2026 (1) TMI 486 - AT - Customs

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 ... Re-import / Re-export - Levy of Customs Duty / IGST - Temporary movement of goods for own use in execution of a service contract constitutes - Activity related to Transportation services or not - ‘supply’ Or Not - statutory definition of ‘supply’ - Benefit for exemption under Sl.No.5 of Notification No.45 - statutory scheme governing the levy of Integrated Goods and Service Tax on goods - extended period of limitation to demand duty - demand of Customs duty [comprising Basic Customs Duty (BCD), Social Welfare Surcharge (SWS) and Integrated Goods and Services Tax (IGST)] - re-import of certain goods apart from ordering confiscation of goods, redemption fine and penalties - HELD THAT:- It is the case of the Appellant that the goods were moved by it to Sri Lanka on its own account, for its own use, without consideration, without transfer of ownership and without supply to any overseas entity, which, according to the Appellant was incidental to the provision of transportation services and hence, such movement may not even remotely satisfy the statutory definition of ‘supply’. In fact, vide clarification issued by CBIC in its Circular No. 80/54/2018–GST dated 31.12.2018, the Board has categorically clarified that inter–State movement of Rigs, tools, cranes and machinery by a service provider, on own account for provision of service where no transfer of title is involved, did not constitute ‘supply’ and therefore the same is not liable to GST. There is also a further clarification provided there, in the same circular that execution of Bond or LUT was not required in such cases as the activity was not a ‘zero– rated supply’. When the charging provision itself is not attracted, the compliance or non-compliance with requirements would naturally become irrelevant. Hence, it is our view that the movement of goods from India to Sri Lanka did not constitute a ‘supply’. In view of the above, there would be no levy under IGST at the time of export and consequently, the very foundation for application of Sl. No.1(d) of Notification disappears. Our understanding, therefore, is that serial No. 1(d) of the Notification may perhaps apply in cases where goods are exported under Bond or on LUT without payment of IGST, in situations where IGST was otherwise payable. It contemplates recovery of IGST that was payable but not paid at the time of export and hence, it may not apply to cases where IGST was not at all payable. A perusal of Notification makes it further clear that the same would recognize the category of goods exported otherwise than by way of supply; the Notification therefore proceeds on the legislative recognition that there could also be exports which are not ‘supplies’. The Original Authority in the impugned order has however, treated every export accompanied by LUT as a supply, has thus negatived the statutory recognition and thereby has chosen to rewrite the Notification, which is clearly beyond the scope of his statutory limitations. The issue in hand is not one of ambiguity in the Exemption Notification but the correct classification of transaction under appropriate entry of Notification. This apart, the decisions relied upon by the Adjudicating Authority does not in any way advance the Revenue’s case as the Appellant’s claim rests on the plain applicability of Sl.No.5 after excluding Sl. Nos. 1 to 4 on admitted facts. Thus, when we observe that the export of goods in question did not constitute ‘supply’ and was not a ‘zero-rated supply’, the same is sufficient to take the case away from the mischief of Sl.No.1(d) of Notification. We also find from the impugned order that the Commissioner has held that since the conditions of Sl. No.1(d) were not satisfied, the Appellant was not entitled not only to the IGST exemption, but also the exemption of BCD and Social Welfare Surcharge (SWS). This reasoning, according to us, betrays the very fundamental misunderstanding of the structure of Notification No.45/2017–Customs which grants exemption from different components of Customs Duty under different serial numbers and which operates under or depend on independent conditions. Even assuming for the sake of arguments that IGST exemption was not available, it does not automatically follow that exemption from BCD was also lost. This is because, BCD is levied/leviable under Section 12 of the Customs Act, 1962 and exemption from the same flows independently under the Notification. Conditions relating to IGST cannot therefore be imported into exemption from BCD, unless the Notification expressly provides for the same and hence, as a natural corollary we have to hold that the impugned order has only travelled beyond the scope of the statute. Commissioner has invoked the extended period of limitation to demand duty alleging that the Appellant had fraudulently claimed exemption but we do not find any material piece of evidence placed on record in this regard. From the explanations filed before the Commissioner we find that all material particulars relating to export of materials/goods, re-import of the same, ownership of materials/goods, purpose of export, time or period of reimport and the claim of exemption have been disclosed through statutory documents [like Shipping Bills, Bills of Entry and accompanying declarations] based on which only the Department negatived the exemption claim for nonfulfilling of Notification; it cannot therefore be