TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 695
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.... 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. 1. At the outset, we would like to make it clear that the provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act are in pari materia and have the same provisions in like matters and differ from each other only on few specific provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act, 2017 would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act, 2017. 2. M/s Panasonic Life Solutions India Private Limited (hereinafter 'the Applicant') submitted a copy of challan CPIN RBI231133....
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.... behalf of whom the goods are being imported by KILPL. * As per the arrangement with the Applicant, the FTWZ unit (viz. KILPL) merely clears and warehouses the goods imported and in consideration, the FTWZ unit collects warehousing charges from the Applicant. * To import goods into India, the Applicant places an order to the foreign suppliers. Based on the purchase order, overseas entities export goods to Panasonic India by mentioning name of consignee as M/s. KILPL (i.e. LSP), FTWZ unit on A/C of the Applicant with shipping address of LSP in all the export documents including export invoices. * Prior to arrival of goods in the customs port, the Applicant would intimate KILPL in Chennai and provides copy of the purchase order and other documents for clearance of goods from the port and storage of the same in FTWZ unit. * On arrival of goods, the FTWZ unit of KILPL files BOE in quintuplicate (5 copies) with the SEZ authorities, in their name i.e. M/s. KILPL, on account of M/s. Panasonic India. The trans-shipment permission is stamped on the fifth copy of the BOE, along with other relevant documents and goods are cleared without payment of customs duty. Post importation, KILP....
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....ic Tariff Area (DTA) or multiple transfers within the FTWZ followed by a subsequent removal from FTWZ Unit would result in bonded warehouse transaction covered under para 8 (a) of Schedule HI of the CGST Act or Tamil Nadu GST and Service Act, 2017 (hereinafter referred to as 'the TNGST Acti) and the rules made there under? Query 2 - If answer of the above query is No, whether Integrated Goods and Services Tax (TGST) is payable by the Applicant on goods stored in FTWZ unit and supplied to its customers in DTA unit, in addition to the customs duty payable [i.e. Basic Customs Duty (BCD) + IGST] by the customer in DTA on removal of goods from the FTWZ unit in accordance with Section 30 of Special Economic Zone ('SEZ' Act, 2005 and read with the Customs laws? Query 3 - If the supply of goods lying in FTWZ unit is not covered under para 8 (a) of Schedule HI of the CGST Act, whether any reversal of input tax credit of common inputs/input services/Capital goods is required at the hands of the Applicant in terms of recent amended Section 17 (3) of the CGST Act? 5. For interpretation of law with reference to the facts in respect of the aforesaid questions, the applicant has quoted conne....
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....tion 58A. the relevant provisions of the Customs Act, reads as below:- 57. Licensing of public warehouses -The Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, license a public warehouse wherein dutiable goods may be deposited. 58. Licensing of private warehouses,- The Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, license a private warehouse wherein dutiable goods imported by or on behalf of the licensee may be deposited. 58A. Licensing of special warehouses,- (1) The Principal Commissioner of Customs or Commissioner of Customs may, subject to such, conditions as may be prescribed, license a special warehouse wherein dutiable goods may be deposited and such warehouse shall be caused to be locked by the proper officer and no person shall enter the warehouse or remove any goods there from without the permission of the proper officer. In terms of Section 57 of Customs Act, the Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, license a public warehouse wherein dutiable goods may be ....
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....the SEZ Rules. They are also of the view that even though the day-to-day activities like warehousing and clearing of goods for home consumption on payment of applicable customs duties are supervised/monitored by Customs officials posted in the FTWZ in accordance with SEZ Act 2005, read with Customs Act, the approval / license/administrative control for FTWZ are fully governed under the provisions of SEZ Act. Therefore, they have submitted that irrespective of the administrative framework to monitor the functioning, it is clear that FTWZ unit is a SEZ unit. 6.1.7 Taking inference from all the above arguments, the applicant is of the view that FTWZ unit can neither be termed as 'warehouse' nor goods stored in a FTWZ unit said to be 'warehoused goods' as defined under the Customs Act. In this regard, they have placed reliance on the case of M/s Haworth. India Private Limited (2023 (8) TMI 1299) in which the Advance Ruling Authority ('AAR') Tamil Nadu have ruled that the transactions narrated in the application are in FTWZ and are governed under the provisions of SEZ Act and not licensed under Customs Act and claimed that supply of goods stored in the FTWZ unit (viz, by KILPL on accou....
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....oms duty should be applicable on such removal. In respect of the fact that customs duty is levied only when goods cross frontiers of India and not when goods land into India, there are plethora of judgements. Some of them are discussed below: * In the case of Kiran Spinning Mills vs Collector of Customs on 5 August, 1999 (1999 (113) ELT 753 SC), it was held that the taxable event occurs when the Customs barrier is crossed. In the case of goods which are in the warehouse, the Customs barriers would be crossed when they are sought to be taken out of the Customs and brought to the mass of goods in the country. * In the case of State Trading Corporation of India Ltd. Vs State of Tamil Nadu [2003] 129 STC 294], it was held that sale of goods shall be treated as sale in the course of imports if the same happens before clearance of goods for home consumption under Section 47 or the clearance of warehoused goods under Section 68 of the Customs Act. 6.2.4 In line with the said principles, by virtue of Section 30 of the SEZ Act, removal of goods from the SEZ/FTWZ unit has been subjected to Customs duty (including IGST) where applicable on such goods when imported. Further, by virtue of ....
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....oods or service by a SEZ unit shall be treated as inter-state supply. To such extent, one can argue that there is an inconsistency between GST provision and SEZ provisions. Therefore, by virtue of Section 51 of the SEZ Act, the SEZ law should prevail over the GST Law and therefore, IGST on supply of goods from SEZ/FTWZ to DTA should be discharged as applicable on import of goods, and there cannot be tax levy in terms of Section 7 (5) of the IGST Act. 6.2.8 Further, the applicant from drawing reference to the paragraph 8 (b) of the Schedule III of the CGST Act, would like to reiterate that on transfer of title of goods by Panasonic India, goods shall be either cleared from the FTWZ unit by the customer or further transfer of title can happen while goods are lying in FTWZ. The applicant has stated that the delivery of goods by Panasonic India gets completed within the FTWZ unit itself. Further, in case of clearance of goods to the DTA unit (as the case may be), the end customer shall file the BOE for home consumption (SEZ to DTA unit) and pay the applicable customs duty on the value at which such goods are being procured by such DTA unit (as the case may be). 6.2.9 In this regard, ....
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....ble at the time of clearance of the warehoused goods for home consumption. In other words, the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse." 6.2.11 With the above analysis, the applicant has submitted that there shall not be any additional IGST liability at the hands of Panasonic India on account of transfer of title of goods lying in the FTWZ unit since such supply qualifies as supply in the course of import. In this regard, the applicant placed reliance on following rulings by Authority of Advance Ruling in the State of Tamil Nadu:- i. M/s. SADES A COMMERCIAL OFFSHORE DE MACAU LIMITED [Order No. 24/AAR/2018 dated 31 December 2018] - In the said ruling, the authority has held that it is evident that removal from the FTWZ to DTA is the point of deferred levy/payment of Customs Duty, i.e., at the time of clearance for home consumption from FTWZ and the applicant is not liable Lo pay IGST at the time of removal of goods from the FTWZ to DTA under the provisions of IGST Act in ad....
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....egard, the applicant placed reliance on the judgement of the Hon'ble Supreme Court in the case of Union of India & Ann Vs M/s Mohit Minerals Pvt. Ltd-[Civil Appeal No. 1390 of 2022) which has upheld the judgement of Hon'ble Gujarat High Court wherein it was held that to the extent value of supply of a service, which has already been included by the legislation as a tax on the import of goods, separate tax on said supply of services cannot be allowed. The High Court in the impugned judgment has observed that:- "What has led to the present day problems in the implementation of the GST: 132. The GST is implemented by subsuming various indirect taxes. The difficulty which is being experienced today in proper implementation of the GST is because of the erroneous misconception of law, or rather, erroneous assumption on the part of the delegated legislation that service tax is an independent levy as it was prior to the GST and it go vivisect the transaction of supply to levy more taxes on certain components completely overlooking or forgetting the basic concept of composite supply introduced in the GST legislation and the very idea of levying the GST. Prima fade, it appears that while....
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....supplies. Further, Section 2 (47) of the CGST Act defines 'exempt supply' as 'supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply. Section 2 (78) of the CGST Act defines non-Taxable supply' as fa supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act'. 6.3.2 Furthermore, in terms of amended Section 17 (3), value of exempt supply" shall not include the value of activities or transactions specified in Schedule III, except, inter-alia, the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the said Schedule i.e. "Supply of warehouse goods to any person before clearance for home consumption". The applicant has claimed that in the instant case, supply of goods stored in the FTWZ unit should not fall under paragraph 8 (a) of schedule III (specifically where goods are cleared for home consumption). 6.3.3 Furthermore, the applicant by highlighting the Explanation 3 of Rule 43 of the CGST Ru....
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.... (iv) Addendum to Free Trade Zone Warehousing Services agreement effective from 25th Jan, 2023 to 24th Jan, 2025. (v) Renewal of Free Trade Zone Warehousing Services agreement on 24th October, 2018 with M/s. Kerry Indev Logistics Private Limited. (vi) Renewal of Free Trade Zone Warehousing Services agreement on 10th September, 2019 with M/s, Kerry Indev Logistics Private Limited. (vii) Letter of approval in Lr. No. 8/5/2012/J. Matadee/SEZ dated 06-08-2012, issued by the Development Commissioner, MEPZ to M/s. Kery Indev Logistics Private Limited for the service activity of "Warehousing" valid for a period of one year. (viii) Additional submissions dated 01-07-2024 along with [a) Sample GSTR-1 (b) Sample GSTR-9C (c) Tweet FAQs from CBIC (d) Sample GSTR-9 (e) Technical guidance on Annual return and GST Audit. (ix) Copies of Relevant provisions of Customs Act, SEZ Act, GST Act and Case laws relation to the instant issue. (x) Application for modification of query-3 is submitted vide letter dated 25th Jun, 2024. 8. The applicant is under the administrative control of State Tax Authorities. The concerned authorities of the Centre and State were addressed to report ....
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.... by them. The AR also discussed various case laws, rulings in support of their defence, but reiterated that FTWZ are to be considered as customs ports and not as warehouses, as per the extant legal provisions. 11.3 When the members enquired as to whether the imported goods are moved to any other warehouse or, whether the applicant transfers only the title of goods to customer, the AR explained that the applicant transfers only the title of goods to customer, and it is for the customer to make further transfers, or to clear the same in DTA. 11.4 In this regard, the AR furnished additional submissions in the form of two booklets, one containing the discussions about the factual background of the case, along with extracts of relevant legal provisions and the other containing sample copies of form GSTR-1, 9C, 9 etc., along with extract of Technical guidance on Annual return and GST audit1. They also furnished a letter dated 25.06.2024 of the applicant, which in effect was an application for modification of Query No. 3 of the advance ruling application field originally and requested the authorities to take the said modification into consideration. The AR further stated that they wish....
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.... 30 of the SEZ Act, removal of goods from the SEZ/FTWZ unit has been subjected to Customs duty (including IGST) where applicable on such goods when imported. * Moreover, in terms of proviso to Section 5 (1), goods imported to India are subject to Customs duty in accordance with the provision of Section 3 of the Customs Tariff Act. * On conjoint reading of above provisions, it is established that removal of goods from SEZ to DTA shall be treated as imports at the hands of DTA unit and accordingly, Customs duty shall be levied in accordance with the proviso to Section 5 (1) of the IGST Act read with Section 3 of the Customs Tariff Act 13.1 Additionally, in support of their view, the applicant wish to highlight the instructions issued for respective GST returns as well as FAQs issued by CBIC wherein, it has been clarified that supply of goods by SEZ unit to DTA unit should be treated as imports in the hands of DTA unit as discussed below: * Vide point no. 9 of the instructions to GSTR-1, it is clarified that supply by SEZ unit to DTA unit shall be reported as imports in GSTR-2 by DTA, Relevant para is reproduced below for your reference - "The supplies made by SEZ on cover of....
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....EZ authorities on the Company with respect to transactions in question. 14. DISCUSSION AND FINDINGS; 14.1 We have carefully considered the submissions made by the Applicant in their application, submissions made during the personal hearing, and the comments furnished by the jurisdictional tax officers. 14.2 From the submissions made at the time of filing the application, it is seen that the applicant had sought an advance ruling, on the following aspect, viz.,- "(i) Whether the transfer of title of goods stored in FTWZ Unit by the applicant to its customers in Domestic Tariff Area (DTA) or multiple transfer within the FTWZ followed by a subsequent removal from FTWZ Unit would get covered under para 8 (a) of Schedule-Ill of the CGST Act or Tamil Nadu GST and Service Tax Act, 2017 (TNGST Act) and the rules made thereunder? (ii) If the answer to the above at (i) is no, whether Integrated Goods and Service Tax (IGST) is payable by the applicant on the goods stored in FTWZ unit and supplied to its customers in DTA unit, in addition to the Customs Duty payable (i.e. Basic Customs Duty (BCD) +IGST)) by the customer in DTA on removal of goods from FTWZ unit in accordance with Sectio....
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.... analysed and understood as defined in Customs Act, 1962, Special Economic Zones Act, 2005 (SEZ Act in short) and the GST provisions. It is seen that as per Section 2 (n) of the Special Economic Zones Act, 2005 (SEZ Act in short), "(n) "Free Trade and Warehousing Zone" means a Special Economic Zone wherein mainly trading and warehousing and other activities related thereto are carried on;" And as per Section 2(za) of the SEZ Act, "(za) "Special Economic Zone" means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-section (1) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone;" It is clear from the above that a Free Trade Warehousing Zone (FTWZ) gets covered as a Special Economic Zone (SEZ), within the meaning of the term. Further, as per Rule 8(5) of the SEZ Rules, 2006, "(5) The Units in Free Trade and Warehousing Zones or units in Free Trade and Warehousing Zone set up in other Special Economic Zone, shall be allowed to hold the goods on account of the foreign supplier for dispatches as per the owner's instructions and shall be allowed for trading with or without labelling, p....
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....the Customs territory of India. 14.6 Further, as per Section 51 of the SEZ Act, the provisions of this Act, shall have an overriding effect over any other law, which is reproduced below "51. Act to have overriding effect,-The provisions of this 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 other than this Act." 14.7 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 duty 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 provisions of the Customs Act. In other words, the goods would become exigible to tax under the domestic enactments only when they are cleared and supplied....
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.... for home consumption. In other words, the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from 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." 14.9 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....
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....all have the same meaning as assigned to it in the Customs Act, 1962." In this regard, it may be seen that though the terms '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" 17. 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 defined 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 ....
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....on 30 of SEZ Act, 2005. 19. It therefore becomes clear from the above that the basic activity of a FTWZ unit is warehousing of the goods belonging to the client. Accordingly, the impugned activities of the applicant get covered under clause (a) of Para 8 of the Schedule III to the CGST Act, 2018 (and not under clause (b) of Para 8 as claimed by the applicant, as clause (b) relates to activities in the nature of High Sea sales'. It is further seen that the applicant has referred to the Advance ruling No. 23/ARA/2023 dated 20.06.2023 passed by the Authority for Advance Ruling, Tamilnadu in the case of M/s. Haworth India (P) Ltd., wherein it has been stated that a FTWZ is not a warehouse licenced under the Customs Act, 1962. However, it is brought to notice that aggrieved over the said ruling, M/s. Haworth India (P) Ltd., have preferred an appeal to the Appellate Authority for Advance Ruling, Tamilnadu, who vide their Order-in-Appeal No. AAAR/06/2023 (AR) dated 20.12.2023 have pointed out the lacunae in the impugned ruling and remanded the matter back to the lower authority for passing appropriate orders, after following the principles of natural justice. Therefore, the reliance plac....
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....that the transfer of title of goods stored in FTWZ Unit by the applicant to its customers in Domestic Tariff Area (DTA) or multiple transfer within the FTWZ, gets covered under para 8 (a) of Schedule-III of the CGST Act, 2017. QUERY-SI.No (ii). (ii) If the answer to the above at (i) is no, whether Integrated Goods and Service Tax(IGST) is payable by the applicant on the goods stored in FTWZ unit and supplied to its customers in DTA unit in addition to the Customs Duty payable (i.e. Basic Customs Duty (BCD) + IGST)) by the customer in DTA on removal of goods from FTWZ unit in accordance with Section 30 of Special Economic Zone (SEZ) Ad, 2005 read with the Customs laws? As already explained in the answer to Query-SL No. (i), the applicant is not liable to pay duties of Customs including BCD and IGST, as long as the goods remain warehoused. On the other hand, when the customer in DTA removes the goods from FTWZ, the same can be made only on payment of applicable duties of Customs including BCD and IGST by the DTA unit concerned. However, since the above query starts with the phrase, 'If the answer to the above at (i) is no" we are of the opinion that this query need not be answer....