CAAR cannot issue a ruling on difficulties in compliance to circular no. 51/2020

In re Pridel Private Limited (CAAR Mumbai)

CAAR find that the dispensation granted to the marine containers by way of duty exemption is subject to observance of specified conditions mentioned in the notifications themselves and supplemented by circulars issued from time to time. Circular No. 51 of 2020 issued by the Board seeks to supersede the earlier Circulars Nos. 69 and 73 of 2002. It states that provision of Circular no. 31 of 2005 covers the procedure prescribed for clearance of only marine containers and clearance of all other durable containers other than marine containers would be governed by guidelines issued under Circular No. 51 of 2020. It is imperative that the issues as raised in the CAAR-1 application are interpreted in the light of provisions of above-mentioned notifications and circulars only. CAAR cannot issue a ruling on difficulties in compliance to the Circular No. 51 of 2020 due to the fact that these issues are certainly not within the scope of 28 H (2) (b)- applicability of notifications issued under section 25 (1) of the Customs Act, 1962 and 28 H (2) (c)- principles to be adopted for the purposes of determination of value of the goods under the provisions of Customs Act, 1962. Hence, the so-called gaps in the interpretation of notification no. 104 of 1995, as amended from time to time, cannot be addressed by advance ruling mechanism.

5.10 I also observe in the instant case that there are multiple entities viz. ULD container supplier, actual users, i.e., importers/exporters who are using ULD containers, third party facilitator like present applicant, shipping lines/cargo handlers or their representatives and various jurisdictional Customs authorities having supervision over movement of such ULD containers. Accounting and declaration of inward and outward movement of ULD containers at the time of import and export and subsequent need for furnishing security in order to safeguard the Revenue interest need to be understood only under the extant legal framework governed by notifications and circulars discussed earlier for performing Customs Compliance Verification (CCV) tasks like accounting for movements, execution of bonds/furnishing of security as well as declaration of ULD container details in respective import/export documents. And due to this the CAAR cannot consider the present advance ruling application.

6. In view of the aforesaid discussions, I have arrived at the conclusion that the issues on which the advance ruling has been requested do not fall within the scope of Section 28H2(b) and (c) of the Customs Act, 1962 and thus are beyond the jurisdiction of CAAR. Therefore, in view of above, I refrain from issuing any ruling in respect of the questions raised in the CAAR-1 application.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

1. M/s Pridel Private Limited (hereinafter referred to as “the Applicant”), a company incorporated in India with registered address in New Delhi 110065 with another address in Mumbai and holding a valid Importer-Exporter Code Number (IEC) – 0517534860 – under section 7 of the Foreign Trade (Development and Regulation) Act, 1992 has submitted CAAR-1 application in terms of Section 281-1 (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’) seeking a ruling on following issues:

(a) “Whether ULDs temporarily imported into India, by air or sea is exempted from payment of Customs duty as per Notification No. 104 of 1994 dated 16-03-1994 as amended by Notification No. 43 of 2017 dated 30-06-2017 as in the case of marine containers.”

(b) “Whether ULDs temporarily imported by air or sea can be cleared out of Customs area based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry as in the case of marine containers. Similarly, re-export of the ULDs should also be allowed without filing of Shipping Bills.”

(c) “Whether ULDs temporarily imported by sea can be exported by air or vice versa based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry / Shipping Bills”

2. Applicant has filed nine CAAR-1 applications pertaining to nine ports of import/export. Since the question asked in the said applications are same, all of them are bunched together for discussion and pronouncement of ruling thereof. Submissions of the applicant are reproduced hereunder as follows:

2.1 The applicant is a global logistics solution provider which has expertise in facilitating easy international trade by providing solutions for moving cargo across borders. One of the customers of the applicant is Envirotainer AB, Sweden, who are manufacturers and suppliers of temperature-controlled Unit Load Devices (ULDs) for transportation of temperature sensitive cargo across the world. ULDs are durable containers with standard sizes, dimensions and unique numbers for identification. Representational images of different types of ULDs are annexed to CAAR-1 application as Annexure- 1. At present, the applicant takes care of the logistics of ULDs in India as entrusted to them by Envirotainer. ULDs are mainly leased out to airlines or direct customers for transportation of temperature sensitive cargo through air.

2.2 The applicant is responsible for handling of empty ULDs which are imported by sea into India at Jawaharlal Nehru Port, Nhava Sheva & Chennai port in 40 feet containers. Pridel has entered into a contract with SEZ Unit holders, namely Jai Matadee FTWZ, Chennai & Arshiya Free Trade Warehousing Zone, Nhava Sheva etc. based on which ULDs imported by sea are cleared and stored in the FTWZ for further usage. At the time of import of these ULDs, as per contract entered into with the Applicant, the Unit holder files a warehousing Bill of Entry for clearance of these ULDs into the FTWZ under the strength of the invoice issued by Envirotainer on the unit holder, clears them from Customs, deposits and stores them in their unit on behalf of the owner i.e., Envirotainer AB, Sweden.

