Pre-Import Condition for Exemption of IGST Condition in Advance Authorisation Case Struck Down by Gujarat High Court
· Pre-Import Condition not to Apply with Retrospective Effect from the date of 31 October 2017
The Central Board of Indirect Taxes & Customs (CBIC), the apex policy-making body for indirect taxes, seems to be in no mood to consider giving exporters exemption retrospectively from the pre-import conditions to avail I-GST (Integrated Goods and Services Tax).
The Madurai Bench of the Madras High Court had upheld the circular of October 2017 in its order dated October 29, 2018, but the Gujarat High Court, in its order of February 4, 2019, struck down the pre-import condition with retrospective effect from the date of imposition — October 13, 2017 — declaring the condition as ‘ultra vires the Advance Authorisation scheme.’
The CBIC might move to higher court against such an adverse order.
The legal cell of the Board, in its instructions, said, “Since a number of petitions on similar issues have been filed in various High Courts…the High Courts concerned may please be apprised of the fact the Madurai Bench of the Madras High Court has upheld pre-import conditions…so that any adverse interim/final order by the respective High Courts may be avoided.”
It also said that in case of any adverse order, appropriate action for filing review petitions/writ appeals and if these are not possible then forwarding of Special Leave Petition (SLP) proposal to the board may also be examined.
The CBIC notification dated October 13, 2017, prescribed certain conditions, which denied benefits to exporters who import input goods after their finished products are exported. The notification was challenged in the High Court. The Finance Ministry then issued another notification in January to remove pre-import conditions and include specified deemed export supplies for exemption from integrated tax and compensation cess for materials imported against Advance Authorisations and Advance Authorisations for Annual Requirement. However, this relief was given prospectively, while demand was to allow relief from October 2017 itself.
Accordingly, the petitioners continued challenging the issue in the High Court. It was said that exporters importing duty-free items under Advance Authorisation licences have been going through unfair and undue hardships ever since the GST was introduced on July 1, 2017.
While BCD (Basic Customs Duty) exemptions continued under GST, the Government did not extend the exemption to IGST on imports under Advance Authorisation. Though, the Government extended exemption to IGST as well, when imported against valid Advance Authorisation licences but with ‘pre-import’ condition. It has been alleged that the ‘conditions were arbitrary and violative of Article 14 of the Constitution.’
According to Abhishek A Rastogi, Partner at Khaitan & Co and who is arguing these petitions in various High Courts, the pre-import condition remains a challenge and soon there will again be investigations till the issue is settled by the Supreme Court. The initial litigation at the time of GST implementation with respect to Advance Authorisation licences has been settled after the apex court dismissed the SLP filed by Union of India with respect to the exemption of IGST prior to the imposition of pre-import condition. “The principle of void for vagueness is expected to be argued at length in the days ahead,” he said, adding that the condition is not only arbitrary but also vague.