AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2024 (6) TMI 11
X X X X Extracts X X X X
X X X X Extracts X X X X
....ud or suppression of material fads or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as an Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s. Sunwoda Electronic India (P) Ltd., No. 199, 200/2, C/o Snowman Logistics Limited, Nayapakkam Main Road, Near ETA Apartments, Irrungattukottai, Sriperumbudur Taluk, Mevalurkuppam, Kancheepuram, Tamil Nadu, 602105 (hereinafter called as 'the Applicant*) who are engaged in the business of importing and trading Portable Lithium System Batteries classifiable under 85076000, are registered under GST with GSTIN 33AAXCS8681F1ZN. 2 The Applicant enters into a contract with an Original Equipment Manufacturer (OEM in short) licensed under Section 65 of the Customs Act, 1956, read with Manufacture and Other Oper....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3P FTWZ, the same are stored there until further sale of such goods by the applicant. STEP 2 - Sale of warehoused goods on "as is where is" basis to OEM's MOOWR unit • The applicant negotiates and executes the sale of said goods on "as is where is" basis to OEM's MOOWR unit through a formal contract of sale. • In this step of transaction, the Commercial Invoice and Packing list carry Bill From' party as M/s. Sunwoda (the Applicant), and the 'Ship From' party as DHL (the 3P FTWZ). • Further, the Bill to' party would be OEM customer name and address, and the 'Ship to' party would be the OEM Customer's MOOWR unit and its address, which does not alter the fact that the Applicant sell the goods lying in FTWZ warehouse to OEM's MOOWR unit by transfer of title. STEP 3 - Clearance/movement of goods from 3P FTWZ to MOOWR Warehouse • For effecting the movement of goods, the OEM's MOOWR unit provides the authorization to file Bill of Entry, IEC/GST/AD Code, Warehouse license and WH code to DHL. • This type of movement is permissible in terms of CBIC's Circular No. 48/2020-Cus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cturer licensed under Section 65 of the Customs Act, 1956 read with Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 ("OEM's MOOWR Unit") for supply of imported Portable Lithium System Batteries. In order to perform the contract, the said goods are imported by the applicant from abroad to a third-party Free Trade Warehousing Zone ("3P FTWZ") in India. The goods are sold to the OEM's MOOWR unit while lying in the 3P FTWZ and are cleared under bond by the OEM's MOOWR unit, on need basis. • The applicant stated that this type of movement is permissible in terms of CBIC Circular No. 48/2020-Customs dated 27.10.2020 which has classified that a Section 65 unit (a MOOWR Warehouse) may source capital goods or inputs from a SEZ/FTWZ unit, following the applicable procedures. They further stated that this type of movement of goods from FTWZ to bonded warehouse is governed by Rule 46 (13) of the SEZ Rules, 2006 read with Instructions No. 63 dated 10.08.2010 (No. C.3/21/2009-SEZ). The applicant and its customers i.e., OEM's MOOWR unit duly comply with the said provisions. • Under GST, the taxable event is 'supply'. Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....viable on said transaction or activity. • The applicant further stated that Para 8 (a) of Schedule III covers the transaction of supply of warehoused goods to any person before clearance for home consumption. As per Section 2 (n) of the SEZ Act, 2005 "Free Trade and Warehousing Zone" means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on. Further, as per Section 53 of the SEZ Act, 2005 a Special Economic Zone is deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. Resultantly, it is submitted that when the goods are warehoused in an FTWZ (SEZ), the said goods have not entered home consumption as the goods are stored in an area which is beyond the customs frontiers of India. In this regard, reliance is placed on the decision of Covema Wood Blast Vs. State of Kerala [2006 (334) E.L.T. 649 (Ker.)] Thus, as far as the sale by the applicant and the movement of the same to the MOOWR warehouse is concerned, it is submitted that the same is covered by Para 8 (a) of Schedule III to the CGST Act. In this regard, the applicant place reliance on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ritory of India in terms of Section 53 read with Section 2 (za) of the SEZ Act. Moreover, as per Section 51 of the SEZ Act, the provisions of the SEZ Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law. Thus, it is submitted that FTWZ is deemed to be a territory outside the customs territory of India in terms of Section 53 and Section 2 (za) of the SEZ Act. Further, in terms of Section 51, said deeming fiction is given an overriding effect over any other law. Consequently, it is submitted that supply of goods lying in FTWZ on "as is where is basis" which is cleared by the customer to its MOOWR Warehouse would be a transaction falling under Para 7 of Schedule III on account of the deeming fiction treating the FTWZ to be outside the customs territory of India. • Therefore, in view of the above submissions, the applicant has submitted that GST is not leviable on the sale of applicant's goods warehoused in a third-party Free Trade Warehousing Zone ("3P FTWZ") on "as is where is" basis to customer who clears the same to bonded warehouse under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y relates to a situation where a sale of goods take place, when the goods are still lying in a bonded warehouse, and as to whether the said sale