2.3 As and when required by Envirotainer, these ULDs are transported from the FTWZ to different airports like Mumbai, Chennai, Delhi, Hyderabad and Bangalore by filing corresponding Shipping Bills at FTWZ for export of duty-free goods, by the unit holder with port of loading as the airport where the ULDs are to be sent and the port of delivery as Sweden considering that the ULDs belong to Envirotainer, Sweden. However, there are instances where the actual airport of loading changes from the one mentioned in the corresponding Shipping Bill filed at the FTWZ. In other words, the ULDs may get requisitioned at a different airport than the one initially declared in the Shipping Bill. Further, the airport of discharge would also change depending on the destination of the cargo which would be shipped in the ULDs.

 2.4 ULDs are handed over to the respective ground handling agents by the Applicant at the airports after Customs admits these ULDs as “passed out” on the Shipping Bills. The Applicant receives an acknowledgement from the ground handling agent at the respective airport of having received the ULDs. Information is thereafter transmitted by Applicant to Envirotainer about handing over the ULDs to the ground handling agent. The ULDs received by the ground handling agents at the airport are handed over to the respective airlines as directed by Envirotainer under acknowledgement. Thereafter, when the ULDs are exported, either empty or with cargo, the airlines updates Envirotainer about the final destination. The Applicant seeks the final status of export of ULDs from the ground handling agent who would share the Export General Manifest (EGM) No. and date with the Applicant under which the ULDs were exported. These details are in turn shared by the Applicant with the unit holder who would inform FTWZ Customs authorities and also update the details on the NSDL portal. An entire set of sample documents covering the chain of transactions of import of empty ULDs at Chennai Seaport to export is appended to the CAAR-1 application as Annexure — 2.

 2.5 At times, ULDs delivered to a particular airport from FTWZ on the strength of Shipping Bills are required to be transported to a different airport as per requirement. Same is the position in case of ULDs damaged and not fit for use. Damaged ULDs are taken out for repairs by ground handling agents and thereafter exported. In case where such damaged ULDs cannot be repaired in India, they are exported to Singapore. The export process is apparently handled by the respective ground handling agents and corresponding Airway Bills are also issued in such cases. Presently, the said exercise of movement of ULDs between airports / movement for repairs etc. is carried out by the ground handling agents. In such cases, there is no fixed documented standard procedure based on which these ULDs can be moved from one airport to other.

 2.6 Given the above, there is no consistent procedure in handling of ULDs imported by sea and air. Whereas the ULDs imported by sea are cleared by filing of Bill of Entry and stored in FTWZ, those imported by air are moved to warehouses by the ground handling agents. Similarly, no procedure is laid down at the time of export of ULDs, either empty or with goods. Shipping Bills are filed for movement of ULDs imported by sea from FTWZ to airport. No shipping bills are filed for export of ULDs temporarily imported by air.

 2.7 Notification No. 104 of 1994 dated 16.03.1994 as amended by Notification No. 43 of 2017 dated 30.06.2017 allows temporary import of durable containers for the purpose of re­export within a period of 6 months or within so much of time as extended by the appropriate authority of Customs. The Applicant submits that ULDs being durable containers having unique identifiers, dimensions etc., squarely fall within the ambit of the aforesaid Notifications read with Circular No. 31 of 2005 dated 25.07.2005 as per interpretation of facts brought out in Annexure-Il of this application. The Applicant therefore submits that ULDs may be allowed to be temporarily imported and re-exported as in the case of marine containers without filing of Bills of Entry / Shipping Bills under the strength of a Bond executed with Customs at the time of import to secure the interests of duty involved.

3. Statement containing applicant’s interpretation of law and/or facts, as the case may be, in respect of the question (s) on which advance ruling are as follows:

I. Applicant’s eligibility for advance ruling

(a) The applicant has been granted a valid Importer-Exporter Code Number (IEC) under section 7 of the Foreign Trade (Development and Regulation) Act, 1992. The same is AADCG2669P. Copy of IEC issued to the applicant is enclosed in their application as Annexure- 3.

(b) Clause (b) of Section 28E of the Customs Act defines ‘advance ruling’ as: –

(b) “advance ruling” means a written decision on any of the questions referred to in section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation;

II. As per applicant the above definition of ‘advance ruling’ allows the Applicant to seek a question of law or fact for ruling from the Authority in respect of any goods prior to its importation.

