TaxTMI 
TaxTMI 
2021 (5) TMI 742
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....ther 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 confusion caused by the raging pandemic, the State....
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....e 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 the State by invoking the provisions of Article 21 of the Constitution of India, 1950 [in short the "Constitution"]. The p....
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....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 albeit at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act. iii. The source of power to levy and col....
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....wever, 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. 607A1 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. Although the Mega Notification no. 12/2012 dated 17.03.2012 [in short "2012 Mega Notification"] qua life-saving medicines provided for the imposition of BCD at the rate of 5% and CVD at the rate of 6% with e....
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....ms 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 agencies; and the other, by the individual, for personal use, by way of gift. There is, thus, an absence of "adequate determining principle". In support of these submissions, reliance is placed on the following judgements. a) Union of India v....
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.... 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 behalf of the State: - 9. The defence that the State takes is as follows:- i. The State has been responsive and has taken various steps in quick succession to mitigate the difficulties faced by the citizens having regard to the ground realities, the availability of drugs a....
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.... [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 considered as a facet of the right to life as encapsulated in Article 21 of the Constitution. [See Shanti Star Builders vs. Narayan Khimlal Totame & Ors., (1990) 1 SCC 520 ; and People's Union for Civil Liberties (PDS Matters) vs. Union of India & Ors., (2013) 2 SCC 688]. vii. The submission of the petitioner that the impositi....
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....o reasonable basis found for differentiation. [See Ameerunnissa Begum vs. Mahboob Begum, 1953 SCR 4042 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 interdicted, if it loses its character and attains a confiscatory hue. Levy of tax in extraordinary times: - 10. Instances of extraordinary times are, to name a few, war, famine, epidemic, pandemic, floods, and other acts of god/nature. 10.1. Tax, which is an exaction, is ordinarily sustained, because the Courts presume [unless established otherwise] that it serves, inter alia, a higher purpose such as redi....
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....s 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. 12.1. The absence of adequate medical resources forced persons infected with coronavirus, their relatives and friends, to fend for themselves and thus, find necessary means for survival. The fact that enough beds were not available in hospitals which, understandably, were required for critically patients, forced other patients to look for sources for supply which provide a viable alternative to LMO. Oxygen concentrators appeared to be that alternative. It i....
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....oms 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 Commissioner of Customs, as the case may be, a certificate from a nodal authority, appointed by a State Government, that the imported goods are meant for free distribution for Covid relief, by the State Government, or the entity, relief agency or statutory body, as specified in such certificate. 4. The importer produces before the Deputy or Assistant Commissioner of Customs, as the case may be, at the port of import within a period of six months from the date of importation, or within such ex....
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..... 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 dated 03.05.2021. 14.3. The State's stand that a substantial reduction in duties and taxes has been brought about with the issuance of the notification dated 24.04.2021 and 01.05.2021 has no relevance to the matter in issue. The petitioner, to begin with, assailed the notification dated 01.05.2021, on the ground that the import of oxygen concentrator by him, which was a gift, albeit for personal use, could not be placed at par with the import of oxygen concentrators for commercial use; for the purposes of takin....
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....ate, 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 petitioner and persons similarly circumstanced would be in public weal. The counter-affidavit filed by the State gives us no clue whatsoever concerning this vital issue. 15.4. We are, therefore, also of the view, that the petitioner has demonstrated, by adverting to his circumstances, that IGST involves "distinct and noticeable burdensomeness", which is, directly attributable to its imposition. The State, in our opinion, could have discharged its onus, by adverting to such facts and figures, which would have persuaded us to hold ....
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.... 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 essential as these notifications are interlinked. 16. Before we discuss the relief that may be accorded to the petitioner, it would be important to deal with an argument advanced on behalf of the State that the issue raised in the writ petition should be best dealt with by the GST Council. In this context, reference was made by Mr. Hossain to Section 6(1) of the IGST Act. 16.1. A bare perusal of the IGST Act would show that the Government can exempt, generally, either absolutely or subject to such conditions as it may specify, inter alia, g....
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....ving 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 personal use, cannot also be equated with those who import oxygen concentrators for commercial use. Therefore, notification bearing no. 30/2021-Customs, dated 01.05.2021, will also have to be quashed. 17.4. That being said, it is, perhaps, rightly argued, on behalf of the State, that the Court cannot issue a writ of mandamus directing the State to issue an exemption notification in favour of the petitioner or persons similarly circumstanced. The power to issue an exemption notification under Section 25 of the Customs Act is vested in the State. Having said so,....
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....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 imported drug or medicine is a life-saving drug. An oxygen concentrator is, on the face of it, concededly, a piece of medical equipment that is required for treatment, mitigation, and/or prevention of the disease [i.e. coronavirus] or disorder in human beings. 17.7. Therefore, the compliance of clause (a) of condition no. 104 appended to entry no. 607A of the General Exemption No. 190, should suffice, in our opinion. Thus, it would be sufficient if the persons, who are similarly circumstanced as the petitioner, furnish a letter of undertaking, to the officer designated by the State whi....
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....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 inserted in Mega Exemption notification no. 50/2017-Customs, dated 30.06.2017, via notification no. 85/2017-Customs, dated 14.11.2017. 2. Instances of taxation statutes being struck down on substantive grounds which had alleged discrimination can be found in the 5-Judge decision of this Court in Kunnathat Thatehunni Moopil Nair v. State of Kerala (1961) 3 SCR 77, in which a uniform tax called "basic tax" levied under the provisions of the Travancore Cochin Land Tax Act, 1955 was held to be discriminatory as it treated unequals equally. The Court held: "Ordinarily, a tax on land or land revenue is assessed on the ....
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.... 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 to Rakhi). The exemption for oxygen concentrators is allowed only for a period till 31 July 2021 for personal use. Explanation: 1. Rakhi (but not gifts related to Rakhi) will be covered under Section 25(6) of Customs Act. 1962 that reads "no duty shall be collected if the amount of duty leviable is equal to or less than Rs. 100/-" 2. Import of goods as gifts with payment of full applicable duties is allowed" 7. 3. Definitions. -In this Act, unless there is anything repugnant in the subject or context, - xxx xxx xxx [(b) "drug" includes- [(i) all medicines for internal or external use of human beings or animals and all ....