Amendment creating new integrated tax liability on re-imported goods repair value operates prospectively not retrospectively

CESTAT New Delhi held that Amendment Notification 36/2021-Customs dated 19.07.2021, which amended Exemption Notification 45/2017-Customs to include integrated tax liability on re-imported goods' repair value, cannot have retrospective effect from the original notification date of 30.06.2017. The tribunal determined that the amendment created new liability for integrated tax that was not previously required under the original notification, making it substantive rather than clarificatory. Since the amendment widened the scope of tax liability rather than merely clarifying existing provisions, it operates prospectively from its issue date under section 25(4) of the Customs Act. Appeal allowed.

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The core issue in these appeals was whether Notification No. 36/2021-Customs, dated 19.07.2021, which amended Notification No. 45/2017-Customs, dated 30.06.2017, should have retrospective effect from the date the original Exemption Notification was issued. The original notification exempted certain goods from integrated tax upon re-import after repairs, but the amendment sought to clarify that integrated tax was indeed applicable.

The appellants, airline operators, argued that the term "duty of customs" in the original notification did not include integrated tax, based on a previous Tribunal decision in InterGlobe Aviation, which had ruled in their favor. They contended that the amendment was substantive and could not be applied retrospectively, as it imposed a new liability. The appellants further argued that retrospective amendments could only be made under section 25(2A) of the Customs Act, which was not the case here.

The Department, however, argued that the amendment was clarificatory, intended to resolve any ambiguity, and should thus be applied retrospectively. They cited the GST Council's recommendations and the consistent policy of levying integrated tax on such imports, even prior to GST implementation.

The Tribunal analyzed the legal framework, including sections 25(1), (2A), and (4) of the Customs Act, which govern the issuance and effect of notifications. It noted that the amendment was issued under section 25(1) and lacked any express provision for retrospective application. The Tribunal emphasized that a clarificatory amendment must not alter the original provision's meaning and should only clear ambiguities, which was not the case here.

The Tribunal also referenced multiple judgments, including those from the Supreme Court, which held that an amendment introducing a new liability cannot be presumed retrospective merely because it uses phrases like "for removal of doubts." The Tribunal concluded that the amendment was substantive, as it imposed integrated tax, which was not previously required, and therefore could not be applied retrospectively.

The Tribunal further highlighted that the original notification's language was clear and unambiguous, and the intention of the government or GST Council could not override the text. It referred to the Constitution Bench judgment in Hemraj Gordhandas, affirming that in taxation, the language of the notification is paramount, not the intent behind it.

Ultimately, the Tribunal set aside the impugned orders that had applied the amendment retrospectively, ruling that the amendment could only take effect from its issuance date, 19.07.2021, and not retroactively from 30.06.2017. All 1714 appeals were allowed, affirming the appellants' exemption from integrated tax for the period before the amendment's issuance.

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