Notification Granting IGST Exemption To Capital Goods Imported Under EPCG scheme Is Clarificatory, Curative: Bombay High Court
The Bombay High Court has held that notification no. 79/2017-Customs dated October 13, 2017, amending notification no. 16/2015-Customs and granting exemption from the IGST to the capital goods imported under the Export Promotion Capital Goods Scheme (EPCG Scheme) is clarifying and curative.The division bench of Justice K.R. Sriram and Justice Arif S. Doctor has directed the department to...
The Bombay High Court has held that notification no. 79/2017-Customs dated October 13, 2017, amending notification no. 16/2015-Customs and granting exemption from the IGST to the capital goods imported under the Export Promotion Capital Goods Scheme (EPCG Scheme) is clarifying and curative.
The division bench of Justice K.R. Sriram and Justice Arif S. Doctor has directed the department to refund in cash the IGST paid on imports of capital goods made during the period 01.07.2017 to 12.10.2017.
Under Section 3 of the Customs Tariff Act, the import of capital goods under a valid authorization under the EPCG Scheme was entirely exempt from payment of any additional duty. The petitioner has taken advantage of the EPCG scheme exemption.
The intention of the Central Government when framing the EPCG Scheme was to permit imports at zero customs duty. Accordingly, by Notification No. 16/2015-Cus dated April 1, 2015, goods covered by a valid authorization issued under the EPCG Scheme were exempted from the whole of the additional duty leviable under Section 3 of the Customs Tariff Act. When the GST regime went into effect, Subsections (7) and (9) of the Customs Tariff Act were added to provide for the imposition of the Integrated Tax and the Goods and Services Compensation Cess. A corresponding amendment was made in Notification No. 16/2015-Cus, vide Notification No. 26/2017-Cus, dated June 29, 2017. In Notification No. 26/2017, the import under the EPCG Scheme, which was exempted from additional duty under Subsections (7) and (9) of Section 3 of the Customs Tariff Act, was not included.
However, Notification No. 16/2015-Cus was issued shortly afterwards, and imports under the EPCG Scheme were exempted from additional duty.
The petitioner claimed that on July 1, 2017, when Notification No. 16/2015-Cus became effective and the new amendment dated October 13, 2017, it paid IGST on capital goods imported.
The court noted that the basic structure of GST was not to grant exemptions, but the GST Council decided to grant exemption from IGST, Cess, etc. under Section 6 of the IGST Act, 2017 read with Section 25 of the Customs Act, 1962, to imports of goods for exporters availing the scheme of advance authorisation/export promotion capital goods or 100% export-oriented units up to March 31, 2018 and to continue the existing monitoring scheme for exports.
"Notification No.79/2017-Cus, dated 13th October 2017 has to be read as clarificatory or curative in nature, inasmuch as, it would, otherwise, leave a whole class of importers who had imported capital goods uncovered during the period 1st July 2017 to 13th October 2017, allowing the Department to levy additional duty under Sub Section (7) and Sub Section (9) of the Customs Tariff Act on such imports, despite the fact that the Foreign Trade Policy 2015-2020 envisaged imports under the EPCG Scheme at zero custom duty," the court stated.
The court ordered that the refund shall be processed and paid together with interest, if any, within four weeks of the petitioner reversing the entries of availment of the subject credit and debiting the said amount from the credit ledger.
Case Title: M/s. Sanathan Textile Pvt. Ltd. Versus Union of India
Citation: Writ Petition No.157 Of 2019
Date: 14.11.2022
Counsel For Petitioner: Senior Counsel V. Raghuraman, Advocates Raghavendra, Shailesh Sheth and Prabhakar K. Shetty
Counsel For Respondent: J. B. Mishra, Anjani Kumar Singh, Ram Ochani
Citation: 2022 LiveLaw (Bom) 451