III. The questions on which an application for an advance ruling can be made have been provided under Section 28H of the Customs Act. As per the said Section 28H (2) of the Customs Act, an applicant may make an application for advance ruling in respect of questions inter-alia relating to:

(a) classification of goods under the Customs Tariff Act, 1975 (51 of 1975);

(b) applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty;

(c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of this Act.

(d) applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 (51 of 1975) or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act;

(e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and matters relating thereto.

(f) any other matter as the Central Government may, by notification, specify.

IV. Further, Section 28-1(2) of the Customs Act is also relevant which reads as under:

(2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application:

Provided that the Authority shall not allow the application where the question raised in the application is —

(a) already pending in the applicant’s case before any officer of customs, the Appellate Tribunal or any Court;

(b)the same as in a matter already decided by the Appellate Tribunal or any Court Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard.

Provided also that where the application is rejected, reasons for such rejection shall be given in the order.

From the above it can be seen that an application for seeking an Advance Ruling can always be filed if the question which is sought to be answered is not disputed or pending decision before an officer of Customs, Appellate Tribunal or any Court.

3.1 The above provisions are relevant in case of an applicant who could not opt for benefit of exemption Notification in the earlier imports for the lack of consistency or laid down procedure for claiming the exemption at the time of clearance of goods from Customs. Thus, if a liberal interpretation of the above provision is taken, the case of the applicant is fit to be considered for Advance Ruling. In the present case, the Application is being filed to seek clarification on applicability of Notification No. 104 of 1994 dated 16-03-1994 to the ULDs temporarily imported into India. As mentioned in the Statement of Facts, there is no consistent or prescribed procedure for temporary importation of ULDs into India for re-export and hence the Applicant has been unable to claim the duty exemption benefits of the aforementioned Notification. The Applicant is filing the present Application for determining the applicability of Notification No. 104 of 1994 as amended by Notification No. 43 of 2017 issued under Section 25(1) of the Customs Act, 1962 on temporary import of ULDs.

3.2 It flows from the above that in the present case, the Applicant satisfies all the three conditions mandated for filing the application for advance ruling, namely:

(a) The applicant has been granted a valid Importer-Exporter Code Number (IEC) under section 7 of the Foreign Trade (Development and Regulation) Act, 1992;

(b) The question raised in the application is not already pending in the Applicant’s case before any officer of customs, the Appellate Tribunal or any Court;

(c) The application for advance ruling is in relation to clause (b) and clause (c) of Section 28H (2) of the Customs Act, 1962.

3.3 Issues requiring advance ruling: In light of the aforementioned, the applicant seeks to enter the following questions for Advance Ruling and its interpretation of the question will be as under:

(i). Question No. 1 “Whether ULDs temporarily imported into India, by air or sea is exempted from payment of Customs duty as per Notification No. 104 of 1994 dated 16­03-1994 as amended by Notification No. 43 of 2017 dated 30-06-2017 as in the case of marine containers.”

(ii). Question No. 2 “Whether ULDs temporarily imported by air or sea can be cleared out of Customs area based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry as in the case of marine containers. Similarly, re-export of the ULDs should also be allowed without filing of Shipping Bills.”

(iii). Question No. 3 “Whether ULDs temporarily imported by sea can be exported by air or vice versa based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry / Shipping Bills”

3.3.1 It is submitted that as per Notification No. 104 of 1994 dated 16-03-1994 as amended by Notification No. 43 of 2017 dated 30-06-2017, containers which are of durable nature are exempted from payment of

(a) the whole of the duty of customs leviable thereon under the said First Schedule;

(b) the whole of the IGST leviable thereon under section 3 of the said Customs Tariff Act by execution of a bond in such form and for such sum as may be specified by the Assistant Collector of Customs and the importer binds himself to re-export the said containers within six months from the date of their importation and to furnish documentary evidence thereof to the satisfaction of the said Assistant Collector and to pay the duty leviable thereon in the event of the importer’s failure to do so. Provided further that in any particular case, the aforesaid period of six months may, on sufficient cause being shown, be extended by the said Assistant Collector for such further period, as he may deem fit.

3.3.2 Circular No. 31 of 2005 dated 25-07-2005 clarifies that the clearance of containers whether empty or loaded, intended for temporary admission, is to be allowed without requirement of filing a formal Bill of Entry for each container separately, by filing an intimation with Customs mentioning the number and identification particulars of the containers to be moved outside the Customs area. The Bond for such movement could be either for a specific individual consignment of containers or a general continuity Bond covering a larger number of containers, as requested by the party. Bond should be executed by shipping line, Non-Vessel Owning Common Carrier (NVOCC), Steamer agents or their authorised representatives and the bond amount should cover only the duty element of the imported containers. The validity period of the bond should be for a year which would be extendable till further such period as requested by the person executing the bond.

