IGST not leviable on re-import of goods which were exported for exhibition

Heeralal Chhaganlal Tank Vs Commissioner Of Customs (CESTAT Delhi) 

CESTAT Delhi held that the goods exported under LUT are admittedly imported within six months of the export then there is no liability to pay tax on re-import. Thus, reimporting of goods earlier exported for exhibition is eligible for exemption from Customs Duty including IGST under clause (5) of Notification No. 45/2017-Cus. dated 30.06.2017.

Facts- The importer- appellant had filed 10 Bills of Entry for re-import of goods exported earlier for participation in exhibition or on a consignment basis. While re-importing of these goods, the appellant-importer was exempted from Customs Duty under clause (5) of the Notification No. 45/2017-Cus. dated 30.06.2017.

The department formed opinion that at the time of re-import thereof, the importer was eligible for exemption under Sr.No.1 (c) or 1 (d) as the case may be, of the Table in Notification No. 45/2017-Cus. dated 30.06.2017 which exempts imported goods from so much duty of customs leviable thereupon which in excess of amount indicated in the corresponding entry in column (3) of the said table in the said notification. Since the appellant had claimed exemption under Sr.No.5 from whole of customs duty as also IGST, the department opined gross mis-declaration of exported goods.

Resultantly, the appellant was denied entitlement to exemption under Sr.5 of Notification No. 45/2017-Cus. dated 30.06.2017. Since appellant had not paid customs duty, amounting to Rs.1,20,17,423/- was proposed to be recovered from the appellant along with penalty and the goods imported by the said bill of entry were proposed to be confiscated. The said proposal has been confirmed vide Order-in-Original except proposal confiscating the goods under Bill of Entry was not accepted. Being aggrieved, the appellant is before this Tribunal.

Conclusion- Held that goods sent out of India on approval basis does not attract integrated tax at the time of re-import, the amount stands already paid, otherwise. The goods exported under LUT are admittedly imported within six months of the export then there is no liability to pay tax on re-import. Above all the export was not on bond as is the requirement of entry at Sr.No.1(d) of Notification dated 30.6.2017. Hence, the order under challenge about demand w.r.t. nine tabled Bills of Entry is liable to be set aside.

Held that re­import of the goods after return from the exhibition can be confirmed under Notification 45/2017-Customs dated 30.06.2017 provided re­import happens within six months from the date of delivery challans for export. Since the time limit was only condition for availing the benefit of Notification, we hold that the appellant cannot claim exemption from payment of integrated tax with reference to this one bill of entry. Thus, we hold that the benefit of the notification has rightly been denied with respect to one Bill of Entry. The demand w.r.t. said Bill of Entry is therefore upheld. The order under challenge to the extent of demand proportionate to the value of goods re-imported vide the said bill of entry is hereby sustained.

FULL TEXT OF THE CESTAT DELHI ORDER

The appellant in the present case are jewelers holding Import and Export Code No.1388003325. The importer- appellant had filed 10 Bills of Entry for re-import of goods exported earlier for participation in exhibition or on a consignment basis. While re-importing of these goods, the appellant-importer was exempted from Customs Duty under clause (5) of the Notification No. 45/2017-Cus. dated 30.06.2017. From the perusal of shipping bills, it appears that the goods were exported either under claim of refund of IGST paid on export or under LUT/Bond without payment of duty of IGST. The department formed opinion that at the time of re-import thereof, the importer was eligible for exemption under Sr.No.1 (c) or 1 (d) as the case may be, of the Table in Notification No. 45/2017-Cus. dated 30.06.2017 which exempts imported goods from so much duty of customs leviable thereupon which in excess of amount indicated in the corresponding entry in column (3) of the said table in the said notification. Since the appellant had claimed exemption under Sr.No.5 from whole of customs duty as also IGST, the department opined gross mis-declaration of exported goods. Resultantly, while issuing show cause notice F. No. VIII (H)10/15/Adj./2019/6056 dated 6.9.2019, the appellant was denied entitlement to exemption under Sr.5 of Notification No.45/2017 dated 30.6.2017. Since appellant had not paid customs duty, amounting to Rs.1,20,17,423/- was proposed to be recovered from the appellant along with penalty and the goods imported by the said bill of entry were proposed to be confiscated. The said proposal has been confirmed vide Order-in-Original No.04/2020-COMMISSIONER (P) Jodhpur dated 5.3.2020 except proposal confiscating the goods under Bill of Entry was not accepted. Being aggrieved, the appellant is before this Tribunal.

