before their clearance from the warehouse would not be subject to the levy of Customs duty or integrated tax and that the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse - 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. It is found 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'. It is held 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t) licensed under Section 65 of the Customs Act, 1956, read with Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 (MOOWR in short) for supply of imported Portable Lithium System Batteries. In order to perform the contract, the said goods are imported by the Applicant from abroad to a third party Free Trade Warehousing Zone (3P FTWZ in short) 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. Under these circumstances, the applicant have filed an application seeking Advance Ruling on the following question Whether, in the facts and circumstances of the case, GST is leviable on the sale of Applicant's goods warehoused in a third-party Free Trade Warehousing Zone ( 3P FTWZ33) on as is where is basis to customer who clears the same to bonded warehouse under MOOWR Scheme? 3.1 The Applicant submitted a copy of challan vide CIN ICIC23083300470645 dated 22.08.2023 evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017. 3.2 The authorities of the Centre and State were addressed to report i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital goods and inputs from a SEZ/FTWZ, following the applicable procedures, and that the same is governed by Rule 46 (13) of the Special Economic Zones Rules, 2006 read with Instruction No. 63 dated 10.08.2010 (No. C.3/21/20098-SEZ). DHL files the Bill of Entry (Bonded Warehouse) at 3P FTWZ Customs for arranging the Space Certificate by the customer, i.e., OEM's MOOWR unit and upon receipt of the same, the Bill of Entry gets assessed with duty foregone for warehousing in another MOOWR (bonded) Warehouse. DHL then arranges the movement of goods from 3P FTWZ based on the quadruplicate BOE, Space Certificate and E-Way bill issued along with commercial invoice. On receipt of the said goods at MOOWR warehouse, the customer arranges the Re-warehouse certificate within 45 days to complete the transaction, after which the customer can use the goods for their export or it can be used for local supply on payment of customs duty. The instant application seeks determination of GST implication of Step 2 supra, i.e., whether GST is leviable on the sale of goods warehoused in 3P FTWZ on as is where is basis to customer who clear the same to bonded warehouse under the MOOWR Scheme. 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thstanding anything contained in sub-section (1), activities or transactions specified in Schedule III of the CGST Act, 2017 shall be treated neither as a supply of goods nor a supply of services. Para 7 and 8 with Explanation 2 therein to Schedule III is extracted below for ease of reference: 7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. 8. (a) Supply of warehoused goods to any person before clearance for home consumption; (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. Explanation 1.- For the purposes of paragraph 2, the term court includes District Court, High Court and Supreme Court. Explanation 2.- For the purposes of paragraph 8, the expression - warehoused goods shall have the same meaning as assigned to it in the Customs Act, 1962. The Customs Act, 1962 defines the expression warehoused goods and warehouse hereunder: (44) warehoused goods means goods deposited in a warehouse; (43) warehouse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1265 - AUTHORITY FOR ADVANCE RULING, TELANGANA. In addition to applicant's claim that the sale of applicant's goods warehoused in 3P FTWZ on as is where is basis to customer who clears the same to bonded warehouse under MOOWR Scheme is covered under Para 8 (a) of Schedule III of the CGST Act, 2017, the applicant also stated that their aforementioned transaction also falls under Para 7 of the Schedule III of the CGST Act, 2017. Para 7 of Schedule III covers the supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. Section 2 (79) of the CGST Act defines 'non-taxable territory' to mean the territory which is outside the taxable territory. Further, Section 2 (109) of the CGST Act defines 'taxable territory' to mean the territory to which the provisions of the CGST Act applies. Section 1 of the CGST Act provides that the Act extends to the whole of India. The term 'India' has been defined in Section 2 (56) to mean the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of filing the application. In addition to the same, they furnished an additional submission along with the relevant legal provisions and the case laws, rulings, etc., that they intended to rely on, in relation to this case. 8.2 In the additional submissions furnished by them during the personal hearing, they reiterated the following aspects, viz., (i) Sale of Applicant's goods is covered by Para 8 (a) of Schedule III. (ii) Public Notice 16/2021 dated 05.04.2021 supports Applicant's stand. (iii) Advance Ruling No. 23/ARA/2023 dated 20.06.2023 in the case of M/s. Haworth India Private Limited, is not applicable to the applicant, as the said ruling was issued in different factual scenario. (iv) Without prejudice to the foregoing, sale of Applicant's goods is covered by Para 7 of Schedule III. 8.3 The applicant filed further submissions dated 20.03.2024, wherein they highlighted the fact that the Advance Ruling No. 23/ARA/2023 dated 20.06.2023 as referred above, in the case of M/s. Haworth India Private Limited, has also been set aside recently and remanded to the Lower Authority for reconsideration and passing of appropriate order by the Tamilnadu Appellate Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding Free Trade and Warehousing Zone) and includes an existing Special Economic Zone; It is clear from the above, that a Free Trade Warehousing Zone (FTWZ) gets covered as a Special Economic Zone (SEZ), within the meaning of the term. Further, as per Rule 8 (5) of the SEZ Rules, 2006, (5) The Units in Free Trade and Warehousing Zones or units in Free Trade and Warehousing Zone set up in other Special Economic Zone, shall be allowed to hold the goods on account of the foreign supplier for dispatches as per the owner's instructions and shall be allowed for trading with or without labelling, packing or repacking without any processing. 