9911796707
TMI Blog2025 (2) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... wable energy projects worldwide. The Ld. Advocate for the applicant is right in its contention that in the instant case. I- RECs in question would qualify as documents of title conferring ownership of goods or benefits on the Applicant. From the nature of the document in question, it is evident that the I-RECs assign ownership to the renewable electricity generated and its use. In other words, the I-RECs certify that the bearer owns one MWh of electricity generated from a renewable energy resource. Further, it Can be seen that these certificates provide benefit to the applicant inasmuch as these certificates can be used by applicant to offset their organisation's carbon emissions. Circular No. 15/2011-Customs, dated 18-3-2011 inter alia clarifies in para 2 thereof as follows: "Tariff Item 49070030 of Heading 4907 refers directly to "Documents of title conveying the right to use Information Technology software ". Hence as per the said Rule 1 mentioned above, such paper licenses which are essentially documents conveying the right to use such IT software, merit classification under CTH 49070030" - In the case at hand also, in a like manner, I-RECs are documents of title which coney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thermal, geothermal and landfill gas projects. They can be used by organizations to offset their carbon emissions. I-RECs are issued by authorized entities in the form of a digital token and as such, no physical form of the same is available. This token can he transferred multiple times until final redemption. Thus Renewable Energy Certificates (RECs) are a market-based instrument that certifies that the bearer owns one MWh of electricity generated from a renewable energy resource. Once the power provider has fed the energy into the grid, the REC received can then be sold on the open market as an energy commodity. In the instant case, the Applicant has purchased I-RECs once, vide Invoice Number 14018130109888A, dated 14-12-2023, issued by International Organisation based out of India and would be paying to such foreign supplier an all-inclusive amount in foreign exchange. As these I-RECs are not in the physical form, the Applicant has downloaded the same into India in an electronic form. The Applicant wishes to continue importing I-RECs in a similar fashion in the future. 2.2 The I-RECs will not be physically imported into India and thus, the essential question is whether I-RECs d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tronic download of the impugned software tantamount to import of goods and relied heavily on the judgment of the Supreme Court in the case of Tata Consultancy Services (supra). The Hon'ble Supreme Court in para 24 of its judgment staled as under :- "24. In our view, the term goods as used in Article 366(12) of the Constitution of India and as defined under the said Act are very wide and include all types of movable properties, whether those properties he tangible or intangible. We are in complete agreement 'with the observations made by this Court in Associated Cement Companies Ltd. (supra). A software programme may consist of various commands which enable the computer to perform a designated task. 'The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become goods. We see no difference between a sale of a software programme on a CD/floppy disc from a sale of music on a cassette/CD o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... severability." From this judgment, it is clear that software even in its intangible form has been declared to be goods by the Supreme Court and therefore electronic download of software from a server located abroad would get captured in the scope of import of goods. A Ministerial Declaration at a WTO conference does not have legal force of overruling a legislated mandate. However, in case of electronic downloads of software, it has not been ascertained whether server from where it was downloaded was actually located abroad. Even presuming it to be so, we need to see whether mechanism exists to levy and collect Customs duty on such downloads. The Customs Act, 1962 contains several provisions for operationalising the levy and collection of Customs Duty, for example, for the date for determination of rate of duty and tariff valuation of imported goods. Section 15 provides that in case of goods entered for home consumption under section 46, it will the date on which Bill of Entry for such goods is presented. As per Section 7, CBEC appoints ports and airports which alone shall be Customs ports and airports for loading and unloading of goods. Section 8 provides for approval of proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o levy and collect duty on intangible goods, Custom duty would not be chargeable en such import of I-REC. As observed by