TaxTMI 
TaxTMI 
2019 (2) TMI 1445
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....ere taken up for hearing together and are decided by this common judgment. 3. For the sake of convenience, reference is made to the facts as appearing in Special Civil Application No.14558 of 2018 filed by Messrs Maxim Tubes Company Pvt. Ltd. 4. The petitioner is a manufacturing unit for manufacture of goods like Stainless Steel Seamless & Welded Pipes, Tubes, UTubes and such products. The petitioner manufactures such goods and sells them in the country and also by way of exports to foreign countries and is a Government recognized export house by virtue of substantial exports made continuously for last several years. 4.1 It is the case of the petitioner that it has been exporting substantial quantities of goods and is a reputed concern and has been conducting manufacturing, selling and exporting activities in accordance with applicable laws and various awards have been given to it, thereby recognizing the petitioner's growth and contribution to exports. 4.2 Under the Foreign Trade Act, the Central Government has been framing Export-Import Policy (also known as FTP, i.e. Foreign Trade Policy) for development, regulation and control of imports and exports in the country a....
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....tiny and grant of such application ordinarily takes three to four weeks; and therefore, a manufacturer-exporter like the petitioner would get an Advance Authorisation about three to four weeks after receiving the export order. Thereupon, order for required raw materials could be placed to a suitable overseas supplier; and locating such suitable supplier, negotiating the price and other issues with such supplier and actual supply of the materials would take minimum three months. If the raw materials required were of extraordinary parameters and specifications, then production of such materials at the overseas supplier's end would take five to six months also. Ordinarily, the transit time for procuring the raw materials, which is normally by sea, is three weeks or a little more; and customs clearance and actual transportation of the materials from the port to the factory would also take minimum one week. Production of the export goods upon utilizing such materials would require ten to fifteen days, and delivery time for such shipments from the factory to the overseas buyer would also be a few weeks depending upon the location of the buyer and availability of sea going vessel. Accordi....
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....e custom authorities all over the country started levying and collecting these new levies even for the goods imported into India against an Advance Authorisation. It appears that some of the aggrieved persons approached the Delhi High Court, challenging such recoveries of integrated tax and GST compensation cess on goods imported against Advance Authorisation, whereupon an interim order came to be made by the said court. 4.7 It is the case of the petitioner that realising the error of not amending the existing notification or in not issuing a new notification for exemption from Integrated Tax and the Cess to goods imported against an Advance Authorisation, the Central Government has issued an amending Notification No.79/2017- Customs dated 13.10.2017, whereby six existing notifications have been amended, including Notification No.18/2015- Customs for imports made against Advance Authorisation. Upon incorporated of the amendments/substitutions made vide the above Notification No.79/2017-Customs in Notification No.18/2015-Cus., exemption is also granted from levies imposed under sub-sections (7) and (9) of section 3 of the Customs Tariff Act. 4.8 The grievance and the subject m....
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....t condition" was satisfied, and accordingly, exemption was admissible to the goods imported against such Authorisation. In view of this belief or impression about the "pre-import condition", it would mean that the exemption of Notification No.18/2015-Customs would not be admissible in case of manufacturer-exporters like the petitioner, who undertake manufacturing and export of goods in a continuous cycle, and it would also mean that the exemption of the above notification would not be admissible when goods manufactured were exported in anticipation of Licence/Authorisation, because such would be a case of export having been made first and duty free import against the Authorisation having been made subsequently. 4.11 In the above view of the matter, a letter dated 3.4.2018 came to be issued by the Deputy Director, DRI, Kolkata to the petitioners informing them about the amendments in the foreign trade policy and customs notification, and also calling upon the petitioners to submit information and details in a prescribed format for ascertaining whether import of goods were made first and exports against the Authorisation under which such imports were made were effected after impor....
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....ndition that the same would be availed at the risk of the exporter only. An exporter is allowed to export in anticipation of Advance Authorisation in terms of paragraph 4.12 of the Hand Book of Procedures, Volume-I, only when either the norms are not fixed in the SION, or they are willing to fulfill their export obligation first. As the process of fixing norms takes considerable time, said provision leaves a window of opportunity for the importer to export in advance at their own risk of not being considered towards discharge of export obligation. 5.1 It is further averred that the amendment in paragraph 4.14 of the Foreign Trade Policy (2015-20) brought in terms of the DGFT Notification No.33/2015-20 and corresponding Customs Notification No.79/2017 dated 13.10.2017 to avail benefit of the exemption of IGST, an importer/exporter is required to strictly follow the conditions of paragraph 4.1.3 (4.03 of Foreign Trade Policy (2015-20). According to the respondents, it is the prerogative of the petitioners to decide whether they are willing to continue with their pattern of business of exporting in anticipation of Advance Authorisation or would prefer to use the duty free materials....
