In a significant development for India’s customs regulations, the Office of the Commissioner of Customs, Chennai-II (Import), under the Ministry of Finance, Department of Revenue, Government of India, has issued a public notice regarding the implementation of a directive from the Hon’ble Supreme Court. This directive, pertaining to a ‘pre-import condition,’ carries implications for importers, customs brokers, and stakeholders. This article will delve into the details and implications of this directive.
Background and Legal Framework
The Hon’ble Supreme Court, in its judgment dated 28.04.2023 in Civil Appeal No. 290 of 2023 (U0I and others vs. Cosmo Films Ltd.), addressed the mandatory fulfillment of a ‘pre-import condition.’ This condition was initially incorporated in para 4.14 of FTP 2015-20 via Central Government (DGFT) Notification No. 33/2015-20 dated 13.10.2017, and it was also reflected in Notification No. 79/2017-Customs dated 13.10.2017. This condition was linked to the Advance Authorization scheme.
Supreme Court’s Decision
The Hon’ble Supreme Court upheld the ‘pre-import condition,’ implying that imports failing to meet this requirement would be subject to IGST (Integrated Goods and Services Tax) and Compensation Cess. However, the court also directed the Revenue to allow claims for refunds or input credits, where applicable and where customs duty was paid.
Claiming Refunds or Input Credits
To facilitate this process, importers and stakeholders must approach the jurisdictional commissioner within six weeks from the date of the judgment. The claims will be examined on a case-by-case basis. A circular will be issued to provide clear procedures for this purpose.
Customs Circular No.16/2023
In response to the Supreme Court’s directive, the Board issued Circular No.16/2023 dated 07.06.2023. This circular extends the impact of the court’s order to importers beyond the respondents in the case. It outlines the procedure to be followed by all such importers. Here’s how this procedure will be implemented at Chennai-II Commissionerate:
a. Importers, including those not limited to the respondents, should approach the assessment group (PAG) at Customs House, Chennai, with relevant details for tax and cess payment, along with applicable interest.
b. Upon request, the assessment group (PAG) will cancel the OOC (Out of Charge) and re-assess the Bill of Entry (BE) to include the tax and cess as per the Supreme Court’s judgment.
c. Payments, along with applicable interest, will be made using the electronic challan generated in the Customs EDI System.
d. Once the importer completes the payment, the Customs’ proper officer will create a notional OOC for the BE on the Customs EDI System, including the IGST and Compensation Cess amounts and their payment dates.
Input Tax Credit and Refunds
Following the assessed BE, input tax credit will become available, subject to eligibility and conditions as per relevant sections and rules of the CGST Act, 2017. Additionally, if this input tax credit is used for paying IGST on outward zero-rated supplies, the possibility of a refund for the IGST paid arises, subject to conditions and restrictions provided in the law.
Conclusion
The directive from the Hon’ble Supreme Court regarding the ‘pre-import condition’ has significant implications for the import community. While it upholds the condition’s validity, it also offers a pathway for refunds and input credits. The issuance of Circular No.16/2023 provides clarity on the procedure to be followed in this regard. Importers, customs brokers, and stakeholders should take note of these developments and ensure compliance with the new regulations. This update signifies the government’s commitment to aligning customs practices with legal directives for a fair and transparent trade environment in India.
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Government of India
Ministry of Finance, Department of Revenue
Office of the Commissioner of Customs, Chennai-II (Import)
Custom House, No. 60, Rajaji Salai, Chennai – 600 001.
F.No. CUS/AG/PN/19/2023-A/M Date:: 21-08-2023
Public Notice No. 31/2023
Subject : Implementation of direction of Hon’ble Supreme Court in judgment dated 28.04.2023 in matter of Civil Appeal No.290 of 2023 relating to ‘pre-import condition’ — reg.
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Kind attention of the Importers, Customs Brokers and all other stakeholders is invited towards the Hon’ble Supreme Court judgment dated 28.04.2023 in matter of Civil Appeal No.290 of 2023 (U01 and others vs. Cosmo Films Ltd.) relating to mandatory fulfillment of a `pre-import condition’ incorporated in para 4.14 of FTP 2015-20 vide Central Government (DGFT) Notification No. 33/2015-20 dated 13.10.2017, and reflected in the Notification No. 79/2017-Customs dated 13.10.2017, relating to Advance Authorization scheme and consequential Board Circular No. 16/2023 dated 07.06.2023 in respect of implementation of the directions of the Hon’ble Supreme Court of India in the aforesaid judgment dated 28.04.2023.