Hon'ble CESTAT in the decision of Atul Kaushik, Shri Krishan Dhawan, M/s. Oracle India Pvt. Ltd. mentioned above, it is a well settled principle that in the absence of mechanism to collect the tax, the tax levy of any law fails, (reference the Apex Court judgment in the case of CIT, Bangalore v. B.C Srinivasa Shetty, 1981 (2) TMI 1). Therefore, it can be concluded that I-RECs when downloaded in the electronic form will not be classifiable as goods under the Customs Tariff Act, 1975. Consequently, it will not be subject to duty of Customs. The aforesaid CESTAT Judgment has been affirmed by the Hon'ble Supreme Court as well in the case of Commissioner v. Oracle India Pvt. Ltd., 2017 (1) TMI 475 SC order. Thus, as per the said judgments, intangible goods are not classifiable under the Customs Tariff Act, 1975 as there is no mechanism provided for the levy and collection of duty in respect of intangible goods. As there is lack of machinery provisions in the Customs Tariff Act, 1975, as it stands today, intangible goods are not classifiable as goods and cannot be a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (1) (2) 4907 UNUSED POSTAGE, REVENUE OR SIMILAR STAMPS OF CURRENT OR NEW ISSUE IN THE COUNTRY IN WHICH THEY HAVE, OR WILL HAVE, A RECOGNIZED FACE VALUE; STAMP-IMPRESSED PAPER; BANK NOTES; CHEQUE FORMS; STOCK, SHARE OR BOND CERTIFICATES AND SIMILAR DOCUMENTS OF TITLE 4907 00 - Unused postage, revenue or similar stamps of current or new issue in the country in which they have, or will have, a recognized face value; stamp-impressed paper; bank notes; cheque forms; stock, share or bond certificates and similar documents of title : xx xx xx 4907 00 90 -- Other HSN Explanatory Notes to Heading 49.07 49.07 - Unused postage, revenue or similar Stamps of current or new issue in the country in which they have, or will have, a recognised face value; stamp-impressed paper; bank notes; cheque forms; stock, share or bond certificates and similar documents of title. The characteristic of the products of this heading is that on being issued (if necessary, after completion and validation) by the appropriate authority, they have a fiduciary value in excess of its intrinsic value. These products comprise : xx xx xx (F) Stock, share or bond certificates and similar documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the same heading will attract Nil GST [under S. No. 122A of Notification No. 2/2017-Central Tax (Rate) dated 28-6-2017, as amended vide Notification No 35/2017-Central Excise (Rate) dated 13-10-2017]. 7. Accordingly, in modification of S.No. 3 of Circular No. 34/8/2018-GST dated 1-3-2018, it is hereby clarified that Renewable Energy Certificates (RECs) and Priority Sector Tending Certificates (PSLCs) and other similar documents are classifiable under heading 4907 and attract 12% GST. The duty credit scrips, however, attract Nil GST under S. No. 122A of Notification No. 2/2017-Central Tax (Rate), dated 28-6-2017. Thus, I-RECs being a document of title will be classifiable under the Heading 49.07 of the Customs Tariff Act, 1975 and more precisely under the Tariff item 4907 00 90. 2.7 In light of the aforementioned submissions, the Applicant has sought to enter the following questions for Advance Ruling and its understanding, as under : Question 1 : Whether I-RECs are intangible goods, taxable under the Customs Act, 1962 when imported in the electronic form and consequently subject to duties of Customs? Applicant's Understanding : No. I-RECs downloaded in the electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In order to maintain uniformity among states, promote the concept of RPO and enable entities to meet their RPOs the concept of Renewable Energy Certificates (RECs) was introduced in the Indian market. The Central Electricity Regulation Commission(CERC) and its CERC Regulations, 2022, with respect to RHCs, are important instruments when it comes to governance of the entire Renewable Energy Certificate Market segment. CERC has also laid down a procedure that has to be followed during the redemption of RECs and is applicable to the eligible entities that chooses to place the RECs for dealings in any of the Power Exchanges as the Renewable Certificate holder may consider appropriate. While speaking of IRECs, the globally renowned non-profit organisation Viz. the 'International Tracking Standard Foundation' grants accreditation to companies that issue International Renewable Energy Certificates (IRECs) and monitors the same. The organisation was founded in 2015 as the "International RFC foundation" (I-REC Standard); eventually re-branded into I-TRACK. The I-TRACK foundation provides a robust standard for developing attribute tracking systems and is acknowledged by major reporting f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a renewable energy source and fed into the grid. These certificates are part