Temporary export and re-import of service-provider goods for contract work held not "supply"; IGST/BCD/SWS demands set aside

Temporary export of goods by a service provider for its own use in executing a service contract, without consideration or transfer of title, was held not to constitute "supply" under GST law, based on CBIC Circular No. 80/54/2018-GST; consequently, IGST was not leviable at export and the re-import exemption could not be denied by invoking Sl. No. 1(d), making Sl. No. 5 of Notification No. 45/2017-Cus applicable, and the demand of BCD/SWS/IGST was set aside. Conditions relating to IGST exemption were held not importable into BCD/SWS exemption absent express wording, so denial of those exemptions was illegal, and extended limitation was rejected for lack of suppression where disclosures were on record. Confiscation, redemption fine, and penalties were quashed, and the appeal was allowed with consequential relief.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the temporary movement of the appellant's own capital equipment from India to Sri Lanka for use in executing an overseas service contract, without consideration and without transfer of title, constituted a "supply" so as to attract IGST consequences.

(ii) Whether the re-import of such Indian-origin goods, exported otherwise than by way of supply, was eligible for exemption under Sl. No. 5 of the relevant customs exemption notification; and whether the mere mention of "LUT" in shipping bills could shift the case to Sl. No. 1(d) or otherwise defeat the exemption.

(iii) Whether the extended period of limitation could be invoked on the allegation of "suppression/fraud" to demand duty in the circumstances of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Temporary movement for own use-whether "supply"

Legal framework: The Court treated "supply" as the taxable event for IGST and examined the statutory scheme that a transaction ordinarily requires consideration and furtherance of business to qualify as supply, subject to specified deeming situations.

Interpretation and reasoning: On admitted facts, the goods (specialised equipment) were moved abroad on the appellant's own account for its own use in performing transportation/logistic services, with no consideration for the goods and no transfer of ownership. The Court held that taxability cannot be created by procedural declarations; the mention of "LUT" in shipping bills could not convert an otherwise non-taxable movement into a "supply." The determinative factor is whether the charging provision is attracted; if not, procedural compliance/non-compliance becomes irrelevant. The Court also noted that departmental records themselves reflected awareness that there was no sale or transfer of title and that LUT was mentioned because the system did not allow marking the transaction as "non-taxable supplies."

Conclusions: The movement of goods from India to Sri Lanka for own use did not constitute "supply." Consequently, IGST was not payable at the time of export, and the foundation for applying the notification entry meant to recover IGST "not paid" on export did not exist.

Issue (ii): Eligibility of exemption on re-import under Sl. No. 5; effect of LUT; circular-based time limit; linkage between IGST and BCD/SWS

Legal framework: The Court examined the structure of the exemption notification and specifically contrasted Sl. No. 1(d) (concerning goods exported under bond/LUT without payment of IGST where IGST was otherwise payable) with Sl. No. 5 (covering goods of Indian origin exported otherwise than by way of supply and re-imported within the stipulated period). The Court also considered the principle that circulars cannot override statutory notifications.

Interpretation and reasoning: The Court held that Sl. No. 5 is a distinct, independent entry meant to cover exports "otherwise than by way of supply," reflecting legislative recognition that some exports are not supplies. The adjudicating authority's approach-treating every export accompanied by LUT as a supply and importing conditions of Sl. No. 1(d) into Sl. No. 5-was rejected as effectively rewriting the notification and rendering Sl. No. 5 otiose. The Court further held that reliance on a circular to impose a six-month re-import period was misplaced because Sl. No. 5 in the notification itself allowed re-import within three years; a circular cannot curtail a substantive exemption granted by the notification. Additionally, the Court found the demand internally inconsistent: while proceeding under Sl. No. 1(d) (which contemplates recovery of IGST not paid), the department also demanded BCD and SWS as if flowing from that entry. The Court also rejected the reasoning that failure under Sl. No. 1(d) automatically disentitled exemption under Sl. No. 5, and clarified that exemption from BCD/SWS operates independently under the notification; IGST-related conditions cannot be imported into BCD exemption absent express provision.

Conclusions: The re-import was eligible for exemption under Sl. No. 5 since the goods were exported otherwise than by way of supply and re-imported within the prescribed period. The mere mention of LUT could not negate the exemption or reclassify the transaction under Sl. No. 1(d). The circular could not impose a shorter time limit than the notification. The demand of BCD/SWS linked to Sl. No. 1(d) and the denial of BCD/SWS merely because of an IGST-related reasoning were held unsustainable.

Issue (iii): Extended limitation-whether "suppression" proved

Legal framework: The Court applied the principle that "suppression" for extended limitation requires deliberate non-disclosure with intent to evade; the burden to prove it lies on the revenue.

Interpretation and reasoning: The Court found no evidence of fraud or suppression. All material particulars-export and re-import documents, ownership, purpose, time period, and exemption claim-were disclosed through statutory documents. The very LUT mention relied upon by the department was apparent on the face of the shipping bills and available from the outset. The dispute arose from an interpretational error as to "supply" and the applicable entry of the notification, not from any concealment by the appellant.

Conclusions: Invocation of the extended period of limitation was unwarranted as suppression/fraud was not established.

Resulting determinations (material consequences): Since the duty demand and its basis were held unsustainable, the Court held that confiscation did not arise, there being no contravention of applicable law in the import, and therefore the impugned order was set aside and the appeal allowed with consequential benefits as per law.

---