3.3.3 The Board vide Circular No. 69 of 2002 dated 25-10-2002 clarified that any goods (containers) used for packaging or transporting other goods, and capable of being used several times, would fall in the category of ‘containers of durable nature’ and that durable containers such as plastic trays for packaging electric motors can also be cleared duty free under the said notification subject to fulfilment of condition that the importer declares the following at the time of import, apart from colour of the tray,

(i). dimensions of each type of the plastic trays,

(ii). weight of each type of the trays,

(iii). Particular identification number engraved on the trays.

The importer may also get the consignment photographed, if required at the time of examination at his expense and get it attested from the Customs. The consignment may be examined at random for the above and other particulars as usual. Identity may be established at the time of export with the help of photograph and these parameters allowing a variation of + 10%.

3.3.4 The said facility was also extended to steel cases which are used to import automobile components vide Circular No. 73 of 2002 dated 7-11-2002. It was clarified that any type of reusable packaging containers such as cases, boxes cartons, trays, etc., made up of metals or plastics may be cleared duty free under Notification No. 104 of 1994 read with Board’s  Circulars subject to fulfilment of conditions stipulated the – particular identification no. on each packaging container. However, the importer was directed to declare other particulars such as dimension, shape, weight, colour of the containers at the time of temporary import in addition to getting the consignment photographed, if required, at the time of examination at his expense and get it attested from the Customs. Identity may be established at the time of export with the help of photographs and these parameters like dimension, weight, etc. allowing a variation off 10%.

3.3.5 The Board has further prescribed guidelines for temporary import of durable containers vide Circular No. 51 of 2020 dated 20-11-2020 other than marine containers, import and re­export of which would continue to be governed by guidelines provided in Circular No. 31/2005- Cus., dated 25-7-2005. The Circular No. 51 of 2020 further states that for durable containers which do not conform to the standard marine container dimensions, but which are intended for temporary import and eventual re-export, the following procedure has been prescribed by the Board.

(a) When empty containers are imported into India – The empty containers shall be required to be declared as an item in the bill of entry filed under section 46 of the Customs Act, 1962. The containers would be eligible for exemption from all the applicable customs duties as per Notification No. 104/94-Cus., dated 16-3-1994, as amended, subject to fulfilment of conditions therein. However, the bond for re-export and the security if applicable shall be required to be furnished at the time of import in the Customs System. Importers are advised to register the same as continuity bond for ease of compliance.

(b) When empty containers are moved out of India by sea or air – The empty containers shall be required to be declared as an item in the shipping bill filed under Section 50 of the Customs Act, 1962. The unique identifier for the containers would require to be verified at the time of the export by Customs.

(c) When containers are imported laden with import cargo – In addition to the declaration of items as per the invoice, such containers shall also be required to be declared as a separate item in the bill of entry filed under section 46 of the Customs Act, 1962. While applicable duties on the imported cargo shall be required to be duly discharged as per the applicable tariff rates under the Customs Tariff Act, 1975, the containers would be eligible for duty exemption as per Notification No. 104/94- Cus., dated 16-3-1994, as amended, subject to fulfilment of conditions therein. After Customs clearance, the empty containers can be moved, subject to the conditions of the bond and the security if applicable.

(d) When containers are exported with export cargo – The durable container shall be required to be filed as separate item (either in the same invoice or in different invoice as per commercial agreement) in addition to the export laden cargo under Section 50 of the Customs Act, 1962, for the goods meant for export. The stuffing of the export cargo at the airport or the exporter’s premises would not be relevant to Customs, as long as the Unique Identifier for the container is verifiable at any time of the export by Customs. The export cargo and the declaration in the shipping bill will be subjected to assessment and examination as per instructions in the Customs Automated System.

(e) Conditions of bond – A continuity re-export bond and security, if applicable at the port of import shall be required to be furnished by the importer for the durable containers that are temporarily imported. The processes involved in tainers for re-export within the stipulated period including facility of partial crediting the bond after export is available in the Customs Automated System.