of a broader system designed to track and verify the production of renewable energy. By purchasing I-RECs, organizations can financially support renewable energy projects globally. Companies can use I-RECs to make claims about their renewable energy consumption and carbon footprint reduction. In some regions, companies can use I-RECs to meet renewable energy mandates or sustainability goals. Renewable energy, producers generate electricity and receive I-RECs for the energy produced. I-RECs can be traded or sold in the market. Organizations can buy I-RECs to support renewable energy and meet their sustainability targets. When a company or individual wants to Claim the renewable energy benefits, the I-REC is retired or redeemed, ensuring it cannot be used again. Organizations can support renewable energy projects anywhere in the world, regardless of their physical location. The system ensures that the renewable energy generation is verified and tracked, providing confidence in the environmental claims. Renewable Energy Certificates provide a flexible and market-driven approach to supporting renewable e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd" approves the issuance of IREC's when the issuing entities have developed the product under the said standard. CERC has also laid down a procedure that has to be followed during the redemption of RECs and is applicable to the eligible entities that chooses to place the RECs for dealings in any of the Power Exchanges as the Renewable Certificate holder may consider appropriate. The applicant has bought these certificates and has proposed to import/download from outside India. It is observed that I-RECs are capable of being bought and sold. Further, I-RECs are capable of transmitted, transferred, delivered, stored and possessed. These certificates are proposed to be downloaded, delivered to, stored and going to be possessed by the applicant. Therefore, I-RECs can be categorised as 'goods' as these certificates have the attributes thereof having regard to all the three points prescribed in the above case law. 8. CESTAT, Delhi in the case of Shri Atul Kaushik, Shri Krishan Dhawan, M/s. Oracle India Pvt. Ltd. v. C.C (Export), New Delhi, 2015 (9) TMI 317 - CESTAT NEW DELHI has observed that "the entire Customs Act in the present form provides mechanism/procedure for levy and collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 (252) E.L.T. 181 (Mad.) : The Madras High Court in this case dealt with the applicability of customs duty on software imported via physical media versus electronic downloads. The court upheld the view that electronically transmitted software is not subject to customs duty, reinforcing the distinction based on the mode of delivery. (iii) Reliance Industries Ltd. v. Commissioner of Customs Mumbai, 2004 (178) E.L.T. 568 (Tri. - Mumbai): CESTAT held that software downloaded electronically from abroad and not imported on any physical media does not attract customs duty. The Tribunal distinguished between physical imports and electronic transmissions, emphasizing that customs duly is applicable to goods physically imported into the country. (iv) State Bank of India v. Commissioner of Customs, 2015 (325) E.L.T. 631 (Tri. -Mum.): The Tribunal held that software imported through electronic download and not through physical media does not attract customs duty. This decision was consistent with the view that customs duty is levied on tangible goods, and electronic transmissions do not constitute such goods. 10. It is also observed that both I-RECs and software are intangible assets. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the nature of the document in question, it is evident that the I-RECs assign ownership to the renewable electricity generated and its use. In other words, the I-RECs certify that the bearer owns one MWh of electricity generated from a renewable energy resource. Further, it Can be seen that these certificates provide benefit to the applicant inasmuch as these certificates can be used by applicant to offset their organisation's carbon emissions. 11.2 Sub-heading 4907 0030 covers documents of title conveying the right to use Information Technology software. Here in the instant case, goods in question i.e. I-RECs are documents of title but not to convey the right to use Information Technology software. These certificates are not bank notes or unused postage, revenue or similar stamps either. Therefore, rational recourse has to be taken to residuary entry to CTI 4907 0090 to classify the I-RECs. 11.3 Circular No. 46/20/2018-GST, dated 6TH June, 2018 issued in the context or applicable GST rate on Priority Sector Lending Certificates (PSLCs). Renewable Energy Certificates (RECs) and other similar scrips clarifies in para 6 that : 6. As such, various certificates like RECs. PSL ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
