IGST & Compensation Cess on goods re-imported after being exported for repairs would be wholly exempt

Interglobe Aviation Limited Vs Union of India (Delhi High Court)

The assessee was a scheduled airline operator engaged in the business of transportation of passengers and goods by air within and outside India. It was re-importing the aircraft and spare parts sent outside India for repairs and maintenance. It claimed exemption under Notification No. 45/2017 –Customs dated June 30, 2017 (Exemption Notification) from the payment of IGST on goods reimported by it in India after repair. The Customs authorities refused the same on the ground that IGST was leviable on the fair cost of repairs and cost of insurance and freight.

The Hon’ble CESTAT Principal Bench, New Delhi on analysis of the Exemption Notification, interpreted that, intention of the legislation was only to impose BCD on the fair cost of repair charges, freight and insurance charges on such imports of goods after repair. Held that, IGST and Compensation Cess on such goods would be wholly exempt.

Subsequently, the assessee was still being compelled to clear goods on payment of IGST resulting in financial losses. Thus, this petition was before the Hon’ble Delhi High Court.

The Hon’ble Delhi High Court observed that in the absence of specific mention of IGST and Compensation Cess in the Exemption Notification, only the BCD on the fair cost of repair charges, freight and insurance charges would be payable. The IGST and Compensation Cess would be wholly exempted. Therefore, the assessee could not be denied such exemption on reimport of repaired air-crafts and spare parts.

However, an appeal has been preferred by the Revenue Department before the Hon’ble Supreme Court against the said Order. The final order of the Hon’ble Supreme Court is awaited.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

Proceedings have been conducted through video conferencing.

CM APPL. 17504/2021 (Exemption)

Allowed subject to all just exceptions.

Application stands disposed of.

CM APPL. 17505/2021 (Exemption from filing duly affirmed affidavit as well as payment of court fee)

For the reasons stated in the application and in view of the present prevailing situation, the present application is allowed. However, the applicant is directed to file duly signed and affirmed affidavits within a period of one week and the requisite Court fee within a period of 72 hours from the date of resumption of regular functioning of the Court. Application is disposed of.

W.P.(C) 5617/2021

1. This petition has been preferred for the following reliefs:

“a) issue the writ of mandamus or any other appropriate writ or order or direction in the nature thereof, directing the Respondents to implement the Final Order No. 51226-51571 / 2020 dated 02.11.2020 & Final Order No.50608 – 51022 / 2021 dated 15.01.2021 passed by the Hon’ble CESTAT, New Delhi in respect of all the consignments of the repaired goods imported/to be imported by the Petitioner;

b) issue the writ of mandamus or any other appropriate writ or order or direction in the nature thereof, directing the Respondent No. 2 to take necessary actions to enable the Petitioner to clear the repaired goods, imported/to be imported into India, without payment of IGST, extending the benefit of exemption Notification No. 45/2017 –Customs dated June 30, 2017;

c) issue such further orders and other reliefs as the nature and circumstances of the case may require.”

2. Petitioner is a Public Limited Company and a scheduled Airline operator engaged in the business of transportation of passengers and goods by air within and outside India. Before the implementation of Goods and Services Tax Regime, Petitioner was re-importing Aircrafts and spare parts sent outside India for repairs and maintenance and was claiming exemptions from levy of BCD, CBD and SAD under various Notifications. On 01.07.2017, Goods and Services Tax Regime was implemented in India which inter alia provided for levy of Integrated Goods and Services Tax (IGST) on inter-state supplies as well as imports. A Notification bearing No. 50/2017-Cus. was issued by Respondent No.1 on 30.06.2017 providing a list of Goods which were exempted from levy of Customs Duty and IGST. Another Notification No. 45/2017 –Customs dated June 30, 2017 was issued on the same date providing the list of Goods exempted from levy of BCD, IGST and Compensation Cess in case of re-import into India.

