M/S. Sanathan Textile PVT. LTD. Thru Director Of Pet. vs. Union Of INDIA, Thru The Secretary, Ministry Of Finance , Dept. Of Revenue And Anr

Held

The Court held that the amendment made by Notification No. 79/2017-Cus dated 13th October 2017 to Notification No. 16/2015-Cus was clarificatory or curative in nature. The reasoning was that the Foreign Trade Policy 2015-2020 envisaged imports under the EPCG Scheme at zero customs duty, and the omission in the intervening notification was an inadvertent oversight. Therefore, the exemption from additional duty under sub-sections (7) and (9) of Section 3 of the Customs Tariff Act should apply retrospectively to the period between 1st July 2017 and 13th October 2017. Consequently, the petitioner is entitled to a refund of the IGST paid during this period. The Court also held that Trade Notice No. 11/2018, to the extent it stated that importers under Chapter 5 would need to pay IGST, was unsustainable. The Court followed the Gujarat High Court's decision in Prince Spintex Pvt. Ltd. vs. Union of India and Radheshyam Spinning Pvt. Ltd. Vs. Union of India. The Court directed that the refund be processed and paid within four weeks of the petitioner reversing the entries of availment of the subject credit and debiting the amount from the credit ledger. Amendments to Bills of Entry were also permitted if required. The constitutional validity of the provisions was not explicitly decided but was implicitly upheld by granting relief based on the interpretation of the notification.

Facts

The petitioner, M/s. Sanathan Textile Pvt. Ltd., imported capital goods under the Export Promotion Capital Goods (EPCG) Scheme. Initially, imports under this scheme were exempted from additional duty under Section 3 of the Customs Tariff Act, 1975, by Notification No. 16/2015-Cus dated 1st April 2015. When the GST regime commenced, Section 3 of the Customs Tariff Act was amended to include sub-sections (7) and (9) for levy of Integrated Tax and Compensation Cess. Notification No. 16/2015-Cus was amended by Notification No. 26/2017-Cus on 29th June 2017, but this amendment inadvertently omitted to include exemptions for imports under the EPCG Scheme from the newly inserted sub-sections (7) and (9). Consequently, the petitioner paid IGST amounting to Rs. 24,94,53,580/- on capital goods imported between 1st July 2017 and 13th October 2017. A subsequent amendment via Notification No. 79/2017-Cus dated 13th October 2017 restored the exemption for EPCG imports.

Key Issues

1. Whether Section 3(7) of the Customs Tariff Act, 1975, Section 5 and Section 7(2) of the Integrated Goods and Services Tax Act, 2017, are unconstitutional as violative of Articles 246/246A/269A of the Constitution of India. 2. Whether the assessment of duties and IGST made under the impugned Bills of Entry by Respondent No. 2 is violative of Articles 14, 19, 265, and 300A of the Constitution of India. 3. Whether Notification No. 79/2017-Cus dated 13th October 2017, which exempted imports under the EPCG Scheme from additional duty under Section 3(7) and 3(9) of the Customs Tariff Act, should be given retrospective effect to cover the period from 1st July 2017 to 13th October 2017, thereby entitling the petitioner to a refund of IGST paid. Petitioner's arguments: The petitioner argued that the omission in Notification No. 26/2017-Cus was an inadvertent oversight, as the intention of the government was always to exempt EPCG imports from additional duties. They contended that Notification No. 79/2017-Cus was clarificatory or curative in nature, intended to rectify the oversight and cover the period of the gap. Reliance was placed on the Gujarat High Court judgment in Prince Spintex Pvt. Ltd. vs. Union of India. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue on the constitutional validity of the provisions or the retrospective application of the notification. However, the court's direction to produce file notings suggests the revenue's stance was likely in defense of the original levy.