2.We have heard Shri Rahul Lakhwani, Chartered Accountant for the appellant and Shri M.K. Chawda, DR for the department.

3. Ld. Counsel for the appellant has mentioned that the adjudicating authority has failed to consider re-imported goods as such where there is no supply of goods involved. The goods were exported for exhibition and those were not sold in the exhibition there, were re-imported. The ownership of the goods does not transfer to buyer/consignee to whom the goods are sent and same remained with the appellant. Since there is no supply of goods in terms of section 7 (1) (c) of CGST Act that the Circular No.21/2019 dated 24.7.2019 issued by CBIC shall apply which clarified that such re-export shall not be considered as “Zero rated supply” as per provisions contained in section 16 of IGST Act, 2017. It is submitted that Sr.No.1(d) of Notification No. 45/2017-Cus. dated 30.06.2017 apply to the bill of entry where the goods were earlier exported under the claim of refund of IGST. For the bill of entry with respect to the goods which were exported on LUT Sr.No.1 will not apply as the re-export has been made within six months in compliance of the condition of Notification No. 45/2017-Cus. dated 30.06.2017. In the light of this discussion, the appellant is impressed upon to have rightly been claimed the benefit of residuary entry at Sr.No.5 of the notification. The show cause notice was issued on wrong premise, the demand confirmed based on wrong premise is therefore liable to be set aside. With respect to imposition of penalty, it is mentioned that there is no act or omission alleged in the show cause notice which may render the goods liable to confiscation in term of section 111(o) of Customs Act,1962. There was no mens-rea to evade payment of customs duty. The appellant had rightly availed exemption notification while re­importing goods which were exported for the purpose of exhibition, penalty cannot be imposed upon the appellant. Otherwise also the issue herein is the outcome of disputed interpretation of notification. Penalty is not imposable upon the appellant in said circumstance. With these submissions, the order is prayed to be set aside and appeal is prayed to be allowed.

5. While rebutting the submissions, ld. DR has mentioned that where the exported goods are not brought back within six months of the removal, the Exporter has to issue tax invoice and the supply would be taken place. In such cases, Sl.No.1(d) of Notification is applicable instead residuary entry of Sl.No.5 of Notification No. 45/2017-Cus. dated 30.06.2017. The said position has been clarified in the Circular No.108/27/2019-GST dated 18.7.2019 wherein para 7 has following words:-

Similarly para 4 of the circular was ignored by the appellant. Thus, the act of the appellant is that of picking and choosing of the clarifications issued by aforesaid circular on 18.7.2019, the same cannot be appreciated. Hence there is no infirmity in the order when the adjudicating authority has denied the benefit of Sl.5 of Notification No. 45/2017-Cus. dated 30.06.2017 to the appellant. The finding in para 4.18 and 4.19 of the order under challenge are impressed upon. While relying upon GST Circular, Ld. DR submitted that the order under challenge is liable to be upheld and appeal liable to be dismissed.

6. Having heard rival submissions, we observe that the issue involved in the present appeal is about applicability of condition of Notification No. 45/2017-Cus. dated 30.06.2017 as to whether the re-import, in the present case, shall be covered under entry 1(d) or under entry 5 of sl.No.5 Notification No. 45/2017-Cus. dated 30.06.2017. The notification reads as under:-

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within any Chapter of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and specified in column (2) of the Table below when re- imported into India, from so much of the duty of customs leviable thereon which is specified in the said First Schedule, and the whole of the, integrated tax , compensation cess leviable thereon respectively under sub-section (7) and (9) of section 3 of the said Customs Tariff Act, as is in excess of the amount indicated in the corresponding entry in column (3) of the said Table.