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....her averred in the reply that both, the DGFT as well as the Department of Revenue notifications, offered exemption from the integrated tax leviable under sub-section (7) of section 3. However, such exemption was not absolute. Two specific conditions were imposed, viz., (i) export obligation has to be fulfilled through physical exports only; (ii) the exemption is subject to pre-import condition, which implies that only after the import of the goods is commenced, such goods are required to be used for manufacture of export goods, which will be ultimately exported. 5.5 It is the case of the respondents that the DGFT and the Department of Revenue could have used a cut-off date and Advance Authorisations issued after 13.10.2017 could have been declared to have been eligible for such benefits only, but they did not do so. It was kept open ended to extend benefit to the importers, who might have followed those two conditions, even in respect of the Advance Authorisations issued to them earlier. In case of insertion of the cut-off date, it would have made them ineligible for the benefit, therefore, the policy makers, in their own wisdom, kept the door ajar for the eligible importers, to....
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....by the Advance Authorisation should invariably be imported first, either in entirety or in a phased manner, for use in the process of manufacture of the finished goods, which in turn would be exported, towards the said Advance Authorisation only. It is not necessary to import in totality, one is allowed to import in piecemeal, if need be. The only condition is that the very materials imported duty free under a specific Advance Authorisation, have to be used for manufacture of the goods to be exported under the said Advance Authorisation towards discharge of export obligation. Physical incorporation of the duty free imported materials in the export goods is the demand for pre-import condition, which is required to be religiously followed. 5.9 The aspect of physical incorporation of the input materials in the export goods have been covered under para 4.03 of the Foreign Trade Policy (2015-20). According to the respondents, a combined reading of para 4.03 of the Foreign Trade Policy in force at the time of issuance of the Authorisations, and the Notification No.31/2003 dated 1.8.2013 read with Circular No.3/2013 (RE-2013) dated 2.8.2013, makes it obvious that benefit of exemption f....
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....s used for manufacture of the export goods were procured otherwise. Rest of the imports are made later and corresponding exports are either nil or far less. It is evident that the imported materials have not been utilized in entirety for manufacture of the export goods, and therefore, "pre-import condition" is violated." 5.11 It is asserted that each and every importer had two options, either to continue paying IGST on the goods imported under Advance Authorisations, without bothering about the physical export/pre-import condition, as they had been doing, since 01.07.2017, or to avail benefit of IGST, but for that they were required to comply with pre-import condition. 6. On behalf of the first respondent- Union of India, an affidavit-in-reply has been filed by the Deputy Director General of Foreign Trade, wherein it has been averred that the Government of India has been taking various steps towards boosting India's share in the international trade. Therefore, the Directorate General of Foreign Trade, Department of Commerce, Government of India, has been formulating and implementing the Foreign Trade Policies under section 5 of the Foreign Trade (Development and Regulation) A....
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....o import made after the discharge of export obligation (i.e. post-exports). The aforesaid provisions of Foreign Trade Policy 2015-20 have been incorporated and given effect through Customs Notification No.79/2007-Cus. Dated 13.10.2017. Therefore, the condition of pre-import in respect of inputs to be incorporated in the export product under Advance Authorisation cannot be stated to be arbitrary. 8. Mr. Paresh Dave, learned counsel for the petitioner in Special Civil Application No.14558 of 2018, vehemently assailed the impugned condition of pre-import by submitting that this condition is wholly unreasonable and illegal because it would severely hamper exports of goods from India and it would be virtually impossible for most of the manufacturersexporters (if not for all of them) to avail benefit of Advance Authorisation scheme because of the pre-import condition. It was contended that this condition which has now been laid down for Advance Authorisations has no nexus with the objective of the Advance Authorisation scheme and that this condition appears to have been inserted in para4.14 of Foreign Trade Policy and also in the customs exemption notification without any rationale, b....
