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Case Law Details

Case Name : Himadri Speciality Chemical Ltd. Vs Pr. Commissioner of Customs Visakhapatnam (CESTAT Hyderabad)
Appeal Number : Customs Appeal No. 30069 of 2024
Date of Judgement/Order : 08/04/2024
Related Assessment Year :

Himadri Speciality Chemical Ltd. Vs Pr. Commissioner of Customs Visakhapatnam (CESTAT Hyderabad)

Whether extended period of limitation can be invoked to raise demand of IGST portion of Customs duty which is available as Input Tax Credit in GST Regime?

The assessee Appellant availed exemptions from payment of entire customs duty on import of inputs under Advance Authorization (AA) for use in manufacture of final products for export purpose. The Customs department contended that the Appellant is entitled to claim exemption under Notification No. 21/2015-Cus (which grants exemption of basic customs duty only) and not the benefit under Notification No. 18/2015-Cus (which grants both exemption of basic customs duty as well as IGST). It was contended that the AA was initially issued by the DGFT authorities sanctioning exemption under Notification No. 18/2005 which was subsequently revised to Notification No. 21/2015. It was the contention of the authorities that since the AA sanctioned for claiming of benefit only under Notification no. 21/2015, the Appellant could not claim exemption benefit under Notification No. 18/2015. The only dispute in the case was with regard to the ultimate claiming of IGST exemption at the time of import of input materials by the Appellant.

The Appellant submitted that even it was assumed they were liable to pay the demanded IGST, the same would have been available as ITC /Cenvat for payment of output GST causing no loss to the Exchequer.

Accepting the submissions of Appellant, the Hyderabad Bench of Hon’ble CESTAT recently vide Final Order dated 08.04.2024 held that demand of IGST could not be raised by invoking extended period of limitation because the IGST even if paid at the time of imports would be available as ITC and the situation would be revenue neutral. In that scenario, there could not be any malafide on the part of the assessee and hence, demand of IGST under extended period of limitation could not be sustained.

FULL TEXT OF THE CESTAT HYDERABAD ORDER

The present appeal is against impugned order of the Principal Commissioner dated 20.11.2023 demanding Customs Duty (IGST) Rs. 1,33,68,646/- invoking the extended period of limitation for imports made during January 2020 to July 2020 along with the order of confiscation under Section 111(m) of the Customs Act, redeemable on payment of redemption fine of Rs.70 lakhs and imposition of equal penalty of Rs. 1,33,68,646/-under Section 114 A of the Act.

2. The brief facts are that the appellant is engaged in the business of manufacture of Coal Tar Pitch, Carbon Black etc., for sale in India as well as by way of export outside the country and is duly registered with the GST authority. The appellant is availing the benefit of input tax credit under GST law for payment of output tax CGST/SGST/IGST.

3. The appellant was issued an Advance Authorisation (AA) dated 30.12.2019 by the DGFT Authority against the invalidation of Advance Authorisation issued to Hindalco Industries Ltd., (Hindalco for short). In terms of the said authorisation, the appellant would be entitled to import input materials by claiming exemption from payment of customs duty. The said imported inputs would be used in the manufacture of output goods for ultimate export by Hindalco. In the present case, the goods imported by the appellant have been used for manufacture of final products which have been exported by Hindalco and the DGFT authority have duly issued the discharge/redemption certificate dated 02.03.2022 confirming the completion of the export obligation arising out of the Advance Authorisations referred to herein above. Thus, whatever input goods were imported have been used in the final output which have been ultimately exported outside India which is an admitted fact.

4. The only dispute in the present case is with regard to claiming of IGST exemption at the time of import of input materials by the appellant. It is the contention of Revenue/Custom Authority that the appellant is entitled to claim exemption under Notification No. 21/2015–CUS (which grant exemption of basic customs duty only) and not the benefit under Notification No. 18/2015-CUS (which grants both the exemption of basic customs duty as well as IGST).

5. It is contended that the Advance Authorisation was initially issued by the DGFT sanctioning exemption under Notification No. 18/2005 which was subsequently revised to Notification No. 21/2015. It is the contention of Revenue Authority that since the advance authorisations sanctioned was for claiming the benefit only under Notification No. 21/2015-CUS, the appellant could not have claimed exemption benefit under Notification No. 18/2015– CUS.

6. The appellant have imported 6 consignments vide 6 different bills of entry during the period January 2020 to 8th July 2020 wherein they have imported Coal Tar Pitch (Tar Pitch). It is alleged that the appellant while claiming exemption of Basic Custom Duty and SW Cess vide Notification No. 21/2015-CUS under self-assessment have also claimed the exemption of IGST by mentioning Notification No. 18/2015–CUS. Revenue issued letter dated 01.10.2021 to the appellant bringing the error in the claim and as to why IGST amount together with interest should not be collected. The appellant filed reply dated 01.09.2021 inter-alia stating that the subject advance authorisation were supplied for deemed exports/supplies. The DGFT, Kolkata wrongly issued authorisation under Notification No. 18/2015 in respect of Notification No. 21/2015-CUS. That due to oversight the authorisation was submitted for assessment of the relevant bills of entry. That as wrong notification was mentioned in the authorisation, bills of entry were assessed automatically giving the benefit of IGST exemption. That the appellant did not have any intention to claim the benefit of exemption/non-payment of IGST against the particular advance authorisation, where the IGST is refundable in the form of credit. It was further urged in the subsequent reply dated 28.12.2021 that the customs EDI particularly is issuing registration of Advance Authorisation under Notification No. 21/2015-CUS however the physical copy of authorisation reflects the Notification No. as 18/2015–CUS. That they have availed IGST exemption for supply to Hindalco against invalidation letter that Notification No. 21/2015-CUS is not applicable in the present case as they have supplied to Hindalco does not cover under Para 7.02b,c,d,e,f,g and h of the Foreign Trade Policy. Further urged that actually Notification No. 18/2015-CUS is the relevant and applicable notification. The appellant also requested to amend the notification on the EDI portal to Notification No. 18/2015-CUS . They further requested to drop the demand of IGST.

7. However SCN dated 21.11.2022 was issued proposing to deny the exemption in respect of the 6 bills of entry as specified filed under Advance Authorisation No. 0210209652 dated 30.12.2019 issued under Customs Notification No. 21/2015–CUS, as amended. Differential duty – IGST Rs.1,33,68,646/- was demanded under Section 28(4) of the Act with interest with further proposal to confiscate the goods under Section 114 of the Act with further proposal to impose penalty under Section 112(a)/114A/117 of the Act.

8. The appellant in the course of adjudication submitted that they are legally entitled to claim benefit under Notification No. 18/2015-CUS which grants complete exemption, which submissions have not been dealt by the Learned Commissioner in the impugned order. The appellant further urges that the demand/SCN was issued under Section 28(4) of the Act by invoking extended period of limitation, which is bad in law in as much as there is no case of fraud or suppression for the reason that even if the IGST would have been paid, the same would have been available to the appellant as input tax credit. Thus the situation is wholly revenue neutral causing no loss to the exchequer. The appellant have relied on the ruling of this Tribunal in the case of Sanghi Industries Ltd., Vs CC, Kandla [2014 (302) ELT 459 (Tri-Ahmd)] and also in Birla NGK Insulators Private Limited Vs CC, Ahmedabad [2014 (3090 ELT 501 (Tri-Ahmd)], wherein the Tribunal after noting that since the additional duty of Customs was available as Cenvat credit, there would be no core case for wilful suppression and in that case demand could not be invoked by resorting to extended period of limitation. Reliance is also place on the ruling of the Apex Court in Nirlon Ltd., Vs CCE, Mumbai [2015 (320) ELT 22 (SC)] wherein it have been held that in case of revenue neutral situation, extended period is not invokable.

9. Opposing the appeal, Learned AR for Revenue relies on the impugned order. He further relies on the ruling of this Tribunal in M/s Interglobe Aviation Ltd., Vs Principal CC, Bangalore [2021 (7) TMI 1027 (Tri-Bang)] wherein this Tribunal held that the bills of entry were self assessed and were cleared under RMS. Under such circumstances it cannot be alleged that the Department was in the knowledge of the various declarations made by the appellant and thus the charge of misdeclaration cannot be lebelled. Reliance is also placed on the following rulings:

i) M/s Gammon India Ltd., Vs CC, Mumbai [2011 (7) TMI 17 – SC]

ii) Commissioner of Customs Vs Dilip Kumar and Company and others [2018 (7) TMI 1826 – SC].

10. It is further urged by Learned AR that the appellant should have been very careful and meticulous in claiming the exemption while filing the bill of entry.

11. Rebutting the arguments of Revenue, Learned Counsel for the appellant urges that revenue have only contended that since Notification No. 21/2015–CUS, does not provide for IGST exemption, but only exemption of basic customs duty, the demand is liable to be sustained. It is also contended by Learned AR that merely because appellant is entitled to credit, the demand of IGST cannot be waived on this ground alone.

12. Having considered the rival contentions, we find that it is not disputed that, had the appellant paid the IGST at the time of import they would have been eligible for input tax credit. Further, admittedly the goods have been used as inputs for manufacture of other goods which have undisputedly been exported to Hindalco. Admittedly, DGFT have issue ‘Export Obligation Discharge Certificate’ to the appellant We further take notice that it is not the policy of the Government to export taxes. We further find that it is a case of contributory negligence on the part of Revenue also, as inspite of having registrated the Advance Authorisation and the entitlement of the appellant to exemption under Notification No. 21/2015–CUS, have allowed the exemption of IGST also as applicable under Notification No. 18/2015-CUS. However, in the facts and circumstances, the situation being revenue neutral undisputedly, no case of malafide is made out against the appellant. In this view of the matter, following the ruling of the Apex Court in the Nirlon Ltd., (supra), we hold that the demand is not invokable by invokation to extended period of limitation. Accordingly, we allow this appeal and set aside the impugned order. The appellant shall be entitled to consequential benefits in accordance with law.

(Order Pronounced in open court on 08.04.2024)

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