3.3.6 As explained above, ULDs are durable containers with specific dimensions and sizes used for transporting temperature sensitive goods across the globe. ULDs are mostly imported and re-exported along with laden cargo. The cargo laden in a particular ULD may belong to another importer / exporter and such importer / exporter would file a bill of entry / shipping bill only for the goods contained in the ULD. Further, at the time of import / export, the importer / exporter is not aware as to which ULD would carry his cargo since ULD for a particular shipment is assigned by the airlines and hence it cannot be expected of them to declare the ULD numbers in the Bill of Entry / Shipping Bill. Even otherwise, as a matter of practice, the ULD numbers are not declared in any shipping documents like invoice, Bill of Lading / Airway Bill etc. The Applicant also remains in the dark about the cargo laden in the ULDs during the time of import / export. It is also practically impossible to file two separate Bills of Entry / Shipping Bills i.e. one for the ULD and another for the cargo. Therefore, it is practically impossible for the Applicant or the importer / exporter to file a Bill of Entry / Shipping Bill at the time of import / export of ULDs laden with cargo. Therefore, the provisions of Circular No. 69 and 73 of 2002 and 51 of 2020 read with Notification No. 104 of 1994 would not be applicable in the case of ULDs since it is practically impossible for the Applicant or the importer / exporter of cargo to comply with especially condition numbers (c) and (d) of Circular No. 51 of 2020 quoted above.

3.3.7 It is submitted that ULDs are durable containers with standard dimensions / sizes and distinctive numbers (unique identifiers) which are used to carry luggage, freight etc. on aircrafts. Therefore, the provisions of Notification No. 104/1994 read with Notification No. 43 of 2017 and Circular No. 31 of 2005 applicable to durable containers are squarely applicable to ULDs at their time of temporary import into India, whether by air or sea.

3.3.8 Further, ULDs being durable container with specific dimensions and sizes are clearly distinguishable from packing materials temporarily imported with certain goods without payment of duty as per Circular Nos. 69 of 2002, 73 of 2002 and 51 of 2020. Hence, the provisions of these Circulars shall not apply to temporary import of ULDs. Even otherwise, when packing materials are allowed to be temporarily imported for re-exportation without payment of duty, the same should be applicable even to containers of a durable nature i.e. ULDs.

3.3.9 Circular No. 51 of 2020 issued by the Board seeks to supersede the earlier Circular Nos. 69 and 73 of 2002. It states that provision of Circular 31 of 2005 covers the procedure prescribed for clearance of only marine containers and clearance of all other durable containers other than marine containers would be governed by guidelines issued under Circular No. 51 of 2020. It is further stated that all such durable containers other than marine containers should be cleared for temporary import by filing Bills of Entry and for export by filing Shipping Bills. However, this goes against the legislative spirit and intent of Notification No. 104 of 1994 as amended by Notification No. 43 of 2017 for the following reasons.

(i). Notification No. 104 of 1994 covers containers of durable nature. Hence, the meaning of durable containers cannot be circumscribed to include only marine containers but all the containers which are reusable like packaging containers such ascases, boxes, cartons, trays, etc.

(ii). Provisions of Notification No. 104 of 1994 were clarified by Circular No. 31 of 2005 which covered all containers of durable nature. Meaning of durable containers mentioned thereunder cannot be narrowed down to include only marine containers by way of issuing another Circular i.e. No. 51 of 2020.

(iii). The procedure for temporary import and re-export of durable containers as envisaged in Circular No. 51 of 2020 can be made applicable to only those durable containers which are used for packaging and covering a specific category of goods and are as such imported only with the identified specific goods by the same importer. For example, reusable plastic trays used for packing electric motors, reusable steel boxes used for importation of automobile components etc. These reusable containers are always imported and exported along with the above identified goods by the same importer and hence, they can be declared in the Bill of Entry and Shipping Bill at the time of import and export respectively as per provisions of Circular No. 51 of 2020.

(iv). However, the provisions of Circular No. 51 of 2020 cannot be made applicable to durable containers like ULDs which are used by various importers / exporters for packaging and transporting various types of goods. This is for the reason that the importers / exporters of the goods are not expected / mandated to declare the particulars of the durable container in the declarations made before Customs. Even otherwise, the importer / exporter will not have the visibility and access to identify the particulars of the durable containers (ULDs) i.e. size, value etc. assigned to their goods by the carrier of the goods.

3.3.10 Thus, ULDs cannot be treated at par with containers of durable nature covered under Circular Nos. 69 of 2002, 73 of 2002 and 51 of 2020. On the other hand, provisions of Circular 31 of 2005 issued in terms of Notification No. 104 of 1994 would be squarely applicable at the time of temporary import of ULDs subject to the condition of re-export within a period of six months from the date of importation and subject to other conditions specified in the Notification. The clearance of ULDs whether empty or loaded, intended for temporary importation, should be allowed without requirement of filing a formal Bill of Entry for each container separately. The handling agent / authorized representative concerned should intimate Customs the number and identification particulars of the ULDs to be moved outside the customs area. The Bond for such movement could be either for a specific individual consignment of ULDs or a general Bond covering a larger number of containers, as requested by the agent.