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....ed that moreover, there is no benefit that the Government derives out of such "pre-import condition", inasmuch as if money is paid as taxes, it will be allowed by way of credit and ultimately have to be returned, but in the process, the funds get blocked. Therefore, such condition is ultra vires articles 14 and 19(1)(g) of the Constitution of India. 8.3 Reliance was placed upon the decision of the Supreme Court in the case of Express Newspapers v. Union of India, (1985) 1 SCC 641, for the proposition that even if the power to grant exemption under section 25 of the Customs Act, 1962 is assumed to be a legislative power and a notification issued by the Government thereunder amounts to a piece of subordinate legislation, even then the notification is liable to be questioned on the ground that it is an unreasonable one. It was submitted that there has been no "pre-import condition" in respect of duty free imports under Advance Authorisation scheme in the past, and therefore, it is not understandable as to why such a condition is now imposed by the Central Government with regard to the Advance Authorisation scheme. It was pointed out that all import duties leviable on goods imported....
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....ade Policy still allows a person to export goods in anticipation of Authorisation after lodging an application through the EDI system and obtaining a file number for an Advance Authorisation. However, this procedure is set at naught in view of the "preimport condition" now imposed vide paragraph 4.14 of the Foreign Trade Policy and clause (xii) of Notification No.18/2015-Cus. It was contended that the fact that the Central Government has not made any change in paragraph 4.14 of the Hand Book of Procedure accompanying the Foreign Trade Policy, 2015-20, also signifies that "pre-import condition" has no nexus with any objective sought to be achieved under the Advance Authorisation scheme. Such condition is, therefore, not a bona fide restriction on genuine manufacturer-exporters and has been imposed in colourable exercise of powers and deserves to be struck down as such in the interest of justice. 8.5 It was submitted that the Advance Licence scheme, now called Advance Authorisation, has been in operation for more than a decade; and this scheme under the Foreign Trade Policy as well as exemption from import duties allowed under the Customs Act for goods imported against Advance Lic....
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....reas manufacturer-exporters shall have to undergo the rigors of paying such levies at the time of import of the goods and then availing its credit or refund. But substantial funds of the manufacturer-exporters would remain blocked for a long time, and any procedural irregularity or infraction while claiming ITC or refund would result in a situation where such credit would remain unutilized with the manufacturerexporters. Thus, "pre-import condition" does not result in any revenue accrual for the Union Government and, therefore, also, such condition has no rationale or logical connection with the policy and purpose of the GST, nor with the Foreign Trade Act and the Foreign Trade Policy framed thereunder. 8.8 It was further submitted that compliance of "pre-import condition" is even otherwise an impossibility because it is not possible for manufacturer-exporters like the petitioners to satisfy the revenue officers about utilization of the goods imported against a particular Authorisation in relation to manufacture of finished goods exported for fulfillment of export obligations of that Authorisation. Only in case of goods having identification marks like serial number or machine n....
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....ent is only curative though it has taken a longer time. 8.11 Reliance was placed upon the decision of this court in the case of Shree Renuka Sugars Ltd. v. Union of India, 2018 (360) ELT 483 (Guj.), wherein the court referred to the decision of the Supreme Court in the case of W.P.I.L. Ltd. v. Commissioner of Central Excise, Merut, 2005 (181) E.L.T. 359 (SC), wherein the court considered a case where exemption notification was withdrawn and a fresh notification was issued shortly thereafter exempting duty of excise on parts used in manufacturing of power driven pumps. The court noted that there was a consistent policy of the Government of India to grant such exemption. The later notification did not grant exemption for the first time. It was held that such notification was merely clarificatory and hence, would apply with retrospective effect. The court also placed reliance upon the decision of this court in the case of Gujarat Paraffins Pvt. Ltd. v. Union of India, 2012 (282) E.L.T. 33 (Guj.), where the court has considered a case where the Government of India had taken corrective measure of reintroducing the exemption after a gap of about sixteen months, and held that such exem....
