Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): A Division Coram of Dilip Gupta, J. (President) and P.V. Subba Rao (Technical Member) allowed an appeal which was seeking quashing of Order-in-Appeal passed by the Commissioner of Customs (Appeals) New Custom House, New Delhi which had set aside the impugned order and allowed the appeal by the department.

The appellant was a subsidiary of M/s. Volvo, Sweden who owned 99.99% of the appellant‟s shares. The parent company manufactures Completely Built Units (CBU) of motor vehicles that were imported and sold by the appellant. Customs duty was chargeable on most goods including motor vehicles on an ad valorem basis. The case of the Department was that the Order in Original it was mentioned that “no expenses are incurred by the importer on behalf of or by understanding or agreement with or under instructions from the suppliers of the goods, e.g., advertising, propaganda expense or any other expense for the sale of the imported goods”. On the other hand it was stated that the importer “needs to manage the customs taxability, inventory cost and simultaneous distribution of imported goods as well as sales promotions including advertising and marketing for its entire business in India.” Whether such expenses had a bearing on the price was required to be analyzed. The authorized representative of the Department, Mr Sunil Kumar submitted that such payments are includable in the assessable value as per Rule 10 (1)(e). The appellant‟s case was that these were expenses incurred by them on their own account to promote their own business.

The Tribunal clarified that Rule 10 (1) (e) required that any payment made as a condition for sale to either the seller or to a third party to satisfy the obligations of the seller was to be included in the value and it found that the appellant was responsible for certain activities such as customs, taxability, inventory costs, distribution, and sales promotions including advertising and marketing for its entire business in India, it cannot be called a payment to their foreign supplier but would be managing affairs related to its own business.

 The Tribunal added that it would have been a different case, if the appellant was required, as per the agreement to promote, at its cost, the sales by the foreign suppliers to other customers in India or make some payment on behalf of the seller to a third party. In such a case, some expense would have been incurred by the appellant that could have been examined to see if it formed an additional consideration for the sale of the goods to the appellant.

The Tribunal while allowing the appeal held that, “The appellant is a distributor and is in the business of selling the cars which necessarily requires them to deal with imports, pay taxes, promote sales, advertise, etc. These, in our considered view, cannot be termed as expenses incurred on behalf of the foreign supplier although the foreign supplier would also indirectly benefit if the appellant‟s business improves. The foreign supplier is also independently selling the goods (cars) to embassies, etc. and there is nothing on record to show that the appellant has incurred any expenses to promote such sales,”[Volvo Auto (India) (P) Ltd. v. Commr. Of Customs, 2021 SCC OnLine CESTAT 254, decided on 25-05-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): P. Dinesha (Judicial Member), allowed an appeal filed with the issue of denial of refund of 4% Special Additional Duty (SAD) under the Customs Notification No. 102/2007-Cus. dated 14-09-2007, as amended. During adjudication, the Assistant Commissioner of Customs (Refunds) had granted a partial refund against which the appellant preferred an appeal before the First Appellate Authority which was rejected by the Commissioner of Customs, thus the present appeal was filed.

The Tribunal while allowing the appeal explained that High Court had categorically answered the doubts raised by the authorities while restricting/denying the refund claim of 4% SAD stating that the goods imported and the goods sold are one and the same and are co-relatable and the department had not proved that the goods sold were different from the goods imported. The lower authority had not disputed the fulfillment of the other substantive conditions of the notification by the appellants thus rejection of partial amount of refund on this flimsy ground was not sustainable. Hence, for the same reason, the impugned order was set aside. [P.P. Products (P) Ltd. v. Commissioner of Customs, Customs Appeal No. C/42420 of 2014, decided on 20-02-2020]

Case BriefsHigh Courts

Allahabad High Court: A Division Bench of Pankaj Kumar Jaiswal and Rajnish Kumar, JJ. dismissed a PIL seeking to ensure that the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act), Uttar Pradesh Goods and Services Tax Act, 2017 (UP GST Act) and Integrated Goods and Services Tax Act, 2017 (IGST Act) were implemented in proper manner qua the duty free shops.

The contention of the petitioner was that the respondent 3 was liable to pay IGST on the goods imported into the territory of India, which it was not doing. Though the Duty-Free Shops (DFS) operated by respondent 3 were in the State of Uttar Pradesh, the goods were sold to international passengers without charging the applicable taxes under CGST and SGST Acts. The petitioner further contended that the respondent was incorrectly permitted to claim a refund of an accumulated input tax credit of GST paid on service of renting of immovable property by AAI (Airports Authority of India) and procurement of domestic goods and services.

The petitioner submitted that a transaction must suffer GST the moment the supply of goods crossed the territorial waters of India. Therefore, the supply of imported goods to respondent 3 needed to be subjected to tax under Section 5 of the IGST Act. The petitioner further submitted that from the standpoint of Section 8 (1) of the IGST Act, the sale made to International passengers at the arrival terminal DFS of the respondent should have been considered as intra-state supply of goods and such sale should have attracted applicable CGST and SGST under Section 9(1) of the CGST Act and SGST Act and that the activity undertaken from the departure terminal DFS operated by the respondent was not an export of goods under GST Act as the essential ingredients to qualify for export were not being satisfied by the respondent.

