TaxTMI 
TaxTMI 
2021 (5) TMI 742
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....trators, hospital beds, ventilators, and other medical equipment, crucial for battling against the infection caused by the virus, has brought out the best and worst in people. We have messiahs. We have charlatans. We have hoarders. We have seen kind and caring hand being struck out by strangers when they could have remained cocooned in the safety of their houses. Brave hearts, there are many; doctors, nurses, and personnel manning public institutions. These are people who are at the forefront of this battle, staking their lives, so that the common man could live; beating this adversary, i.e., the virus is their only goal. There is, thus, in this litigation, no adversary other than the virus. 3. On 04.05.2021, the captioned petition was moved before us. Despite the respondent [hereafter referred to as the "State"] being served with an advance copy of the petition, there was no representation on its behalf. The matter was posted on the next date, i.e., 05.05.2021 when, the State was represented by Mr. Chetan Sharma, Additional Solicitor General and Mr. Zoheb Hossain, Senior Standing Counsel. We, at that stage, carried the impression, that because of the prevailing chaos and confus....
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....eafter, the matter was taken up by us on 06.05.2021. Even at that stage, we issued a notice in the petition, with the hope that course correction would follow. Since we had received, up until then, no concrete response from the State, concerning amelioration of the difficulty faced by the petitioner, we issued interim directions for clearance of the oxygen concentrator imported by him upon deposit of an amount equivalent to the IGST [presently payable by the petitioner] with the Registry of this Court within three days from the date of passing of the said order. We also made it clear that the petitioner would fulfil all other requisite formalities necessary for the import of the oxygen concentrator. 4.1. Pertinently, to assist the Court, we had via our order dated 06.05.2021, also appointed Mr. Arvind Datar, Senior Advocate, as Amicus Curiae in the matter. The matter was, thus, posted for 18.05.2021. The State, since then, has filed a counter-affidavit in the matter. 5. The matter thus, raises certain seminal questions concerning constitutional law. The petitioner has sought to assail the notification bearing no. 30/2021-Customs, dated 01.05.2021, and subsequent actions of th....
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....ad been supplied oxygen concentrators free of cost from bearing the burden of IGST. 6.2. However, our attempt at nudging the State to take, what we thought was a reasonable stand, [and we dare say, a morally right position] has come a cropper. Submissions made on behalf of the Amicus and the petitioner: - 7. Mr. Datar, the learned amicus curiae, broadly, made the following submissions. i. There is an interplay between the provisions of The Customs Act, 1962 [in short the "Customs Act"]; The Customs Tariff Act, 1975 [in short the "CTA"]; The Goods and Services Tax Act, 2017 [in short the "GST Act"]; and The Integrated Goods and Services Tax Act, 2017 [in short the "IGST Act"]. ii. The interplay of the aforementioned statutes allows for the imposition of Basic Customs Duty [in short "BCD"] and IGST on goods imported into the country at the rates stipulated in the CTA. Section 2 of the CTA, read along with First and Second Schedules, provides for rates at which BCD is levied. Likewise, Section 3 of the CTA read with the first proviso to Section 5 of the IGST Act allows for levy of IGST on goods imported into India at the values determined under the CTA albei....
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....rom customs duty/BCD, IGST, via a separate notification, i.e., notification no. 30/2021 dated 01.05.2021 was reduced from 28% to 12% qua imports made for personal use. An exception was, however, made insofar as oxygen concentrators imported by a canalising agency was concerned. In such cases, vide notification no. 4/2021 dated 03.05.2021, complete exemption from IGST was granted, albeit, subject to certain conditions. ix. It is seen that, in most cases, where BCD is nil, exemption from imposition of IGST is also given. The imposition of IGST at the rate of 12% on oxygen concentrators imported for personal use even while the imposition of BCD on them is exempted, places such cases in the excepted category; which is, contrary to the prevailing practice. x. Furthermore, a perusal of entry no. 607A^1 of General Exemption no. 190 would show that complete exemption from BCD and IGST is granted for life-saving drugs/medicines imported for personal use which are supplied free of cost by overseas supplier. The exemption, however, is subject to the condition i.e. obtaining a certificate from the named officials that, the goods in issue are life-saving drugs/medicines. Altho....