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....he rights of the citizens where the necessities of the situation demand. When the validity of a law placing restriction upon the exercise of fundamental rights in article 19(1) is challenged, the onus of proving to the satisfaction of the court that the restriction is reasonable lies upon the State. It was submitted that this is not a case of first time exemption. Now that they seek to place restriction, the respondents must show that the condition has been inserted is to remove some evil, else such condition would be violative of the petitioner's right under article 19(1)(g) of the Constitution of India. It was, accordingly, urged that there being no rationale behind introducing the condition of pre-import which has no nexus with the object sought to be achieved by the Advance Authorisation Scheme, the same is violative of the petitioner's fundamental rights under article 19(1) of the Constitution of India, and deserves to be set aside. 9. Mr. Abhishek Rastogi, learned counsel with Mr. Pratyushprava Saha, learned advocate for the petitioners in Special Civil Applications No.15184 and 15186 of 2018 and Mr. Aayush Mehrotra and Mr. Digant Popat, learned advocates for the petitione....
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....ports whereas the other batch is imported after meeting export obligation. It is also unclear whether this qualifies as a violation of "pre-import condition" for all transactions made under the licence. That further begs the question whether the fulfillment of the conditions should be looked at qua the transaction or qua the Advance Authorisation. (c) It is also unclear whether, in order to satisfy the "preimport condition", the petitioners are required to showcase records indicating one-to-one co-relation of the imported inputs with the finished products. While it may be possible for the automobile sector to adhere to this requirement, as its inventory of inputs can be easily identified in its exported products, it may not be possible for the petitioners to identify inputs based on the date of import, once they get mixed with the stock of inputs already procured. (d) The petitioners businesses are such that exports will occur as per export orders received and it may not be possible to fulfill export obligations or meet its export orders when they follow "pre-import condition". There may also be instances where a batch of inputs is imported, refined and exported b....
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.... condition (xii) of the notification. It was submitted that condition (iv) lays down the process in case the imports have been made before the fulfillment of export obligation. There is no indication of any additional obligation that is required to be fulfilled other than execution of a bond. Similarly, in condition (v), the process to be followed in case where the imports follow the discharge of export obligation has been laid out. As per this process, the Advance Authorisation holder is only required to furnish a bond in case it was availing the benefit under rule 18 or 19 of the erstwhile Central Excise Rules, 2002 or CENVAT Credit Rules, 2004. As per this process, the duty exemption benefit shall still be available if the bond as required is furnished. However, as per condition (vi), where the Advance Authorisation holder has not availed the benefit under rule 18 or 19 of the erstwhile Central Excise Rules, 2002 or CENVAT Credit Rules, 2004, and sufficient proof is submitted to that extent by the Advance Authorisation holder, there is no requirement to furnish any bond. It was submitted that in view of conditions (v) and (vi), it is clear that the intention is to provide the be....
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....ivilege in the form of concession. The court held that the decision of the Government of India not to extend subsidy to bulk consumers, could not be said to be an arbitrary decision, discriminatory or in violation of the principles contained in Article 14 of the Constitution of India and that, such policy decisions are not amenable to judicial review. The court placed reliance upon its earlier decision in the case of State of Rajasthan v. J. K. Udaipur Udyog Ltd., (2004) 7 SCC 673, wherein it was observed that exemption is a privilege. In fiscal matters, the concession granted by the State Government to the beneficiaries cannot confer upon them legally enforceable right against the Government to grant a concession, except to enjoy the benefits of the concession during the period of its grant. Enjoyment is defeasible one and can be taken away in exercise of very power under which such exemption was granted. It was submitted that therefore, there is no vested right in the petitioners to claim continuation of the earlier policy. 10.1 Reliance was also placed upon the decision of the Supreme Court in the case of Shri Bakul Oil Industries v. State of Gujarat, (1987) 1 SCC 31, wherein....
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....aims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the noncompliance of which would not affect the essence or substance of the notification granting exemption. It was submitted that in the absence of the impugned condition, the petitioners would be getting double benefit by claiming input credit on the imported goods and not paying taxes on the export. 10.5 The learned senior standing counsel further reiterated the contentions raised in the affidavit-in-reply filed on behalf of the respondents. It was, accordingly, urged that the petitions do not merit accepta....