2 . The FTP amended on 13.10.2017 and in existence till 09.01.2019 had provided that imports under Advance Authorization for physical exports are also exempt from whole o f the integrated tax and compensation cess, a s may be provided in the notification issued by Department of Revenue, and such imports shall be subject to pre-import condition.
3. Hon’ble Supreme Court upheld the above said pre-import condition vide the aforesaid judgment implying that the relevant imports that d o not meet the said pre-import condition requirements are leviable IGST and Compensation Cess to that extent.
4. While allowing the appeal of Revenue, the Hon’ble Supreme Court has however directed the Revenue to permit claim of refund or input credit (whichever applicable and/or wherever customs duty was paid). For doing so, the respondents shall approach the jurisdictional commissioner, and apply with documentary evidence within six weeks from the date of the judgment. The claim for refund/credit, shall be examined on their merits, on a case- by-case basis. For the sake of convenience, the revenue shall direct the appropriate procedure to be followed, conveniently, through a circular in this regard.
5. In this regard Board has issued Circular No.16/2023-cus dated 07.06.2023 directing that the order of the Hon’ble Court shall also have bearing on importers others than the respondents and prescribed the procedure to be followed by all such importers, for purpose o f carrying forward the Hon’ble Court’s directions. Accordingly the said procedure as mentioned below shall be adopted at Chennai-II Commissionerate:
a. For the relevant imports that could not meet the said pre-import condition and are hence required to pay IGST and Compensation Cess to that extent, the importer (not limited to the respondents) may approach the concerned assessment group (PAG), Customs House, Chennai with relevant details for purposes of payment of the tax and cess along with applicable interest.
b. Based on the request of the importer, the assessment group (PAG) at Customs House ,Chennai-II shall cancel the OOC and indicate the reason in remarks. The BE shall be assessed again s o a s to charge the tax and cess, in accordance with the above judgment.
c. The payment of tax and cess, along with applicable interest, shall be made against the electronic challan generated in the Customs EDI System.
d. On completion of the above payment by the importer, the proper officer of the Customs shall make a notional OOC for the BE on the Customs EDI System [so as to enable transmission to GSTN portal of, inter alia, the IGST and Compensation Cess amounts with their date of payment (relevant date) for eligibility as per GST provisions].
e. the procedure specified at (a) to (d) above can be applied once to a BE.
6.1 Accordingly, the input credit with respect to such assessed BE shall be enabled to be available subject to the eligibility and conditions for taking input tax credit under Section 16, Section 17 and Section 18 of the CGST Act, 2017 and rules made thereunder.
6.2 Further, in case such input tax credit is utilized for payment of IGST on outward zero- rated supplies, then the benefit of refund of such IGST paid may be available to the said registered person as per the relevant provisions of the CGST Act, 2017 and the rules made thereunder, subject to the conditions and restrictions provided therein.
7. All Trade/Customs broker associations are requested to take note and publicize the contents of this Public Notice among their member/constituents.
8. This Public Notice should be considered as Standing Order for the purpose of Officers/Staff of Chennai II (Import) Commissionerate, Chennai.
9. Difficulties, if any faced by the Trade/Importers/Customs Brokers in implementation of the above may be brought to notice of the undersigned through Email: commr2-cuschn@gov.in.
Signed by
KSVV Prasad
Date: 21-08- 023 12:16:4
Commissioner of Customs,Chennai-II
To
All Concerned.
Copy to :
1. The Chief Commissioner of Customs, Chennai Zone for kind information
2. All the Pr.Commissioners/Commissioners of Customs, Customs Zone
3. All the ADC/JC/Dy/Assistant Commissioners of Customs, Chennai-II.
4. Deputy Commissioner( EDI) for uploading on Chennai Customs website.
5. CHS- for displaying Notice Board.
6. Master file.