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..... xiv. The Central Board of Excise and Customs [in short "CBEC"] had issued Circular no. 9/2014-Customs, dated 19.08.2014, setting forth guidelines for issuance of exemption notifications under Section 25(2) of the Customs Act in respect of goods imported for relief and rehabilitation of people affected by natural disasters and epidemics. Amongst others, the following guideline is relevant: "Cases of import required for treatment of individuals, who are suffering from life-threatening diseases, could be considered on [a] case-to-case basis. Such cases will be examined from the point of view of the nature of the medical condition and financial circumstances of the applicant". xv. While there is no right in law to claim exemption from taxes, however, once the State invokes the provisions of Section 25 of the Customs Act such delegated legislation can be judicially reviewed. The impugned notification is manifestly arbitrary, and hence, is violative of Article 14 of the Constitution. The impugned notification is irrational as there is no intelligible differentia in classifying the import of oxygen concentrators into two categories. One, by the State and its a....
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....t impact it has on the citizens' rights. Reliance, in this behalf, was placed on the judgement of the Supreme Court in R.C. Cooper vs. Union of India, (1970) 1 SCC 248 at paragraph 49; and Federation of Hotel & Restaurant Association of India vs. Union of India, (1989) 3 SCC 634 at paragraph 46. Besides this, reliance is also placed on the order of the Supreme Court dated 18.12.2020, passed in Suo Motu Writ Petition (Civil) No.7/2020, to buttress the plea that the right to health includes the right to affordable treatment. xviii. The impugned notification violates not only the right to health but also the right to human dignity which is interwoven in Article 21 of the Constitution. In support of this plea, reliance is placed on the judgement of the Supreme Court in Jeeja Ghosh vs. Union of India, (2016) 7 SCC 7618. 8. Mr. Sudhir Nandrajog, learned senior counsel, who appears on behalf of the petitioner, has adopted the arguments of Mr. Datar. Mr. Nandrajog submitted that the facts obtaining, in this case, would clearly show that the impugned notification and the actions of the State are violative of both Article 14 and 21 of the Constitution. Submissions advanced on ....
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....l channels. Therefore, consciously, parity has been brought about between the oxygen concentrators imported for commercial purposes and those imported for personal use. iv. The decision to impose a tax and/or the fixation of the rate at which tax is to be imposed cannot be subjected to judicial review. [See S. Kodar vs. State of Kerala, (1974) 4 SCC 422, at paragraph 10]. v. The courts have refrained from exercising the power of judicial review over matters concerning economic issues. [See R.K. Garg vs. Union of India & Ors., (1981) 4 SCC 675 (paragraph 8 and 19); Hoechst Pharmaceuticals Ltd. & Ors. vs. State of Bihar & Ors., (1983) 4 SCC 45 (paragraph 82); Federation of Hotel Case; CIT vs. Vatika Township Pvt. Ltd., (2015) 1 SCC 1 ; and Partington vs. Attorney General, (1869) LR 4 HL 100]. vi. The imposition of IGST on imported oxygen concentrators, which are gifted, and are for personal use, does not violate Article 21 of the Constitution. If this argument of the petitioner is accepted, it will lead to absurd consequences in as much citizens will attempt to seek exemption from property tax, and food items since both housing and food items have been cons....
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....persons as against the other as long as the classification made is not arbitrary and artificial or evasive. There must be a reasonable, natural, substantial difference in the nature of class(es) on which the law operates. Thus, differential treatment does not ipso facto constitute violation of Article 14. The charge of denial of equal protection can get sustained only when there is no reasonable basis found for differentiation. [See Ameerunnissa Begum vs. Mahboob Begum, 1953 SCR 404^2 at 414 and Ashoka Smokeless Coal India (P) Ltd. vs. Union of India, (2007) 2 SCC 640] vi. While differential treatment by forming different classes is permissible; what is not permissible is the distinctions made that are unjust and unreasonable when correlated with the object sought to be achieved by the State. vii. The State, in order to tax something, does not have to tax everything. It is allowed the leeway to pick and choose. viii. Tax being one, amongst an array of instruments available to the State, to further its economic policy, it requires a "play in the joints". ix. Although fixation of the rate of tax falls within the domain of the legislature, it can be....