The learned counsel for the respondent, Sheeran Mohiuddin Alavi, submitted that supply of goods to and from the DFS was before the clearance of imported goods for home consumption/export and the supply of goods from DFS at International Airports were considered as export of goods. He contended that as per Section 7(2) of the IGST Act, the supply of goods imported into the territory of India was considered as Inter-State Supply till they cross customs frontiers.

The Court held that the supply of imported goods to and from the DFS did not cross the customs frontier and hence these supplies were an inter-state supply in accordance to Section 7 (2) of the IGST Act. Consequently, the supply wasn’t liable to CGST and SGST under Section 9 of the CGST and SGST Act. It further observed that Section 7(2) read with proviso to Section 5(1) of the IGST Act stated that integrated tax on “goods imported into India” would be levied “at the point” when the duties of customs were levied on the said goods under Section 12 of the Customs Act, 1962 and at no other point. According to Section 12 of the Customs Act, duties of customs were levied on imported goods only when such goods were cleared for home consumption.

The Court relied on Kiran Spinning Mills v. Collector of Customs, (2000) 10 SCC 228 in which the Supreme Court had held, the taxable event occurs when the customs barriers are crossed. In the case of goods which are in the warehouse, the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country.”

It was held that when the goods were imported from outside India and kept in a customs warehouse and exported therefrom, the stage for payment of customs duty under Customs Act, 1962 did not arise. Hence neither Custom duty nor IGST was payable.

In view of the above, the petition was dismissed and it was held that the exemption under GST on goods supplied to and from the DFS was rightly conferred and the claims of any accumulated unutilized ITC were refundable to respondent 3.[Atin Krishna v. Union of India, PIL Civil No. 12929 of 2019, decided on 03-05-2019]

Foreign LegislationLegislation Updates

G.S.R. 581 (E).—In exercise of the powers conferred by sub-section (1) of Section 156 of the Customs Act, 1962 (52 of 1962), read with clauses (n) and (u) of sub-section (2) of Section 11 of the said Act, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following rules to amend the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, notified by the Government of India in the Ministry of Finance (Department of Revenue), Notification No. 47/2007-CUSTOMS (N.T.), dated the 8th May, 2007, published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i), vide number G.S.R. 331 (E), dated the 8th May, 2007, except as respects things done or omitted to be done before such amendment, namely:

1 (i) These rules may be called the Intellectual Property Rights (Imported Goods) Enforcement Amendment Rules, 2018.

(ii) They shall come into force on the date of their publication in the Official Gazette.

2. In the said rules,

(A) in Rule 2, –

(i) in clause (b), the words and figures “patent as defined in the Patents Act, 1970,” shall be omitted;

(ii) in clause (c), the words and figures “the Patents Act, 1970,” shall be omitted;

(B) in Rule 5, after condition (b), the following conditions shall be inserted, namely:

“(c) the right holder or his authorised representative shall inform the Commissioner of Customs at the time of giving notice about any amendment, cancellation, suspension, or revocation of the Intellectual Property Right by the authorities under the Intellectual Property Laws or any Court of Law or Appellate Board, subsequent to its registration with the authorities under the Intellectual Property Law and in case of any such amendment, cancellation, suspension or revocation of the Intellectual Property Right during the validity of the notice registered under Rule 4, the same shall be brought to the notice of the Commissioner of Customs by the right holder within a period of one month of the date of communication of any such amendment, cancellation, suspension or revocation of the Intellectual Property Right to the right holder or any person authorised by him in this regard;

(d) in the event of any amendment, cancellation, suspension or revocation of the Intellectual Property Right by the authorities under the Intellectual Property Law or by any Court of Law or Appellate Board, the Commissioner of Customs may accordingly amend, suspend or cancel the notice and the corresponding protection.”.

[F. No. 394/04/2018-Cus.(AS)]

Note: The Notification No. 47/2007-CUSTOMS (N.T.), dated the 8th May, 2007, was published in the Gazette of India, Extraordinary, vide number G.S.R. 33l (E), dated the 8th May, 2007.

Ministry of Finance

[Notification No. 56/2018 – Customs (N.T.)]

Case BriefsHigh Courts

Punjab and Haryana High Court: While deciding the case of detainment of imported goods of petitioner for the inordinate period by Directorate of Revenue Intelligence (DRI) or the customs authorities, the Bench of Rajesh Bindal and Harinder Singh Sidhu, JJ, said that the importing company cannot be burdened to incur unnecessary detention and demurrage charges if the delay is condoned by the Port Authority.

The imported goods of petitioner was detained by the Authorities and DRI also requested Commissioner of Customs (Import), Mumbai, for putting on hold the imported consignment of the petitioner as well as five other importers based in Ludhiana till the time they do not obtain the NOC from the said Authority. Even the good imported by the petitioner were not of prohibited nature. The petitioner made several requests to the Authorities that the goods are incurring detention and demurrage charges but he was left unheard by the authorities, so he approached the  High Court.

In the light of given facts and conditions the Court ordered the DRI and Custom Authority that the petitoner should not be held liable for the delay which was condoned by the Authority and thereby the Court also said that the Authorities will be liable to bear the cost of inordinate delay. [Shri Lakshmi Steels v. Union of India, 2016 SCC OnLine P&H 12111), decided on December 23, 2016]