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.... restriction was imposed on enjoyment of CENVAT credit in relation to goods purchased prior to one year. The court held that the impugned provisions though did not make hostile discrimination between similarly situated persons, the same did impose a burden with retrospective effect without any justification. It was submitted that the above decision would be squarely applicable to the facts of the present case, inasmuch as the same factors, parameters and considerations would prevail even after coming into force GST regime and hence, there is no rational or reasonable basis for imposition of the impugned condition of pre-import. It was submitted that the object of the scheme is (a) boosting of exports, (b) employment generation, and (c) making the exporter and exports competitive in the international market; and therefore, the condition of pre-import has no nexus with the object sought to be achieved and it on the contrary sets the Advance Authorisation Scheme at naught and hence, should be struck down. 11.1 Insofar as the contention raised by the learned advocate for the respondents that this being a fiscal policy, judicial review is barred, the learned counsel placed reliance u....
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.... "4.13 "pre-import condition"in certain cases (i) DGFT may, by Notification, impose "pre-import condition" for inputs under this Chapter. (ii) Import items subject to "pre-import condition" are listed in Appendix 4-J or will be as indicated in Standard Input Output Norms (SION). (iii) Import of drugs from unregistered sources shall have pre-import condition." "4.14 Details of Duties exempted Imports under Advance Authorisation are exempted from payment of Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, Safeguard Duty, Transition Product Specific Safeguard Duty, wherever applicable. Import against supplies covered under paragraph 7.02 (c), (d) and (g) of FTP will not be exempted from payment of applicable Anti-dumping Duty, Countervailing Duty, Safeguard Duty and Transition Product Specific Safeguard Duty, if any." "4.16 Actual User Condition for Advance Authorisation (i) Advance Authorisation and/or material imported under Advance Authorisation shall be subject to 'Actual User' condition. The same shall not be transferable even after completion of export obli....
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....f Act, 1975 and from the whole of the additional duty, safeguard duty, transitional product specific safeguard duty and anti-dumping duty leviable thereon, respectively, under sections 3, 8B, 8C and 9A of the Customs Tariff Act. 15. When the Goods and Services Tax Acts came into force with effect from 1st July, 2017, there was no corresponding amendment in this notification. However, section 3 of the Customs Tariff Act, 1975 came to be amended by substituting sub-section (7) and sub-section (9) thereof, whereby levy of integrated tax as leviable under section 5 of the Integrated Goods and Service Tax Act, 2017 and levy of Goods and Service Tax compensation cess at such rate as is leviable under section 8 of the Goods and Service Tax (Compensation to States) Cess Act, 2017 [GST compensation cess] came to be incorporated therein. Sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act, as amended, reads thus: "(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding 40% as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India....
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....ss was levied even against Advance Authorisation, the same came to be challenged before the Delhi High Court in a number of petitions, wherein interim relief came to be granted. According to the respondents (as averred in the affidavits-in-reply), because of the problem of goods and services tax, the committed refund of IGST was getting delayed, which resulted in blocking of working capitals for many businesses. 19. Thereafter, the Central Government issued an amending notification dated 13th October, 2017 in exercise of powers under sub-section (1) of section 25 of the Customs Act, 1962 being Notification No.79/2017-Cus dated 13.10.2017 inter alia amending the opening paragraph of Notification No.18/2015- Cus dated 1.4.2015 whereby the material imported into India was exempted from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act and from the whole of the additional duty leviable thereon under sub-sections (1), (3) and (5) of section 3, integrated tax leviable thereon under sub-section (7) of section 3 and goods and services tax compensation cess leviable under sub-section (9) of section 3 of the Customs Tariff....
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....partment of Revenue, and such imports shall be subject to pre-import condition." 21. It is the insertion of the condition of pre-import in condition (xii) in Notification No.18/2015-Cus and paragraph 4.14 of the Foreign Trade Policy which hurts the petitioners and similarly situated persons the most. For the purpose of deciding the validity of condition (xii) of the above notification and the pre-import condition in paragraph 4.14 of the Foreign Trade Policy, it would be necessary to examine the relevant provisions of the Foreign Trade Policy and Handbook of Procedure to understand how the scheme of Advance Authorisation operates. 22. Paragraph 4.27 of the Foreign Trade Policy envisages exports in anticipation of authorisation and as noticed earlier, in terms of the cycle of import-manufacture-export carried out by the petitioners, the delivery time allowed by the overseas buyers is about three to four months. The approximate time taken for the entire cycle from receipt of export order to transportation for export of overseas buyers, as put forth by the petitioners, is as follows: Sr. No. Particulars Normal time taken 1 Application for Advance Authorisation and....