said to have played fraud or suppression. Moreover, even there is no dispute as to mentioning of ‘LUT’ in the very Shipping Bills which also remain disclosed so glaringly, which is available right from the beginning. The trigger point was only the misinterpretation of ‘supply’ and the exemption claimed relevant/applicable Notification No. 45/2017 ibid. Therefore, invoking extended period of limitation in such a situation is unwarranted. Strangely though, the Commissioner has on the one hand accepted that the goods were not sold and ownership was not transferred; but on the other hand, proceeds to treat the export as a ‘taxable supply’ only because of the mention of ‘LUT’, which only exposes the inconsistent or contradictory stand which has made the impugned order legally vulnerable. Taxation cannot be imposed by inference or assumptions, it must flow from or have clear support, from the Statute. Confiscation - There being no import made by the Appellant by violating or contravening any law applicable for the time being in force at the relevant point of time, the confiscation as ordered cannot stand. In the result, the impugned order deserves to be set aside, which we hereby do. Appeal stands allowed with consequential benefits, if any, as per law. Issues: (i) Whether temporary movement of goods by the Appellant from India to Sri Lanka for its own use in execution of a service contract constitutes 'supply'? (ii) Whether the reimport of such goods is eligible for exemption under Sl. No. 5 of Notification No. 45/2017-Customs dated 30.06.2017? (iii) Whether the Commissioner has proved 'suppression' to invoke the extended period of limitation?Issue (i): Whether temporary movement of goods by the Appellant from India to Sri Lanka for its own use in execution of a service contract constitutes 'supply'?Analysis: The taxable event under GST is 'supply' as charged by Section 5 of the IGST Act, 2017 and Section 7 of the Central Goods and Services Tax Act, 2017 requires consideration and transfer in the course of furtherance of business unless specifically deemed a supply by Schedule I. The facts establish movement of plant and machinery by the Appellant on its own account, without sale, transfer of title, or consideration, for use in performance of a service contract abroad. CBIC Circular No.80/54/2018 clarifies that inter-state movement of rigs, tools and machinery by a service provider on own account where no transfer of title occurs does not constitute 'supply'. The mere recording of an LUT in shipping documents is a procedural/system entry and does not convert a non-supply into a taxable supply when statutory charging provisions are not attracted.Conclusion: The temporary movement of goods for the Appellant's own use in execution of the service contract does not constitute a 'supply'.Issue (ii): Whether the reimport of such goods is eligible for exemption under Sl. No. 5 of Notification No. 45/2017-Customs dated 30.06.2017?Analysis: Sl. No. 5 of Notification No.45/2017 recognizes goods exported otherwise than by way of supply and permits re-import within the prescribed period (three years) without levy. The Notification separately and independently specifies conditions for different entries; conditions applicable to other serial numbers (e.g., Sl. No.1(d) addressing goods exported under bond without payment of integrated tax) cannot be transposed to Sl. No.5. Circulars cannot curtail or override the scope of a statutory notification. The Appellant satisfied the substantive requirements of Sl. No.5: goods were of Indian origin, exported otherwise than by way of supply, re-imported within the statutory period, and relevant documents disclosed the transactions. Procedural mention of LUT in shipping bills does not negate eligibility under Sl. No.5.Conclusion: The reimport of the goods is eligible for exemption under Sl. No.5 of Notification No.45/2017-Customs; exemption cannot be denied solely due to procedural mention of LUT.Issue (iii): Whether the Commissioner has proved 'suppression' for invoking the extended period of limitation?Analysis: Invocation of the extended period (Section 11A) requires proof of suppression, fraud or collusion; mere omission or an incorrect statement is insufficient. The material particulars concerning export, re-import, ownership and purpose were disclosed in statutory documents (shipping bills, bills of entry and declarations) and the LUT mention was also on record. The Department's claim arose from a differing legal interpretation of 'supply' rather than any deliberate concealment. Precedent authority requires strict construction of 'suppression' and casts burden of proof on the revenue to establish deliberate non-disclosure.Conclusion: The Commissioner has not proved suppression; extended period of limitation is not invokable.Final Conclusion: The Appellant is entitled to the claimed exemptions and consequential demands, confiscation, fines and penalties based on those demands are unsustainable; the impugned order is set aside and the appeal is allowed with consequential benefits as per law.Ratio Decidendi: Where goods are temporarily moved abroad by their owner for use in performing services without transfer of title or consideration, such movement is not a 'supply' under GST; consequently goods re-imported in that category qualify for exemption under Sl. No.5 of Notification No.45/2017-Customs, and the extended period for recovery cannot be invoked absent proven suppression or fraud.