3. According to the Petitioner, after implementation of GST, the Petitioner cleared the Goods re-imported into India between July 2017 till date by claiming exemptions under the said Notifications. The concerned Authorities allowed exemptions from levy of BCD but refused to do so with respect to IGST on the ground that IGST is leviable on fair cost of repairs and cost of insurance and freight in terms of Serial No. 2 of Notification No. 45/2017 –Customs dated June 30, 2017 Though the Petitioner did not agree with the said stand, however, out of commercial sense, it cleared the Goods on payment of IGST, albeit under protest.

4. Bills of Entry filed by the Petitioner were challenged before the Commissioner (Appeals). However, vide common orders dated 30.04.2019 (for 349 Bills of Entry) and 22.11.2019 (for 415 Bills of Entry), the appeals were rejected and levy of IGST was upheld. Vide order dated 02.11.2020, appeals with respect to 346 Bills of Entry were allowed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as ‘CESTAT’) holding that IGST was not leviable on Goods re­imported into India. In so far as the appeals with respect to 415 Bills of Entry were concerned, the CESTAT vide its order dated 15.01.2021 allowed the appeal holding that IGST was not leviable on the Goods re­imported into India and order of Commissioner (Appeals) was set aside.

5. Petitioner herein seeks appropriate directions to the Respondents to apply the observations and the findings in the final orders of the CESTAT dated 02.11.2020 and 15.01.2021 in respect of all consignments of the repaired Goods imported/to be imported by the Petitioner, to enable the Petitioner to clear the Goods without payment of IGST, thereby extending the benefit of exemption Notification dated 30.06.2017 bearing Notification No. 45/2017 –Customs dated June 30, 2017 (Annexure ‘2’ to the memo of this writ petition).

6. It is submitted by counsel for the Petitioner that as per the provisions of the Customs Act, 1962 and the Rules enacted thereunder, when the goods are imported, Bills of Entry are to be filed by the Petitioner. These Bills of Entry are to be verified by the officers of the Respondents and looking to the documents which are presented by the importer / Petitioner, the provisions of the Customs Act and Rules made thereunder and also to the Notification issued thereunder, the assessment of the Bill of Entry is to be made by the Respondents.

7. The grievance of the Petitioner is that though the dispute pertaining to levy of IGST on the repaired Goods re-imported into India has been decided in favour of the Petitioner, the Petitioner is still being compelled to clear Goods on payment of IGST, resulting in financial losses. Orders of the CESTAT were brought to the notice of Respondent No. 2 with a request to clear the goods without payment of IGST, but no action has been taken. It is further submitted that it is a settled principle of judicial discipline that the lower Authorities must comply with the orders passed by the higher or Appellate Authorities and the Respondents are thus duty bound to give effect to the orders of the CESTAT. There is a variation in the assessment by the Respondents because different officers are interpreting the Notifications differently, which is impermissible in law since the issue stands conclusively decided by the CESTAT in both its orders.

8. It is contended that time and again, Petitioner is being compelled to approach the Courts and CESTAT, despite two orders of the CESTAT in its favour. Since November, 2020, Petitioner has filed 541 Bills of Entry on which it has paid IGST, though under protest, to the tune of Rs. 116 Crores approximately, even though the same was not payable. For every Bill of Entry, Petitioner is having to resort to legal remedies under the Customs Act viz. before Commissioner (Appeals) and CESTAT, which is sheer victimization, besides blocking the working capital of the Petitioner resulting in financial loss, which has aggravated on account of Pandemic Covid-19. Respondents are acting in complete ignorance of the orders of CESTAT, particularly paragraphs 47 to 50 wherein it is clearly observed that in the absence of mention of ‘Integrated Tax’ and ‘Compensation Cess’ in Column (3) under Serial No. 2 of the exemption Notification, only the basic Custom Duty on the fair cost of repair charges, freight and insurance charges is payable and Integrated Tax and Compensation Cess are wholly exempted. Despite the clear observations and findings of CESTAT, Respondents are not following the direction and granting the requisite exemptions.