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....ion of the impugned tax in times of pandemic, war, famine, floods, and such like conditions would subserve public interest? iii. Whether Article 21 of the Constitution, imposes on the State, a positive obligation to provide adequate resources for protecting and preserving the health and well-being of persons residing within its jurisdiction? iv. What relief, if any, can be granted to the petitioner? Issue No. (i): - 12. Insofar as the first issue is concerned, what is required to be taken judicial notice of is that LMO is in short supply not only in Delhi but in all parts of the country which has resulted in people scrambling for oxygen cylinders, oxygen concentrators, and in cases where a person has suffered severe infection, for hospital beds, so that the concerned person could be put on a ventilator. The situation became particularly critical, in and about 07.05.2021. The official data, provided by the Ministry of Health and Family Welfare, Government of India [in short "MoHFW"], for that date, revealed that 4,14,188 persons per day were detected as having been afflicted with coronavirus. The per-day death rate, on that date, as reported, was 3915. ....
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.... imported into India for personal use, from the imposition of IGST at a rate in excess of 12% as leviable in accordance with the provisions of Section 3(7) of the CTA read with Section 5 of the IGST Act. 12.9. On the day, when the instant petition was served on the Standing Counsel for the State, i.e., 03.052021, yet another notification bearing no. 4/2021-Customs, dated 03.05.2021, was issued by the State; this time, by exercising powers under Section 25(2)^5 of the Customs Act. Through this notification, the State, inter alia, exempted the imposition of IGST on oxygen concentrators subject to the conditions provided in the annexure appended to the said notification. The conditions prescribed; which applied to the import of oxygen concentrators as well, read as follows. "1. The said goods are imported free of cost for the purpose of Covid relief by a State Government or, any entity, relief agency or statutory body, authorised in this regard by any State Government. 2. The said goods are received from abroad for free distribution in India for the purpose of Covid relief. 3. Before clearance of the goods, the importer produces to the Deputy or Assistant....
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....es located outside the country. It is the petitioner's case that the oxygen concentrator was shipped to him by his nephew who is located in New York, United States of America. 14.2. What makes the discrimination egregious is the fact that when notification dated 24.04.2021 was issued exempting imposition of BCD on oxygen concentrators; there was recognition by the State that "public interest" required it to take such a step. As noted above, this notification was issued under Section 25(1) of the Customs Act. The said provision enables the State to exercise its powers of granting exemption from customs duty in the "public interest". Likewise, the notification dated 03.05.2021, which was issued by the State, in the exercise of powers under Section 25(2) of the Customs Act, notes that the said step is taken on account of "exceptional circumstances prevailing due to the COVID-19 pandemic ...". Given the fact that both notifications were issued in the wake of the pandemic, raging across the country, it makes little sense as to why individuals such as petitioner, are sought to be excluded from the beneficence which is bestowed on persons who fall within the sway of the notification da....
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.... for the greater good of the public; unless proved to the contrary. However, in times of peril, the Courts must examine the stand taken by the State to defend an action instituted to lay challenge to a tax - on anvil of Article 21 of the Constitution; as it is not the form but the impact of the tax which will determine its tenability. 15.2. The Courts and the State have to adopt a humanistic approach, which, in our view, is a facet of Article 21 of the Constitution. The failure to do so both, by the Court and by the State, would lead to an unbridgeable chasm between law and justice, resulting in, disruption of social order. 15.3. Therefore, if the State expected its action to be sustained, in the instant case, it ought to have demonstrated, that the revenue, it would possibly garner, as IGST, in respect of oxygen concentrators which are imported in the circumstances, in which, the petitioner is put, would be appreciably more than the cost incurred to administer the collection of IGST on such transactions. These details need not have borne mathematical precision; a broad-brush approach would have sufficed-so that we could be persuaded to hold that denying relief to the petitio....
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....re measures such as delaying its collections, granting rebates, or, as in this case, permitting, import of vital medical equipment, drugs, medicines, for a defined period, till such time, normalcy is restored. As alluded to above, the notification dated 24.04.2021, allows import of oxygen concentrators at nil rate of BCD while notification dated 30.04.2021, inter alia, allows import of life-saving drugs/oxygen concentrators which are received as gifts. Both these notifications, for the moment, extend benefits and/or grant leeway only till 31.07.2021. In the same vein, the notification dated 03.05.2021 exempts imposition of IGST on oxygen concentrators which are imported free of cost, albeit, via canalizing agency up until 30.06.2021. The State could have, if it intended to treat, persons who are similarly circumstanced as the petitioner, at par with those who fall within the sway of the notification dated 03.05.2021- extended the exemption to them as well and withdrawn the same once normalcy was restored. 15.8. To begin with, the period of exemption could have been so configured, that the date of expiration of exemption, was common in the aforementioned notifications. This is es....