(i). The nature of bond should be “continuity bond”

(ii). No Bank Guarantee/Security would be required to be furnished along with the bond

(iii). Bond should be executed by the handling agent or their authorised representatives.

(iv). The bond amount should cover only the duty element of the imported containers and not the cargo it is carrying

(v). The validity period of the bond should be for a year which would be extendable till further such period as requested by the person executing the bond.

3.3.11 To summarise, ULDs whether empty or laden with cargo, temporarily imported into India by air or sea for re-export should be allowed to be cleared from Customs as per provisions of Notification No. 104 of 1994 dated 16-03-1994 as amended by Notification No. 43 of 2017 dated 30-06- 2017 read with Circular No. 31 of 2005, without filing of Bill of Entry or Shipping Bill, specifically for the ULDs. The Applicant or his authorize be allowed to move the temporarily imported ULDs, either empty or laden with cargo, by air or sea, out of Customs area with exemption from payment of:

(a) the whole of the duty of customs leviable thereon under the said First Schedule; and

(b) the whole of the IGST leviable thereon under section 3 of the said Customs Tariff Act;

by execution of a continuity bond without bank guarantee / security executed by the Applicant or his authorized representative at the port of import covering the duty element of the ULDs and the Applicant or his authorized representative binds himself to re-export the said containers within six months from the date of their importation or such extended period as allowed.

3.4 In the light of aforementioned, the Applicant seeks to ask the following questions for Advance Ruling and submits their interpretation of the question as under: –

(i). Question No. 1 – “Whether ULDs proposed to be temporarily imported into India is exempted from payment of Customs duty as per Notification No. 104 of 1994 dated 16-03-1994 as amended by Notification No. 43 of 2017 dated 30-06-2017.” Applicant’s understanding: Yes.

(ii). Question No. 2 “Whether ULDs proposed to be temporarily imported can be cleared out of Customs area based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed with the Customs authorities at the port of import, covering the amount of duty applicable and without filing of Bills of Entry.”

Applicant’s understanding: Yes.

(iii).Question No. 3 “Whether ULDs temporarily imported by sea can be exported by air or vice versa based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry / Shipping Bills” Applicant’s understanding: Yes.

4. Copies of CAAR-1 applications were forwarded to respective jurisdictional Customs Commissionerates seeking their comments on the issue. However, no comments were received from any of the jurisdictional Customs Commissionerates.

5. A personal hearing in the context of present CAAR-1 applications was conducted on 17.05.2023. During the course of hearing Advocate Sh. Sanjeev Nair, Sh. Shreeni B. Pillai, rep. EY and Sh. Sanjeev Kumar, PRIDEL represented the applicant. No one was present for the jurisdictional Customs Commissionerates. The above-mentioned representatives explained CAAR-1 application, notification no. 104/1994, CBIC Circulars no. 69/2002, 31/2005 & 51/2020, various case laws in support of their contentions and the technical details of actual ULD containers. They stated that the applicant is an AEO operator. They also referred to previous CAAR ruling in case of GDPK Returnable Solutions Pvt. Ltd dtd. 16.06.2022. They, during the course of hearing, submitted additional submissions bringing out difficulties faced in movement of ULD containers during the course of imports and exports.

5.1 I find that the applicant has filed nine CAAR-1 applications pertaining to nine ports of import/export. In view of the fact that the question on which the advance ruling is sought is identical and common in all the applications and further that the counsel for the applicants is same I propose to take up all the applications for advance ruling for common disposal. The applicant is a global logistics solution provider which has expertise in facilitating easy international trade by providing solutions for moving cargo across borders. Applicant is not an actual importer of either cargo coming through the ULD containers or the ULD containers themselves. Principal customer of the applicant is Envirotainer AB, Sweden, who are one of the manufacturers and suppliers of temperature-controlled Unit Load Devices (ULDs) for transportation of temperature sensitive cargo across the world. ULDs are durable containers with standard sizes, dimensions and unique numbers for identification.

5.2 Section 28 E of Chapter VB: Advance Rulings defines “applicant” means any person, –

(a) holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992; or

(b) exporting any goods to India; or

(c) with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under section 28H;

I find that the applicant holds a valid IEC number. Applicant has raised following issues in their CAAR-1 application.

(i). “Whether ULDs temporarily imported into India, by air or sea is exempted from payment of Customs duty as per Notification No. 104 of 1994 dated 16-03-1994 as amended by Notification No. 43 of 2017 dated 30-06-2017 as in the case of marine containers.”

(ii). “Whether ULDs temporarily imported by air or sea can be cleared out of Customs area based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry as in the case of marine containers. Similarly, re-export of the ULDs should also be allowed without filing of Shipping Bills.”

(iii). “Whether ULDs temporarily imported by sea can be exported by air or vice versa based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry / Shipping Bills”

5.3 Before turning to these issues it is essential to understand the legal framework relevant for deciding present matter. Section 28H of the Customs Act, 1962 provides the scope for the questions on which an application for an advance ruling can be made. As per the said Section 28H (2) of the Customs Act, an applicant may make an application for advance ruling in respect of questions relating to:

(a) classification of goods under the Customs Tariff Act, 1975 (51 of 1975);

(b) applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty;

(c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of this Act.

(d) applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 (51 of 1975) or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of custom leviable under this Act or the Customs Tariff Act;

(e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and matters relating thereto.

(f) any other matter as the Central Government may, by notification, specify.

5.4 Applicant has stated that their application is filed under the scope of provisions of section 28 H (2) (b) & (c). This means the ruling is requested on

(i). applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty;

(ii). the principles to be adopted for the purposes of determination of value of the goods under the provisions of this Act.

5.5 Applicant has quoted various notifications and circulars issued by the CBEC/CBIC which they think that are relevant for deciding the present issue. These are:

(i) Notification 104 of 1994 as amended by Notn. 43 of 2017,

(ii) CBEC Circular 69 of 2002,

(iii) CBEC Circular 31 of 2005,

(iv) CBIC Circular 51 of 2020

5.5.1 I find that these notifications and circulars primarily cover procedural aspects of the Customs law compliance. Applicant has asked whether ULDs temporarily imported into India, by air or sea are exempted from payment of Customs duty as per Notification No. 104 of 1994 dated 16-03-1994 as amended by Notification No. 43 of 2017 dated 30-06-2017 as in the case of marine containers. It means applicant wants to ascertain whether the ULD containers are treated at par with marine containers under the Customs Act, 1962 or not. If yes, then the applicant has asked further, whether ULDs temporarily imported by air or sea can be cleared out of Customs area based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry as in the case of marine containers.

5.5.2 Further, in so far as return journey of imported ULD containers by way of re-exports is concerned, the applicant has requested to clarify whether a re-export of the ULDs can be allowed without filing of Shipping Bills. Finally, applicant has asked whether ULDs temporarily imported by sea can be exported by air or vice versa based on the aforementioned Notification on the strength of a continuity bond without bank guarantee or security executed at the port of import, covering the amount of duty applicable and without filing of Bills of Entry / Shipping Bills.

5.6 Applicant has submitted that ULDs are durable containers with standard dimensions/sizes and distinctive numbers (unique identifiers) which are used to carry luggage, freight etc. on aircrafts. Therefore, the provisions of Notification No. 104/1994 read with Notification No. 43 of 2017 and Circular No. 31 of 2005 applicable to durable containers are squarely applicable to ULDs at their time of temporary import into India, whether by air or sea. ULDs being durable container with specific dimensions and sizes are clearly distinguishable from packing materials temporarily imported with certain goods without payment of duty as per Circulars Nos. 69 of 2002, 73 of 2002 and 51 of 2020. Hence, the provisions of these Circulars shall not apply to temporary import of ULDs. Even otherwise when packing materials are allowed to be temporarily imported for re-exportation without payment of duty, the same should be applicable even to containers of a durable nature i.e. ULDs. However, Circular No. 51 of 2020 issued by the Board seeks to supersede the earlier Circulars Nos. 69 and 73 of 2002. It states that provision of Circular no. 31 of 2005 covers the procedure prescribed for clearance of only marine containers and clearance of all other durable containers other than marine containers would be governed by guidelines issued under Circular No. 51 of 2020. It is further stated that all such durable containers other than marine containers should be cleared for temporary import by filing Bills of Entry and for export by filing Shipping Bills.

5.7 Applicant has claimed that provisions of Circular 51 of 2020 go against the legislative spirit and intent of Notification No. 104 of 1994 as amended by Notification No. 43 of 2017 for the following reasons:

(i).Notification No. 104 of 1994 covers containers of durable nature. Hence, the meaning of durable containers cannot be confined to include only marine containers but all the containers which are reusable like packaging containers such as cases, boxes, cartons, trays, etc.

(ii).Provisions of Notification No. 104 of 1994 were clarified by Circular No. 31 of 2005 which covered all containers of durable nature. Meaning of durable containers mentioned thereunder cannot be narrowed down to include only marine containers by way of issuing another Circular i.e. No. 51 of 2020.

(iii). The procedure for temporary import and re-export of durable containers as envisaged in Circular No. 51 of 2020 can be made applicable to only those durable containers which are used for packaging and covering a specific category of goods and are as such imported only with the identified specific goods by the same importer. For example, reusable plastic trays used for packing electric motors, reusable steel boxes used for importation of automobile components etc. These reusable containers are always imported and exported along with the above identified goods by the same importer and hence, they can be declared in the Bill of Entry and Shipping Bill at the time of import and export respectively as per provisions of Circular No. 51 of 2020.

(iv).However, the provisions of Circular No. 51 of 2020 cannot be made applicable to durable containers like ULDs which are used by various importers/exporters for packaging and transporting various types of goods. This is for the reason that the importers/exporters of the goods are not expected/mandated to declare the particulars of the durable container in the declarations made before Customs. Even otherwise, the importer/exporter will not have the visibility and access to identify the particulars of the durable containers (ULDs) i.e. size, value etc. assigned to their goods by the carrier of the goods.

5.8 In contradiction to the applicant’s contention mentioned in para 5.6, the applicant has claimed that the ULDs cannot be treated at par with containers of durable nature covered under Circular Nos. 69 of 2002, 73 of 2002 and 51 of 2020. Further, the applicant contends that the provisions of Circular 31 of 2005 issued in terms of Notification No. 104 of 1994 would be squarely applicable at the time of temporary import of ULDs subject to the condition of re­export within a period of six months from the date of importation and subject to other conditions specified in the Notification. Applicant has further requested that the clearance of ULDs whether empty or loaded, intended for temporary importation, should be allowed without requirement of filing a formal Bill of Entry for each container separately. The handling agent/authorized representative concerned should intimate Custom authorities the number and identification particulars of the ULDs to be moved outside the Customs area. The Bond for such movement could be either for a specific individual consignment of ULDs or a general Bond covering a larger number of containers, as requested by the agent. Even though the applicant has claimed that provisions of Circular 51 of 2020 go against the legislative spirit and intent of Notification No. 104 of 1994 as amended by Notification No. 43 of 2017 for the reasons stated above, it is important to note that these instructions are in force as on the date and the CAAR cannot overrule the extant departmental instructions in the pretext of issuing an advance ruling. Hence, I find that the resolution of such issues falls outside the ambit of provisions of section 28 H (2) of the Customs Act, 1962.

5.9 I find that the dispensation granted to the marine containers by way of duty exemption is subject to observance of specified conditions mentioned in the notifications themselves and supplemented by circulars issued from time to time. Circular No. 51 of 2020 issued by the Board seeks to supersede the earlier Circulars Nos. 69 and 73 of 2002. It states that provision of Circular no. 31 of 2005 covers the procedure prescribed for clearance of only marine containers and clearance of all other durable containers other than marine containers would be governed by guidelines issued under Circular No. 51 of 2020. It is imperative that the issues as raised in the CAAR-1 application are interpreted in the light of provisions of above-mentioned notifications and circulars only. CAAR cannot issue a ruling on difficulties in compliance to the circular no. 51/2020 due to the fact that these issues are certainly not within the scope of 28 H (2) (b)- applicability of notifications issued under section 25 (1) of the Customs Act, 1962 and 28 H (2) (c)- principles to be adopted for the purposes of determination of value of the goods under the provisions of Customs Act, 1962. Hence, the so-called gaps in the interpretation of notification no. 104 of 1995, as amended from time to time, cannot be addressed by advance ruling mechanism.

5.10 I also observe in the instant case that there are multiple entities viz. ULD container supplier, actual users, i.e., importers/exporters who are using ULD containers, third party facilitator like present applicant, shipping lines/cargo handlers or their representatives and various jurisdictional Customs authorities having supervision over movement of such ULD containers. Accounting and declaration of inward and outward movement of ULD containers at the time of import and export and subsequent need for furnishing security in order to safeguard the Revenue interest need to be understood only under the extant legal framework governed by notifications and circulars discussed earlier for performing Customs Compliance Verification (CCV) tasks like accounting for movements, execution of bonds/furnishing of security as well as declaration of ULD container details in respective import/export documents. And due to this the CAAR cannot consider the present advance ruling application.

6. In view of the aforesaid discussions, I have arrived at the conclusion that the issues on which the advance ruling has been requested do not fall within the scope of Section 28H2(b) and (c) of the Customs Act, 1962 and thus are beyond the jurisdiction of CAAR. Therefore, in view of above, I refrain from issuing any ruling in respect of the questions raised in the CAAR-1 application.