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....ion has to be used for manufacture of the goods to be exported under the said Advance Authorisation towards discharge of export obligation. Physical incorporation of the duty free imported materials in the export goods is the demand of pre-import condition, which is required to be religiously followed. 25. As to how rigorous and stringent this process is as per the DRI can be better understood from the averments made in the affidavit-in-reply of the DRI, the relevant portion whereof is extracted herein below for ready reference: "9.10 Primarily DRI has taken up cases involving violations of the provisions of the recently amended Policy in terms of para 4.14 of the Foreign Trade Policy (2015-20) read with Customs Notification No.79/2017 dated 13.10.2017. The cases can be divided into two broad categories a. IGST benefit being availed against Advance Authorisations, for which export obligations have been discharged through deemed exports, either in full or partially. This is in clear contravention of the requirement of the Policy and the Customs notification, which demand, fulfilling EO through physical exports only, therefore, the importers are not eligible for ....
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....esponding exports are either nil or far less. It is evident that the imported materials have not been utilized in entirety for manufacture of the export goods, and therefore, pre-import condition is violated." 26. Thus, in case there is any shortage of raw material imported against an Advance Authorisation, to meet with such exigency, if the importer uses raw material imported against another Advance Authorisation, it will be considered as breach of pre-import condition. In case the exports are made in anticipation of authorisation in terms of paragraph 4.27 of the Handbook, since the raw material used in the goods so imported would not have been imported under that particular advance licence, the "pre-import condition" would be held to be violated and consequently, the importer would be denied exemption from levy of integrated tax and GST compensation cess. Thus, an importer who manufactures goods in a cycle as delineated in some of the earlier paragraphs, would no longer be in a position to do so and all exports made in anticipation of authorisation as permitted by paragraph 4.27 of the Handbook of Procedure would be held to be in breach of the "pre-import condition" insofar a....
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....hall be subject to pre-import condition." 29. Thus, paragraph 4.13 is a provision which is specifically made for "pre-import" condition and provides for the categories of cases to which such condition has to be applied. In paragraph 8 of the affidavit-in-reply of the Directorate of Revenue Intelligence it has been stated that "Para 4.13 (Foreign Trade Policy-2015-20) has been in existence (under different Paras in different Policy periods) for years. Since, 2003, all drug companies have been importing their raw materials sourced from unregistered sources, under preimport condition. Silk in any form, Raw Sugars, Natural Rubbers, Tea Spices and precious metals etc are allowed to be imported under pre-import condition only. As already stated, pre-import condition is in-built within the Advance Authorization Scheme itself, and in terms of Para 4.04 of the Policy, which is integral part of the Policy since its inception, it has been continually hammered upon the potential exporters, that they are allowed to import those inputs under Advance Authorisation scheme, which would be physically incorporated in the export goods." Thus, even according to the respondents, there is a specific p....
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....n Advance Authorization, would require the Policy to create a new provision, to accommodate such diverse set of conditions in a single Authorization. Neither the present set of Policy nor the Customs notification has any provision to consider imports under an Advance Authorization by hypothetically bifurcating it into an Authorization, simultaneously compliant to different set of conditions. As of now, the Advance Authorisations are embedded with a particular set of conditions only. An authorisation can be issued either with pre-import condition or without it. Law doesn't permit splitting it into two imaginary set of Authorizations, for which requirement of compliances are different." 31. Reference may also be made to paragraph 5 of the letter dated 3.4.2018 of the Directorate of Revenue Intelligence addressed to the petitioner M/s Maxim Tubes Company Private Limited (Annexure-R), wherein it has been stated thus: "5. Combined provisions of the Policy and the subject Customs Notification, clearly mandate only imports under pre-import condition would be allowed with the benefit of such exemption. Therefore, no such exemption can be availed, in respect of the Advance Autho....
