| Headnote |
Foreign Trade (Development & Regulation) Act, 1992 –Foreign Trade Policy of 2015-2020 (FTP) – Handbook of Procedures2015-2020 (HBP) – Notification No.18/2015-Customs exemptedpayment of basic customs duty, additional duty (countervailing duty,special additional duty), safeguard duty and anti-dumping duty oninputs imported against a valid Advance Authorization (AA) – GSTregime was introduced w.e. f 01.07.2017 – However, nocorresponding amendment was made to the aforesaid Notificationw.r.t IGST and compensation cess – Notification No.79/2017-Customs amended the aforesaid Notification by granting IGST andcompensation cess exemption, subject to the conditions that theexport obligation shall be fulfilled by physical exports only andshall also be subject to ‘pre-import condition’ – Notification No.33/2015-2020 was also issued, amending various provisions of theFTP, whereby this ‘pre-import condition’ was incorporated inparagraph 4.14 – High Court set aside the mandatory fulfilment ofthe ‘pre-import condition’ incorporated in the FTP and HBP by theaforesaid two Notifications – As per the High Court, such fulfilmentin order to claim exemption of IGST and GST compensation cess oninput imported into India for the production of export goods, onthe strength of an AA was arbitrary and unreasonable –Sustainability of – Held: Not sustainable – Exporters were madeaware of the changes brought about due to the introduction of GST,through a trade notice – However, this trade notice escaped theattention of the High Court – Further, the concept of ‘pre-importcondition’ was not alien – Appendix-4J (mentioned in paragraph4.13 (ii) of the FTP) listed several articles as articles for which the‘pre-import condition’ was applicable, prior to the GST regime –Furthermore, by paragraph 4.13 of the FTP, the DGFT could impose‘pre-import conditions’ on articles other than those specified –Retention of the power to impose ‘pre-import conditions’ on articles other than those specified in Appendix-4J, meant that the DGFTcould exercise it, in relation to any goods – High Court did notdiscuss this aspect and proceeded on the assumption that onlyspecified goods were subject to the pre-import condition – Anycategory of supply, other than actual exports to other country andsupply to SEZ cannot be considered as physical exports – In casethe entire exports were not physical exports, the AAs wereautomatically ineligible for exemption – The introduction of the GSTregime resulted in a substantial and fundamental overhaul of theindirect tax structure – There is no constitutional compulsion thatwhilst framing new law or policies, particularly when an entirelydifferent set of fiscal norms are created, overhauling the taxationstructure, concessions hitherto granted should necessarily becontinued in the same fashion as they were in the past – Inevitably,this process is bound to lead to some disruption – In this case, thedisruption is in the form of exporters needing to import inputs, paythe two duties, and claim refunds – Yet, this inconvenience isinsufficient to trump the legislative choice of creating an altogethernew fiscal legislation, and insisting that a section of assessees ordertheir affairs, to be in accord with the new law – Therefore, theexclusion of benefit of imports in anticipation of AAs, and requiringpayment of duties, u/s.3 (7) and (9) of 1975 Act, with the ‘pre-importcondition’, cannot be characterized as arbitrary or unreasonable– Impugned notifications cannot be faulted for arbitrariness orunder classification – Impugned judgment of the High Court setaside – Customs Tariff Act, 1975 – ss.3 (7), (9).Foreign Trade (Development & Regulation) Act, 1992 – s.5 –Foreign Trade Policy of 2015-2020 (FTP) vis-à-vis Handbook ofProcedures 2015-2020 (HBP) – Held: FTPs are statutory and areframed by the Union, exercising its powers u/s.5 of the FTRA –Whereas, the HBP does not have the status of rules or regulations –It merely contains guidelines.Tax/Taxation – Validity or constitutionality of fiscal laws/economic measures – Hardship/inconvenience, if relevant – Held:Court is not concerned with the wisdom or unwisdom, the justice orinjustice of the law as Parliament and State Legislatures – Hardshipis not relevant in pronouncing on the constitutional validity of afiscal statute or economic law – When reform by way of new legislation is introduced, the doctrine of classification cannot beapplied strictly, and that some allowance for experimentation, toobserve the effect of the law, is available to the executive orlegislature – Doctrine of Classification. |
