Customs warehousing discretion and solar power generation using imported capital goods fall within the duty-deferment scheme, with no implied exclusion.

A Delhi HC ruling on the customs warehousing scheme held that an instruction under section 151A could not direct authorities to review existing solar-power warehousing permissions or predetermine cancellation, because statutory discretion must remain with the proper officer. The court also read sections 61 and 65 with the MOOWR Regulations as a duty-deferment regime that covers solar power generation using imported capital goods in a bonded warehouse, with no express exclusion for such activity. Consequential licence cancellation and show cause notices founded on the impugned instruction were set aside.

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Issues: (i) Whether the Board's instruction directing review of existing warehousing permissions and further action under the solar-power warehousing scheme was valid under section 151A of the Customs Act, 1962; (ii) Whether solar power generation using imported capital goods in a bonded warehouse fell within sections 61 and 65 of the Customs Act, 1962 and the MOOWR Regulations; (iii) Whether the consequential cancellation of licence and show cause notices based on the impugned instruction could stand.

Issue (i): Whether the Board's instruction directing review of existing warehousing permissions and further action under section 151A of the Customs Act, 1962 was valid.

Analysis: Section 151A permits instructions for uniformity and implementation, but its proviso forbids directions that require a particular assessment or interfere with statutory discretion. The impugned instruction did not remain at the level of a general clarification; it declared that permissions already granted to solar power projects were contrary to law and required immediate review and follow-up action. That direction effectively bound licensing authorities and left no room for independent consideration under the statutory scheme. The power to cancel a licence under section 58B lies with the proper officer, who must decide after applying the statute and hearing the licensee.

Conclusion: The impugned instruction, to the extent it mandated review of existing licences and follow-up action, was invalid and could not be sustained.

Issue (ii): Whether solar power generation using imported capital goods in a bonded warehouse fell within sections 61 and 65 of the Customs Act, 1962 and the MOOWR Regulations.

Analysis: Sections 61 and 65, read with the MOOWR Regulations and the contemporaneous circulars and FAQs, show a duty-deferment regime for warehoused capital goods and other goods used in manufacturing or other operations. The statute does not create an express exclusion for solar power generation. The expression "in relation to" is of wide import and does not require the capital goods themselves to undergo transformation or to be consumed in the resultant product. The absence of an input-output ratio for electricity did not justify reading an exclusion into the scheme. The contemporaneous material also supported the availability of the benefit to capital goods used in such operations.

Conclusion: Solar power generation using imported capital goods in a bonded warehouse was held to fall within the scope of sections 61 and 65 and the MOOWR Regulations.

Issue (iii): Whether the consequential cancellation of licence and show cause notices based on the impugned instruction could stand.

Analysis: The cancellation order and the notices were founded on the same invalid instruction and proceeded on the assumption that the activity itself was outside the statutory scheme. Since the foundational instruction was unsustainable and the authorities were required to exercise their own statutory discretion, the consequential actions could not survive.

Conclusion: The cancellation order and the impugned show cause notices were quashed.

Final Conclusion: The writ petitions succeeded, the Board's restrictive instruction was struck down to the extent it required review of existing permissions, and the impugned consequential actions against the petitioners were set aside while the statutory authorities were left free to proceed in accordance with law.

Ratio Decidendi: An administrative instruction under section 151A cannot compel a quasi-judicial customs authority to reach a predetermined result or foreclose independent statutory discretion, and a customs warehousing scheme framed for duty deferment must be construed according to its text, which does not permit reading in an exclusion that the legislature did not express.

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