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....ragraph 4.14 which merely provides for the details of duties exempted, all the raw materials imported under an Advance Authorisation, whatever be their nature, have been made subject to "preimport condition" for the purpose of availing the benefit of exemption from integrated tax and GST compensation cess. 34. Moreover, a piquant situation has been created whereby the very same inputs which are not subject to "pre-import condition" insofar as payment of basic customs duty, additional customs duty, education cess, anti-dumping duty, safeguard duty and transition product specific safeguard duty are concerned, are subject to condition of pre-import insofar as integrated tax and GST compensation cess are concerned, thereby setting at naught the first part of paragraph 4.14, inasmuch as if the very same inputs are subject to the condition of pre-import qua some levies, it would amount to importing the inputs subject to the condition of pre-import even qua the other levies. Thus, an anomalous situation has arisen, whereby the second part of paragraph 4.14 is inconsistent with the first part thereof and renders the first part redundant. 35. The Foreign Trade (Development and Regulat....
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....ot subject to "pre-import condition". The consequence is that with the advent of the Goods and Services Tax regime (which merely subsumes the earlier levies), on account of the condition of pre-import stipulated to get the benefit of exemption from the levy of integrated tax and GST compensation cess, imports under the Advance Authorisation scheme (which has been operating successfully since many years without the condition of pre-import), have become next to impossible, which certainly does not subserve the objective of the Act and the Foreign Trade Policy. Moreover, in absence of compliance with the condition of pre-import, the exporters would be liable to make upfront payment of IGST/Compensation Cess on import of inputs, thereby defeating the objective of preventing cash blockage of exporters. When a scheme is formulated by the respondents, it has to be workable as a whole. The scheme of Advance Authorisation has been working smoothly without any hitch for all these years (nothing has been pointed out on behalf of the respondents that there were any difficulties or irregularities on account of non-imposition of the "pre-import condition"), therefore, in the absence of anything ....
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....urt respectfully does not agree with the view taken by the Madurai Bench of the Madras High Court in M/s Vedanta Ltd. v. Union of India (supra). 39. At this stage, the contentions advanced on behalf of the revenue may also be dealt with. The contention in paragraph 9.4 of the affidavit-in-reply that physical incorporation of the duty free imported materials in the export goods is the demand of pre-import condition, which is required to be religiously followed and that the aspect of physical incorporation of the input materials in the export goods has been covered under paragraph 4.03 of the Foreign Trade Policy, 2015-2020, which specifically demands for such physical incorporation of imported material in the export goods, which is possible only when imports are made prior to export; does not explain as to why when physical incorporation was already provided under paragraph 4.03, there was any necessity to impose condition of pre-import under paragraph 4.13. Such contention therefore, does not merit acceptance. Besides, such contention also flies in the face of paragraph 4.27 of the Handbook, which specifically allows imports in anticipation of Advance Authorisation. 40. The s....
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.... permitted even now, for the purpose of exemption from levy of IGST and GST compensation cess, such imports have suddenly become replenishment imports. As to how such imports are replenishments is incomprehensible. The learned counsel for the petitioners has submitted that there is nothing like replenishment in the present case and that, it is a continuous cycle whereby materials are imported for manufacture, used for the purpose of manufacturing the export goods, and exported. One fails to understand as to how import of goods in anticipation of Advance Authorisation under paragraph 4.27 of the Handbook and permitted in respect of other levies under section 3 of the Customs Tariff Act, amounts to replenishment merely because the taxes which were earlier in the nature of sales tax etc., are now subsumed in the goods and services tax. Furthermore, the learned counsel for the respondents has not been able to explain the same to this court. Moreover, insofar as replenishment is concerned, there are special schemes under the Foreign Trade Policy, which are specifically replenishment schemes. The Advance Authorisation scheme does not envisage replenishment of inputs and hence, there is n....
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....Court in Express Newspapers v. Union of India (supra), wherein the court proceeded on the assumption that for the purposes of those cases the power to grant exemption under section 25 of the Customs Act, 1962 is a legislative power and a notification issued by the Government thereunder amounts to a piece of subordinate legislation, and held that even then the notification is liable to be questioned on the ground that it is an unreasonable one. Thus, the contention that this being a policy decision is beyond the pale of challenge before this court, does not merit acceptance. 47. In the facts of the present case, having regard to the scheme of Advance Authorisation and the historical background as well as the contentions advanced on behalf of the respondents, and considering the fact that for years together right since the inception of the Advance Authorisation Scheme, the Government did not find any nexus between the condition of pre-import and the objective of this Scheme, this court is of the considered view that the impugned exemption notification and paragraph 4.14 of the Foreign Trade Policy, to the extent the same are subject matter of challenge in these petitions, cannot b....