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....ssues. 17.1. One cannot quibble with the submissions made hereinabove on behalf of the State, as these are substance, in the nature of principles enunciated, time and again by the Courts. The exceptions to these principles have already been alluded to. To reiterate very briefly, a taxing statute can be tested on the anvil of Article 14, inter alia, on the ground that the justification for classification proffered by the State is artificial and unreasonable. [See N. Venugopala Ravi Varma Rajah vs. Union of India and Another, 1969 (1) SCC 681] 17.2. Having found so, in our view, a declaratory relief can be accorded, to the effect, that imposition of IGST on oxygen concentrators, imported as gifts, i.e., free of cost, for personal use, is violative of Article 14 of the Constitution on the ground that an artificial, unfair and unreasonable distinction has been drawn between persons, who are similarly circumstanced as the petitioner and those who import oxygen concentrators through a canalizing agency. 17.3. The logical sequitur of this would be that persons who are similarly circumstanced as the petitioner, i.e., those who obtain imported oxygen concentrators as gifts, for per....
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....ate has issued several notifications, such as notifications dated 20.04.202128, 24.04.2021^9, 30.04.2021, 01.05.2021, and 03.05.2021 as also the press release dated 03.05.2021 - which only buttresses the view taken by us that oxygen concentrators are to be treated as drugs in terms of General Exemption Notification No. 190. This approach, in our opinion, would serve two purposes. i. First, it would preserve the notification dated 03.05.2021. ii. Second, it would not require the State to issue a separate notification for grant of exemption to individuals who are similarly circumstanced as the petitioner. 17.6. This brings us to the other aspect, as to whether condition no. 104, which is appended to entry no. 607A, of the General Exemption No. 190 should apply in this case. To our minds, given the fact that each day counts for the person who requires an oxygen concentrator, the cumbersome certification procedure, provided under condition no. 104 is both impractical and inefficacious. We are also of the view that a plain reading of the said condition would show, certification is required, in a situation, where it could be a matter of debate as to whether the impor....
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....ed. 19.2. To obviate misuse of the oxygen concentrators, by the petitioner and/or persons similarly circumstanced, she/he/they would have to furnish a letter of undertaking to the officer designated by the State that the same would not be put to commercial use. The petitioner would thus submit a letter of undertaking with seven days of the State intimating/notifying the particulars of the officer designated for this purpose. Till such time an officer is designated by the State, the direction set forth in paragraph 17.7 above will operate. 20. The writ petition is disposed of in the aforesaid terms. The pending application shall also stand closed. 21. The Registry is directed to release the money, deposited with it, by the petitioner, along with interest, if any accrued, at the earliest. 22. Before we part with the judgement, we must place on record our appreciation for the invaluable assistance rendered by Mr. Arvind Datar, Mr. Zoheb Hossain, Mr. Sudhir Nandrajog as also Mr. Siddharth Bambha. Their assistance helped us to traverse over what was, somewhat, new and uneven terrain. --------------------- Notes: 1. Entry no. 607A was in....
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....3. See https://www.indiabudget.gov.in/doc/Budget_at_Glance/budget_at_a_glance.pdf; last accessed on 20.05.2021 at 1400 hours. 4. SECTION 25. Power to grant exemption from duty. - (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. 5. SECTION 25. Power to grant exemption from duty. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which duty is leviable. 6. "Revised Para 2.25 of FTP, 2015-2020 Import of goods, including those purchased from e-commerce portals, through post or courier, where Customs clearance is sought as gifts, is prohibited except for life saving drugs / medicines/ oxygen concentrators and Rakhi (but not gifts related t....
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....decision it becomes difficult to understand how the word "and" as used in the definition of drug in Section 3(b)(i) between "medicines" and "substances" could have been intended to have been used conjunctively. It would be much more appropriate in the context to read it disjunctively. In Stroud's Judicial Dictionary, 3rd Edn. it is stated at p. 135 that "and" has generally a cumulative sense, requiring the fulfilment of all the conditions that it joins together, and herein it is the antithesis of or. Sometimes, however, even in such a connection, it is, by force of a contexts, read as "or". Similarly, in Maxwell on Interpretation of Statutes, 11th Edn., it has been accepted that "to carry out the intention of the legislature it is occasionally found necessary to read the conjunctions "or" and "and" one for the other". This Court held that as the word "substances" in the clause is used to mean something other than "medicine", it was not the intention of the legislature that the word "and" was meant to be read conjunctively. Accordingly, this Court held that the two parts of the definitional clause must be read disjunctively. 16. In the above view, Section 3(b)(....