constitute a 'supply* and its implications from the GST point of view. 9.3 Prima facie, we observe that the imported goods of the applicant are initially warehoused in a third party Free Trade Warehousing Zone ("3P FTWZ"), where the third party with whom the applicant has entered into a warehousing agreement, happens to be M/s. DHL Supply Chain India (P) Ltd., (DHL in short). On perusal of the "Warehousing, Logistics and Customs Clearance Services Agreement" dated 21.06.2023, it is seen that the said agreement has been entered into by the applicant with DHL for the purpose of provision of FTWZ warehousing, storage, safekeeping, customs clearance, transportation and other subsidiary services by DHL to the applicant. Further, as per 'Article 4 Customs Clearance' of the agreement, DHL acts for the applicant in processing the declaration of inbound/outbound FTWZ warehouse, and as per 'Article 5 Transportation', DHL is responsible for the safe transportation of the applicant's goods. 9.4.1 Moving on to the legaliti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." 9.4.4 A combined reading of the above provisions shows that Free Trade Warehousing Zone (FTWZ) is part of SEZ scheme and it is a Customs bonded warehouse. Warehousing of goods that are imported without payment of appropriate Customs duties are carried out in these zones. SEZ is a specifically delineated duly free enclave which is deemed to be a foreign territory for the purposes of trade operations and duties and tariffs. Normally, the applicant imports goods and stores them in FTWZ till he finds a local customer who will purchase the goods and such purchaser clears the goods under the Customs Act. In other words, the goods would become exigible to tax under the domestic enactments only when they are released for home consumption. 9.4.5 This fact was reiterated in the CBIC Circular No. 3/1/2018-IGST dated 25.05.2018, the excerpts of which are reproduced below: "3. It is seen that the "transfer/sale of goods while being deposited in a customs bonded warehouse" is a common ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the customs bonded warehouse. 7. This Circular would be applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse, on or after the 1st of April, 2018." 9.4.6 However, from 01.02.2019 onwards, when an amendment to Schedule III of the CGST Act, 2017 took place to the effect that 'supply of warehoused goods to any person before clearance for home consumption shall be neither a supply of goods nor a supply of services.', the aforesaid Circular became redundant, and so the same stood rescinded by way of another Circular No. 04/01/2019-GST dated 01.02.2019, which read as below: "The provisions of the CGST (Amendment) Act, 2018 and SGST Amendment Acts of the respective States have been brought into force w.e.f 01.02.2019. Schedule III of the CGST Act, 2017 has been amended vide section 32 of the CGST (Amendment) Act, 2018 so as to provide that the "supply of warehoused goods to any person before clearance for home consumption" shall be neither a supply of goods nor a supply of services. 2. Accordingly, Circular No. 03/01/2019-IGST dated 25th May, 2018 is hereby rescinded." 9.5 It may be noted that though the IGS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9;warehouse' and 'warehoused goods' have not been defined under the SEZ Act, 2005, the same have been defined under Section 2 (43) and 2 (44) of the Customs Act, 1962, as, "(43) "warehouse" means a public warehouse licensed under section 57 or a private warehouse licensed under section 58 or a special warehouse licensed under section 58A." "(44) "warehoused goods" means goods deposited in a warehouse" 9.7 It may be seen that the SEZ Act does not carry such definitions, but that the same is due to the fact that apart from the definitions in-built under the SEZ Act, the definitions under other Acts are also borrowed, as the case may be, as specified under Section 2 (zd) of the SEZ Act, which reads as, "(zd) all other words and expressions used and not defined in this Act but de fined in the Central Excise Act, 1944 (1 of 1944), the Industries (Development and Regulation) Act, 1951 (65 of 1951), the Income-tax Act, 1961 (43 of 1961), the Customs Act, 1962 (52 of 1962) and the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) shall have the meanings respectively assigned to them in those Acts." Therefore, the 'warehoused ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jective of Section 65 is to enable manufacture and other operations in customs bonded warehouses. For this purpose, the units should be able to procure required raw materials, consumables, capital goods etc., imported or procured from domestic market. There are no restrictions imposed on sourcing of goods by units operating under Section 65. Moreover, the units are GST registrants, which are also allowed to procure goods from SEZ/FTWZs. In view of the foregoing, it is clarified that a Section 65 unit may source capital goods or inputs from a SEZ/FTWZ, following the applicable procedures." 9.11 Under Rule 46 (13) of the SEZ Rules, 2006, a unit is permitted to transfer goods to a bonded warehouse without payment of duty, and it runs as below: "(13) The Authorized Officer may permit a Unit to transfer goods to an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio-technology Park Unit or to a bonded warehouse, without payment of duty subject to following conditions, namely." On perusal of the documents furnished by the applicant in relation to the execution of sale of said goods on "as is where is" basis to O....