9. Despite the order of CESTAT dated 02.11.2020, Petitioner was constrained to approach the CESTAT yet again with respect to 415 Bills of Entry. Separate appeals were preferred, which were also allowed vide order dated 15.01.2021 (Annexure ‘4’ to the memo of this writ petition). CESTAT interpreted the same Notification and reiterated its observations made in the earlier order dated 02.11.2020. Both the orders are binding on the Respondents and there is no reason why the Petitioner should be compelled to approach the Court again and again with respect to each Bill of Entry.

10. In the aforesaid facts, learned counsel for the Petitioner submits that suitable directions be given to the Respondents to follow and abide by the orders of the CESTAT dated 02.11.2020 and 15.01.2021 and grant exemptions to the Petitioner for the subsequent Bills of Entry, without compelling the Petitioner to approach the Courts or other Forums repeatedly.

11. Counsel appearing for the Respondent, per contra, submits that general orders cannot be passed by this Court with respect to the assessments for different Bills of Entry filed by the Petitioner. Every Bill of Entry has to be assessed separately and in case the Petitioner is aggrieved by an assessment, it is not remediless and has the remedy of filing a statutory appeal against the assessment order. From the order of the Commissioner (Appeals), remedy of further appeal before the CESTAT, New Delhi, is also available and it is thus not open to the Petitioner to approach this Court directly and the writ petition is not maintainable.

12. We have heard learned counsels for the parties and looked into the facts of the present case.

13. Petitioner is a scheduled Airline operator engaged in the business of transportation of passengers and goods by air. For the said purpose, Petitioner imports aircrafts and it is averred that when the engine / auxiliary power units or other parts develop defects / problems, they are exported for repairs and the repaired parts are thereafter re-imported into India. At the time of re-import, Bills of Entry are filed which are assessed to Customs Duty and Integrated Tax at the applicable rates. The dispute primarily is with regard to claiming exemption of the Integrated Tax under the Exemption Notification No. 45/2017 –Customs dated June 30, 2017 The primordial grievance of the Petitioner is that once the dispute pertaining to levy of IGST of the repaired goods re-imported into India stands decided by two orders of the CESTAT, there is no reason why the benefit of the Exemption Notification be not granted to the Petitioner on further re-imports and the Petitioner should not be subjected to the harassment of approaching the Courts and other Forums for the said purpose.

14. We find merit in the contention of the learned counsel for the Petitioner. CESTAT has passed two orders in favour of the Petitioner clearly holding that the Petitioner is entitled to the Exemption under the Notification, one with respect to 349 Bills of Entry and the other with respect to 415 Bills of Entry. Petitioner made representations dated 15.03.2021 and 01.04.2021 to Respondent No.2 for implementing the orders passed by CESTAT and to allow the Petitioner to clear the re­imported goods without payment of IGST. However, there has been no response from the concerned Respondent. Once the legal issue stands adjudicated between the parties to the lis, we find no plausible or justifiable reason for compelling the Petitioner to approach the CESTAT or this Court to claim the benefit of the Exemption Notification for subsequent transactions. In fact, once the illegal action of the Respondents in depriving the Petitioner of the benefit of Exemption has been set aside by the CESTAT and the errors of law stand corrected, the action of the Respondents in once again placing a wrong interpretation on the Notification is completely unwarranted and certainly a harassment to the Petitioner.

15. The National Litigation Policy is based on the recognition that Government and its various agencies are the pre-dominant litigants in Courts and Tribunals in the country. Its aim is to transform Government into an Efficient and Responsible litigant. In its 126th Report on “Government and Public Sector Undertaking Litigation Policy and Strategies”, the Law Commission expressed the need of having a Litigation Policy to avoid litigation or to reduce it so as to bring down the load on the judicial system resulting in reduction of expenses on judicial set up.

