2023 (12) TMI 722 - AAR - GST

BCD, CVD, and SAD paid for non-fulfillment of EPCG export obligations cannot be claimed as GST input tax credit

In Re: M/s. Vijay Flexi Packaging Industries

The AAR, Tamil Nadu ruled that BCD, CVD, and SAD paid due to non-fulfillment of EPCG export obligations cannot be claimed as input tax credit under GST. ... Input tax credit on Basic Customs Duty (BCD), Countervailing Duty (CVD) and Special Additional Duty (SAD) - non-fulfillment of EPCG obligation can be taken as Input tax credit under GST or not - HELD THAT:- Rule 3 of CENVAT Credit Rules allows credit of additional duties of CVD and SAD paid under Section 3 of the Customs Tariff Act, 1975. However, upon the introduction of Goods and Service Tax Laws w.e.f. 01.07.2017, the levy of CVD and SAD of Customs were subsumed into GST. In the present case the imports relate to a period prior 01.07.2017 and duties as applicable on the date of import was paid by the Applicant. However, in the GST regime, with respect to imported goods, the definition of Input tax and input tax credit as per Section 2 of the GST Act, 2017, (reproduced at para 6.2), includes only IGST charged on imports of goods. There is no provision under the GST Law for availing credit of CVD and SAD. In case of the Applicant, Basic Customs Duty (BCD), Countervailing Duty (CVD), Special Additional Duty (SAD) along with interest has been paid towards non-fulfilment of prescribed export obligation on import of capital goods under EPCG scheme, which commenced before the implementation of GST and concluded post the implementation of GST. Payment of Basic Customs Duty (BCD), Countervailing Duty (CVD), Special Additional Duty (SAD) made on non-fulfillment of export obligation under EPCG scheme, cannot be claimed as Input Tax Credit under GST Act, 2017. Issues involved:The issues involved in this legal judgment include the admissibility of input tax credit under the GST Act for payment of Basic Customs Duty (BCD), Countervailing Duty (CVD), Special Additional Duty (SAD) made on non-fulfillment of export obligation under the EPCG scheme.Details of the Judgment:Admissibility of Input Tax Credit:The applicant, a partnership concern engaged in the manufacture of printed poly packing materials, imported machinery under the EPCG Scheme and availed concessional duty benefit. Due to unforeseen circumstances, they could not fulfill the export obligation and subsequently remitted the duty amount along with interest. The applicant sought a ruling on whether the payment of BCD, CVD, SAD made on non-fulfillment of EPCG obligation could be claimed as Input tax credit under GST.State Jurisdiction Officer's Remarks:The State Jurisdiction Officer highlighted that the applicant did not provide essential details such as filing revised returns, status of machinery, and details of depreciation claimed. The officer also emphasized the need for analysis of the nature and usage of imported machinery to determine the admissibility of CENVAT credit.Central Tax Authority's Response:The Central Tax Authority did not report any pending proceedings against the applicant regarding the issue raised, indicating no ongoing investigations.Applicant's Submissions:During the personal hearing, the applicant's representatives reiterated their application submissions but failed to provide requested documents such as DGFT obligations, Bill of Entry, and detailed activity write-up.Discussion and Findings:The Authority for Advance Ruling found the application admissible under Section 97(2)(d) of the GST Act. The ruling focused on whether BCD, CVD, SAD paid on non-fulfillment of EPCG obligation could be considered as Input tax credit under GST.Ruling:The judgment concluded that the payment of BCD, CVD, SAD made on non-fulfillment of export obligation under the EPCG scheme cannot be claimed as Input Tax Credit under the GST Act, 2017.Conclusion:The legal judgment clarified the admissibility of input tax credit in the context of duty payments related to the EPCG scheme, providing a clear ruling on the specific issue raised by the applicant.