9.4.2 The SEZ link to Customs Act, is established under Section 53 of the SEZ Act, which runs as below, 53. Special Economic Zones to be ports, airports, inland container depots, land stations, etc., in certain cases.- A Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorised operations. (2) A Special Economic Zone shall, with effect from such date as the Central Government may notify, be deemed to be a port, airport, inland contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods in the course of interstate trade or commerce. Further, the proviso to sub-section (1) of section 5 of the IGST Act provides that the integrated tax on goods imported into India would be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (hereinafter referred to as the CTA ). Thus, in case of supply of the warehoused goods, the point of levy would be the point at which the duty is collected under section 12 of the Customs Act, 1962 (hereinafter referred to as the Customs Act ) which is at the time of clearance of such goods under section 68 of the Customs Act. 5. It may also be noted that sub-section (8A) has been inserted in section 3 of the CTA aide section 102 of the Finance Act, 2018, with effect from 31st March, 2018, so as to provide that the valuation for the purpose of levy of integrated tax on warehoused imported goods at the time of clearance for home consumption would be either the transaction value or the value as per sub-section (8) of section 3 of the CTA (i.e. valuation done at the time of filing the into-bond bill of entry), whichever is higher. 6. It is therefore, clarified that integrated tax shall be levied an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 9.6 From the legal provisions referred above, it becomes clear that even before the amendment to Schedule III of the CGST Act, 2017, the legal position was that the supply of goods before their clearance from the warehouse would not be subject to the levy of Customs duty or integrated tax and that the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse. It was made all the more conspicuous, post the amendment carried out through para 32 of the Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018), whereby clauses 7 and 8 were added to Schedule III of the CGST Act, 2017, along with Explanation 2, as follows: 32. In Schedule III of the principal Act, - (i) after paragraph 6, the following paragraphs shall be inserted, namely:- 7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. 8. (a) Supply of warehoused goods to any person before clearance for home consumption; (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding IGST, as long as the imported goods in question stay warehoused, either in a Customs bonded warehouse, or in a warehouse under a FTWZ/SEZ. 9.9 Moving on to the next leg of transaction involving 'Sale of warehoused goods on as is where is basis to OEM's MOOWR unit', it is seen that MOOWR refers to Manufacture and Other Operations in Warehouse , which in turn is governed by 'Manufacture and Other Operations in Warehouse (no. 2) Regulations, 2019', as specified under Notification No. 69/2019-Customs (N.T) dated 01.10.2019. Section 65 of the Customs Act, deals with 'Manufacture and other operations in relation to goods in a warehouse', and it reads as below: 65. Manufacture and other operations in relation to goods in a warehouse.- (1) With the permission of the Principal Commissioner of Customs or Commissioner of Customs and subject to such conditions] as may be prescribed, the owner of any warehoused goods may carry on any manufacturing process or other operations in the warehouse in relation to such goods. 9.10 In this regard, the CBIC Circular No. 48/2020-Customs dated 27.10.2020 throws light on whether a Section 65 unit can procure goods from FTW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BOND ED WAREHOUSE UNDER SEZ RULE 46 (13) WITHOUT PAYMENT OF DUTY. THE VALUE DECLARED IN THIS BE IS NOT LESS THAN INWARD PRICE-IMPORT BOE NO. 1005705 DT. 07.07.2023, Seal number : 0078771 9.12 In this regard, the applicant had pointed out in their additional submissions made during the personal hearing that the Public Notice No. 16/2021 dated 05.04.2021 issued by the Commissioner of Customs, City Customs Commissionerate, Bengaluru issued on procedure to be followed by Warehouses permitted for manufacture and other operations under Section 65 of the Customs Act, 1962 read with MOOWR, 2019}, clarifies the position in Tart III. Procurement of goods from SEZ/FTWZ', as under: III. Procurement of goods from SEZ/FTWZ : Section 65 unit may source capital goods or inputs from a SEZ/FTWZ, following applicable procedures. As per Rule 46 (13), SEZ units can clear the goods to Warehouses without payment of duty. 9.13 Further, under FAQs issued by CBIC in F. No. 484/03/2015-LC (Pt) on Manufacture and Other Operations in Customs Warehouse , clarifications have been issued on various queries, including a situation as to whether unit undertaking manufacture and other operations in a bonded ware ..... X X X X Extracts X X X X X X X X Extracts X X X X
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