16. The Ministry of Law and Justice held a ‘National Consultation for Strengthening the Judiciary, towards Reducing Pendency and Delays’ on 24th and 25th October, 2009 and one of the agenda was the huge pendency in courts. The Resolution presented by the then Minister of Law and Justice in the said Consultation acknowledged the initiative taken by the Government of India to frame a National Litigation Policy (NLP) with a view to ensure that the Central Government acts as a responsible litigant and also urged every State Government to evolve similar policies.

17. To implement the said Resolution, Department of Legal Affairs, formulated a National Litigation Policy in the year 2010 and launched the same on 23rd June, 2010. Its aim is to transform Government into an Efficient and Responsible litigant. This policy was also based on the recognition that it is the responsibility of the Government to protect the rights of citizens, to respect fundamental rights and those in charge of the conduct of Government litigation should never forget this basic principle.

18. Justice VR Krishna Iyer’s concurring opinion in the Hon’ble Supreme Court’s decision in Dilbagh Rai Jarry v. Union of India, (1974) 3 SCC 554 [Para 25] cited with approval a judgment of the Kerala High Court in P.P. Abubacker v. Union of India, AIR 1972 Ker 103, wherein the Kerala High Court observed as under:

“The State, under the Constitution, undertakes economic activities in a vast and widening public sector it inevitably gets involved in disputes with private individuals. But it must be remembered that the State is no ordinary party trying to win a case against one of its own citizens by hook or by crook; for the State’s interest is to meet honest claims, vindicate a substantial defence and never to score a technical point or overreach a weaker party to avoid a just liability or secure an unfair advantage, simply because legal devices provide such an opportunity. The State is a virtuous litigant and looks with unconcern on immoral forensic successes so that if on the merits the case is weak, Government shows a willingness to settle the dispute regardless of prestige and other lesser motivations which move private parties to fight in court. …………………..”

(Emphasis supplied)

20. The Hon’ble Supreme Court in case of State of Punjab v. Geeta Iron & Brass Works Ltd., (1978) 1 SCC 68 at page 69 [Para 4] observed as under :-

“ ………….We like to emphasise that Governments must be made accountable by Parliamentary social audit for wasteful litigative expenditure inflicted on the community by inaction……. A litigative policy for the State involves settlement of governmental disputes with citizens in a sense of conciliation rather than in a fighting mood. Indeed, it should be a directive on the part of the State to empower its law officer to take steps to compose disputes rather than continue them in Court. We are constrained to make these observations because much of the litigation in which Governments are involved adds to the case load accumulation in Courts for which there is public criticism. …

(Emphasis supplied)

21. In the above context, it would be useful to refer to passages from the judgement of the Hon’ble Supreme Court in CIT v. S.R.M.B. Dairy Farming (P) Ltd., (2018) 13 SCC 239 wherein the Hon’ble Supreme Court gave its imprimatur to the judgement of the Karnataka High Court in CIT vs. Ranka & Ranka, 2011 SCC OnLine Kar 3982 [para 27] as under:

“9. The Bench considered the issuance of the Circular in the conspectus of the National Litigation Policy Document released. The said Policy Document which has been extracted in the judgment for its reliance has been reproduced hereinunder: (CIT vs. Ranka & Ranka, 2011 SCC OnLine Kar 3982 para 27)

“Introduction

Whereas at the National Consultation for Strengthening the Judiciary Toward Reducing Pendency and Delays held on 24-10­2009/25-10-2009, the Union Minister for Law and Justice, presented resolutions which were adopted by the entire conference unanimously.

And wherein the said resolution acknowledged the initiative undertaken by the Government of India to frame the National Litigation Policy with a view to ensure conduct of responsible litigation by the Central Government and urges every State Government to evolve similar policies.

The National Litigation Policy is as follows:

The Vision/Mission

1. The National Litigation Policy is based on the recognition that the Government and its various agencies are the predominant litigants in courts and Tribunals in the country. Its aim is to transform the Government into an efficient and responsible litigant. This policy is also based on the recognition that it is the responsibility of the Government to protect the rights of citizens, to respect fundamental rights and those in charge of the conduct of the Government litigation should never forget this basic principle.

