Case Law Details
Prince Spintex Pvt. Ltd. Vs Union of India (Gujarat High Court)
Chapter 5 of the Foreign Trade Policy, 2015-2020 makes provision for the EPCG Scheme, which is an incentive scheme. The incentive given is that the importer holding a valid authorisation for capital goods covered under the EPCG Scheme would be exempted from payment of customs duty and additional duty under section 3 of the Customs Tariff Act, and correspondingly, the importer would be obliged to fulfill export obligation to the extent provided in the Scheme. Since exemption from payment of customs duty and additional duty can only be granted under section 25 of the Customs Act, to give effect to the promise held out in Foreign Trade Policy 2015-2020, Notification No.16/2015-Customs dated 1st April, 2015 came to be issued exempting import of goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy, from the whole of the customs duty leviable under the First Schedule to the Customs Tariff Act and the whole of the additional duty leviable under section 3 of the Customs Tariff Act. Accordingly, when the authorisation under the EPCG Scheme was issued in favour of the petitioner, and when the exporter issued commercial invoice in favour of the petitioner on 16.5.2017, the petitioner had reason to believe that it would not be required to discharge any liability in respect of customs duty leviable under the First Schedule to the Customs Tariff Act or any additional duty under section 3 of the said Act, inasmuch as, a promise was held out to the petitioner that it will not be liable to pay any additional duty under section 3 of the Customs Tariff Act on the import of such capital goods subject to fulfilling the export obligation. Thus, Notification No. 26/2015- Cus dated 29th June, 2017, to the extent it limited the exemption from payment of additional duty under section 3 of the Customs Tariff Act to subsections (1), (3) and (5) thereof, is repugnant to the policy declared by the Central Government under Chapter 5 of the Foreign Trade Policy 2015-2020.
In the facts of the present case, import of capital goods under a valid authorisation under the EPCG Scheme was wholly exempt from payment of any additional duty under section 3 of the Customs Tariff Act. The intention of the Central Government while framing the EPCG Scheme was to permit export at zero customs duty. Accordingly, by Notification No.16/2015-Cus dated 1st April, 2015, goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy were inter alia exempted from the whole of the additional duty leviable under section 3 of the Customs Tariff Act. However, when the GST regime came into force, while section 3 of the Customs Tariff Act came to be amended by inserting sub-sections (7) and (9) providing for levy of integrated tax and goods and service compensation cess, in the corresponding amendment made in Notification No. 16/2015-Cus vide Notification No. 26/2017-Cus dated 29th June, 2017, sub-section (7) and sub-section (9) of section 3 were left out. However, within a short time thereafter, vide notification dated 13th October, 2017, Notification No.16/2015- Cus came to be further amended and the imports under EPCG Scheme were exempted from additional duty under subsection (7) and sub-section (9) of the Customs Tariff Act. It is therefore, apparent that it was on account of inadvertence or oversight that while amending notification No. 16/2015-Cus dated 1st April, 2015 by Notification No. 26/2017-Cus, the words, figures and brackets “sub-section (7) and sub-section (9)” were not inserted and that it was always the intention of the Central Government to exempt imports of capital goods under the EPCG Scheme from payment of additional duty under section 3 of the Customs Tariff Act. Notification No. 79/2017 dated 13th October, 2017, therefore, has to be read as clarificatory or curative in nature, inasmuch as, otherwise it would leave as whole class of importers who had imported capital goods, uncovered during the period 1.7.2017 to 13.10.2017, allowing the department to levy additional duty under sub-sections (7) and (9) of the Customs Tariff Act on such imports, despite the fact that the Foreign Trade Policy 20 15-2020 envisages imports under the EPCG Scheme at zero customs duty. Under the circumstances, the action of the respondents in levying integrated tax and compensation cess on the import of capital goods by the petitioner under a valid authorisation under the EPCG Scheme, not being in consonance with the Foreign Trade Policy 2015-2020 cannot be sustained. For the same reasons, Trade Notice 11/2018 dated 30.6.2017, to the extent it is stated therein that under Chapter 5 importers would need to pay IGST, is also rendered unsustainable. Consequently, subject to fulfilment of the conditions contained in the Foreign Trade Policy, 2015-2020 and the exemption Notification No. 16/2015-Cus dated 1st April 2015 as amended from time to time, the petitioner would continue to enjoy exemption from payment of additional duty under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act even during the period 1.7.2017 to 13.10.2017 and is, therefore, entitled to refund of the additional duty paid by it under sub-sections (7) and (9) of section 3 of the Customs Tariff Act.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
1. By this petition under article 226 of the Constitution of India, the petitioner has challenged Notification No. 26/2017- Customs dated 29.6.2017 to the extent it amends Notification No. 16/2015-Customs dated 1.4.2015. The petitioner further challenges Trade Notice No. 11/2018 dated 30.6.2017 issued by the second respondent Director General of Foreign Trade to the extent it is stated therein under Chapter 5 that importers would need to pay integrated goods and services tax (IGST). The petitioner has also challenged the order-in-original dated 9.2018 with consequential relief and seeks refund of Rs.2,38,82,204/- (sic. Rs.2,38,83,203/-) with interest at the rate of 24% thereon.
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Dear Sir,
We have received TWO EPCG license in the year 2013 after that 2019 we have extended another 2 years valid up to 2021 and till date EO not completed. Now we are ready to pay duty amount with interest. Is this possible to reduce the Interest amount (Note : Interest Value is exceeded the duty value).
If any clarification please call 8754493478