7. Both parties have relied upon the Circular No.108/27/2019-GST dated 18.7.2019 read with Circular No.21/2019 dated 24.7.2019 which reads as under:

“Subject: Clarification regarding applicability of Notification No. 45/2017-Cus. dated 30.06.2017 on goods which were exported earlier for exhibition purpose/consignment basis-Regarding

Representations have been received for clarifying the issue of applicability of Notification No. 45/2017-Cus on the re-import of goods which had been earlier exported either for participation in exhibition or on consignment basis.

2. Matter has been examined. Circular No.108/27/2019-GST dated 18.7.2019 has clarified that the activity of sending/taking the specified goods (i.e. goods sent/taken out of India for exhibition purpose or consignment basis for export promotion except the activities satisfying the tests laid down in Schedule I of the CGST Act, 2017) out of India do not constitute supply within the scope of Section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not supply, the same cannot be considered as ^„Zero rated supply‟ as per provisions contained in section 16 of the IGST Act, 2017. Also that there is no requirement of filing LUT/bond as required under section 16 of IGST Act,2017 for such activity of taking specified goods out of India.

3. Situations mentioned at Sl.No.1(d) of Notification No. 45/2017-Cus. dated 30.06.2017 require payment at the time of re-import of integrated tax not paid initially at the time of export. For availing exemption under the said notification. As in the case of re-import of specified goods, no integrated tax was required to be paid for specified goods at the time of taking these out of India, the activity being not supply, hence the said condition requiring payment of integrated tax at the time of re-import of specified goods in such cases is not applicable. It is clarified that such re-import cannot be taken to be falling under situation at Sl.No.1(d) of the said Notification. Such cases will fall more appropriately under residuary entry at Sl.No.5 of the said Notification even though those specified goods were exported under LUT, in view of the fact that the activity of sending/taking specified goods out of India is neither a supply nor a zero rated supply.

4. It is also clarified that, even in cases where exports have been made to related or distinct persons or to principals or agents, as the case may be, for participation in exhibition or on consignment basis, but, such goods exported are returned after participation in exhibition or the goods are returned by such consignees without approval or acceptance, as the case may be, the basic requirement of ^„supply‟ as defined cannot be said to be met as there has been no acceptance of the goods by the consignees. Hence, re-import of such goods after return from such exhibition or from such consignees will be covered by entry at Serial no.5 of the Notification No. 45/2017-Cus. dated 30.06.2017, provided re-import happens before six months from the date of delivery challans.”

8. Perusal of the said notification and circular makes it clear that where the goods exported either under the Scheme of refund of integrated tax paid on export of goods or under bond without payment of integrated tax, on being re-imported, that too within six months of export, the same shall not amount to supply of goods.

9. As per Section 5(1) of the IGST Act levy of the integrated tax is on inter-state ^„supply‟ of goods or services or both. Thus, for levy of integrated tax there must be ^„supply‟ of goods or services or both.

10. In the present case, the goods are sent either for exhibition or on consignment basis. The goods which are re-imported are the once which are not sold in the Exhibition or are not approved by the buyer. The ownership of the goods does not transfer to the buyer/consignee to whom the goods i.e. appellant. In case of Exhibition, the appellant only takes the goods out of India and brings the same back after Exhibition. For supply of goods, there has to be supplier of goods and recipient of goods. However, in case of goods taken for exhibition both are same person. It is well settled principle that sale cannot be made to oneself only, similar concept is applicable in case of supply as well. Further, there is no consideration paid when the goods are re-imported by the appellant. Thus, at the time of re-import there is no ^„supply‟ of goods as per Section 7 (1) (a) of the CGST Act.