“Efficient litigant” means

(i) Focusing on the core issues involved in the litigation and addressing them squarely.

(ii) Managing and conducting litigation in a cohesive, co­ordinated and time-bound manner.

(iii) Ensuring that good cases are won and bad cases are not needlessly persevered with.

(iv) A litigant who is represented by competent and sensitive legal persons: competent in their skills and sensitive to the facts that the Government is not, an ordinary litigant and that a litigation does not have to be won at any cost.

“Responsible litigant” means

(i) That litigation will not be resorted to for the sake of litigating.

(iii) That false pleas and technical points will not be taken and shall be discouraged.

(iv) Ensuring that the correct facts and all relevant documents will be placed before the court.

(v) That nothing will be suppressedfrom the court and there will be no attempt to mislead any court or tribunal.

2. The Government must cease to be a compulsive litigant. The philosophy that matters should be left to the courts for ultimate decision has to be discarded. The easy approach, “Let the court decide” must be eschewed and condemned.

3. The purpose underlying this Policy is also to reduce the Government litigation in courts so that valuable court time would be spent in resolving other pending cases so as to achieve the goal in the National Legal Mission to reduce the average pendency time from 15 years to 3 years. Litigators on behalf of the Government have to keep in mind the principles incorporated in the National Mission for Judicial Reforms which includes identifying bottlenecks which the Government and its agencies may be concerned with and also removing unnecessary Government cases. Prioritisation in litigation has to be achieved with particular emphasis on welfare legislation, social reform, weaker sections and senior citizens and other categories requiring assistance must be given utmost priority.

In respect offiling of appeals in revenue matters it is stated as under:

(G) Appeals in revenue matters will not be filed:

(a) if the stakes are not high and are less than that amount to be fixed by the Revenue Authorities;

(b) if the matter is covered by a series of judgments of the Tribunal or of the High Court which have held the field and which have not been challenged in the Supreme Court;

(c) where the assessee has acted in accordance with long­standing industry practice;

(d) merely because of change of opinion on the part of the jurisdictional officers.

Review ofpending cases

(A) All pending cases involving the Government will be reviewed. This due diligence process shall involve drawing upon statistics of all pending matters which shall be provided for by all Government departments (including public sector undertakings). The Office of the Attorney General and the Solicitor General shall also be responsible for reviewing all pending cases and filtering frivolous and vexatious matters from the meritorious ones.

(B) Cases will be grouped and categorised. The practice of grouping should be introduced whereby cases should be assigned a particular number of identity according to the subject and statute involved. In fact, further sub-grouping will also be attempted. To facilitate this process, standard forms must be devised which lawyers have to fill up at the time of filing of cases. Panels will be set up to implement categorisation, review such cases to identify cases which can be withdrawn. These include cases which are covered by decisions of courts and cases which are found without merit withdrawn. This must be done in a time-boundfashion.”

(Emphasis supplied)

22. From the conspectus of the judgments above, it is clear that the aim of the Policy is to transform the Government into an efficient and responsible litigant. “Efficient litigant” means ensuring that good cases are won and bad cases are not needlessly persevered. Litigation should not be resorted to for the sake of litigating. Government must cease to be a compulsive litigant. The Hon’ble Supreme Court has been repeatedly affirming that the propensity of Government Departments and Public Authorities to keep litigating is one of the reasons for docket explosion. Mindful of the said factor and the rising litigation, Government has framed the National Litigation Policy to ensure that pendency of cases is brought down and only meaningful issues are brought before the Court.

23. The Hon’ble Supreme Court in National Co-operative Development Corporation Versus Commissioner of Income Tax, Delhi-V, 2020 SCC OnLine SC 733, in its Postscript Note 1, observed that a certificate for dismissal is obtained from the highest court so that a quietus could be put to the matter in the Government Departments. Relevant paras of the judgement are as under: