CASE : UNION OF INDIA & ORS VERSUS COSMO FILMS LIMITED
An Advance Authorization is a license issued to exporters by the government that allows them to import inputs, raw materials, or capital goods without payment of basic customs duty, additional customs duty, or any other taxes or cess, subject to certain conditions. The imported goods are to be used in the production of export goods, which are to be exported within a specified time period.
The pre-import condition, which was previously imposed on Advance Authorizations, required the exporter to first import the inputs, raw materials, or capital goods into India before using them in the production of export goods. This meant that the exporter could not use the benefit of Advance Authorization on a “replenishment” basis, in which the exporter would first undertake exports and then avail the corresponding benefit of exemption on subsequent imports.
Timeline of advance authorization holder gets split into three phases:
- Period prior to 13th October 2017
- Period from 13th October 2017 to 10th January, 2019
- Period from 10th January onwards
Timeline of Rule 96(10) also divided into three phases:
- First is position till 23rd October, 2017.
- Second is position between 23rd October, 2017 to 9th October 2018.
- Third is the position after 9th October, 2018.
It is pertinent to note that till 23rd October, 2017 there was no implication of Rule 96(10) of the CGST Rules, 2017 on anyone including the Advance Authorization holders.
The case is about the mandatory fulfilment of a ‘pre-import condition’ incorporated in the Foreign Trade Policy of 2015-2020 and Handbook of Procedures 2015-2020 by Notification No. 33/2015-20 and Notification No. 79/2015-Customs, both dated 13.10.2017, which was set aside by the Gujarat High Court.
According to the High Court, such fulfilment in order to claim exemption of Integrated Goods and Services Tax (“IGST”) and GST compensation cess on input imported into India for the production of goods to be exported from India, on the strength of an advance authorization5 (“AA”) was arbitrary and unreasonable.
However, the condition was subsequently removed through a notification, although only prospectively, Meaning that benefits between October 13, 2017, and January 9, 2019, would continue to be impacted by these conditions.
The Supreme court is of the opinion that it is now settled that the FTPRA contains no power to frame retrospective regulations. Construing the later notification of 10.01.2019 as being effective from 13.10.2017 would be giving effect to it from a date prior to the date of its existence; in other words the court would impart retrospectivity.
To give retrospective effect, to the notification of 10.01.2019 through interpretation, would be to achieve what is impermissible in law. Therefore, the impugned judgment of Gujarat High court cannot be sustained.
However, since the respondents were enjoying interim orders, till the impugned judgments were delivered, the Revenue is directed to permit them to claim refund or input credit (whichever appliable and/or wherever customs duty was paid). For doing so, the respondents shall approach the jurisdictional commissioner, and apply with documentary evidence within six weeks from the date of this judgment.
The claim for refund/credit, shall be examined on their merits, on a case-by-case basis. For the sake of convenience, the revenue shall direct the appropriate procedure to be followed, conveniently, through a circular, in this regard.
This Article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc. if any.