11. Even GST circular dated 18.7.2019, the CBIC has specifically clarified that since, the goods which are being sent or taken out of India for exhibition or on consignment basis are without consideration, the same shall not fall within the ^„scope of supply‟ as laid down under section 7 of the CGST Act. The circular further clarified that since, the transaction is not a supply, the same cannot be considered as ^„Zero rated supply‟ as per provisions contained in section 16 of the IGST Act. The relevant extract of the Circular reads as under:

“It is, accordingly, clarified that the activity of sending/taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act (hereinafter referred to as the specified goods”), do not constitute supply as the said activity does not fall within the scope of section 7 of CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as Zero rated supply‟ as per provisions contained in section 16 of the CGST Act. (Para 6)”

Department has also issued circular dated 24.7.2019 which clarifies that since, exporting of goods on consignment basis is not ^„supply‟ in terms of section 7 of the CGST Act, the re-import of the same would not attract any integrated tax.

From the bare perusal of the above extract, it is evident that the department itself admits that in case of consignment export, the transaction shall not be considered as ^„supply‟ when the goods are initially sent out.

12. Reverting to the facts of present case, we further observe that there is no denial to the fact that the goods under three of bills of entry were exported under LUT/bond have been re-exported within six months of the country, details as follows:

13. From the above fact on record, we also observe that out of ten bills of entry export with reference to six of them were made with payment of IGST along with interest was paid at the time of export of goods. There is no denial about payment of IGST of Rs.1,50,145/- with interest. The details of these six bills of entries reads as under:

Thus no demand in respect of this amount can be confirmed.

14. Since the goods exported are already held to not to be ^„Goods Supplied‟ but for exhibition, the goods exported on LUT bond gets apparently out of the scope of entry 1(d) of the notification dated 30.6.2017. Thus shall fall under entry 5 of the said notification to which applies ^„Nil‟ duty. Thus, we are of the opinion that the demand has wrongly been confirmed with respect to these 3 bills of entry.

15. We further observe that from above tabled six Bills of Entry, that those were filed mentioning payment of IGST of Rs.1,50,145/-along with interest at the time of export of goods mentioned therein. In view thereof demand in respect of this amount also shall not be confirmed. Thus, it is clear that the demand with respect to above tabled Bills of Entry (3+6) has wrongly been confirmed for the reasons discussed above i.e. goods sent out of India on approval basis does not attract integrated tax at the time of re-import, the amount stands already paid, otherwise. The goods exported under LUT are admittedly imported within six months of the export then there is no liability to pay tax on re-import. Above all the export was not on bond as is the requirement of entry at Sr.No.1(d) of Notification dated 30.6.2017. Hence, the order under challenge about demand w.r.t. nine tabled Bills of Entry is liable to be set aside.

16. Now the demand in respect of one bill of entry No.6830735 dated 16.6.2018 in respect of which the export was made under LUT and re­import could not be effected within six months of the export. Keeping in view the circular dated 24.7.2019 as quoted above, we hold that re­import of the goods after return from the exhibition can be confirmed under Notification 45/2017-Customs dated 30.06.2017 provided re­import happens within six months from the date of delivery challans for export. Since the time limit was only condition for availing the benefit of Notification, we hold that the appellant cannot claim exemption from payment of integrated tax with reference to this one bill of entry. Thus, we hold that the benefit of the notification has rightly been denied with respect to one Bill of Entry. The demand w.r.t. said Bill of Entry is therefore upheld. The order under challenge to the extent of demand proportionate to the value of goods re-imported vide the said bill of entry is hereby sustained.

17. With respect to imposition of penalty upon the appellant, we observe that the issue in the present case is of the interpretation of a particular notification. The appellant are held to have rightly availed the benefit of Notification No.45/2017-Customs dated 30.6.2017. We do not find any evidence on record produced by the department which may prove alleged mens rea for the appellant to evade payment of customs duty. Though one Bill of Entry is held as not eligible for exemption from full customs duty but for want of evidence of alleged intent to evade, we do not find any justifying reason for imposition of penalty upon the appellant. Hence, we set aside order imposing penalty upon the appellant.

18. In view of above discussion, order under challenge is hereby set aside except for the amount of duty to be paid with reference to bill of entry No.6830735 dated 16.6.2018. Consequent thereto, appeal stands partly allowed.

(Order pronounced in the open court 31.10.2023)