Court quashes IGST requirement on imports under EPCG Scheme, orders refund and interest

The Court quashed the notification requiring importers to pay IGST, ruling it contrary to the Foreign Trade Policy. It held that the levy of IGST on imports under the EPCG Scheme was illegal and not in line with policy. The Court clarified that IGST should be exempted from such imports and ordered a refund of IGST paid during a specific period with interest. Trade Notice was quashed, and petitioners were granted relief, entitling them to the refund and interest.

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Issues Involved:
1. Quashing of Notification No. 26/2017-Customs and Trade Notice 11/2018.
2. Refund of IGST paid by the petitioners under the EPCG Scheme.
3. Validity of the levy of IGST on imports under the EPCG Scheme during the transition to the GST regime.

Summary of Judgment:

Issue 1: Quashing of Notification No. 26/2017-Customs and Trade Notice 11/2018

The petitioners requested to quash Notification No. 26/2017-Customs dated 29.06.2017 and Trade Notice 11/2018 dated 30.06.2017, which required importers to pay IGST. The petitioners argued that these notifications were contrary to the Foreign Trade Policy 2015-2020, which allowed for the import of capital goods at zero customs duty under the EPCG Scheme.

Issue 2: Refund of IGST paid by the petitioners under the EPCG Scheme

The petitioners sought a refund of the IGST paid, amounting to Rs. 4,95,90,643/-, on the grounds that the levy was illegal and contrary to the policy. The Court referenced a previous decision in the case of M/s. Prince Spintex Pvt Ltd vs. Union of India, where it was held that the levy of IGST on imports under the EPCG Scheme during the period from 01.07.2017 to 13.10.2017 was not in consonance with the Foreign Trade Policy 2015-2020.

Issue 3: Validity of the levy of IGST on imports under the EPCG Scheme during the transition to the GST regime

It was argued that the imposition of IGST on imports under the EPCG Scheme was due to an oversight when amending Notification No. 16/2015-Cus. The Court found that the intention of the Central Government was always to exempt such imports from additional duties, including IGST. The Court held that Notification No. 79/2017 dated 13.10.2017, which exempted IGST on such imports, should be considered clarificatory and applicable retrospectively from 01.07.2017.

Final Directions:

The Court quashed Trade Notice 11/2018 and the impugned order-in-original dated 29.09.2018. It held that the petitioners are entitled to a refund of the IGST paid during the period from 01.07.2017 to 13.10.2017, with interest at the statutory rate. The petitions were allowed, and the rule was made absolute in each petition.

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