Bombay HC Orders Dept. for IGST Refund Paid Under EPCG Scheme

The Bombay High Court stated that notification no. 79/2017-Customs on October 13, 2017, revising notification no. 16/2015-Customs and granting exemption from IGST to the capital goods imported beneath the export promotion capital goods scheme (EPCG scheme) clarified and corrective.

The division bench of Justice K.R. Sriram and Justice Arif S. Doctor rendered the department to refund in cash the IGST paid on imports of capital goods incurred in the duration of 1.7.2017 to 12.10.2017.

Under Section 3 of the Customs Tariff Act, the capital goods imported beneath the valid authorization beneath the EPCG scheme were completely get exempted from the payment of any other duty. The applicant would take benefit from the EPCG scheme exemption.

Central Government intended on framing the EPCG scheme to allow imports at zero customs duty. As per notification No. 16/2015-Cus dated April 1, 2015, the goods covered via authorization provided beneath the EPCG scheme were exempted from the whole of the other duty imposed under Section 3 of the Customs Tariff Act. when the GST regime came into force Subsections (7) and (9) of the Customs Tariff Act were summed to furnish the levy of the Integrated Tax and the Goods and Services Compensation Cess.

A related revision was incurred in Notification No. 16/2015-Cus, vide Notification No. 26/2017-Cus, dated June 29, 2017. In Notification No. 26/2017, the import under the EPCG Scheme, which was exempted from additional duty under Subsections (7) and (9) of Section 3 of the Customs Tariff Act, was not comprised.

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But, Notification No. 16/2015-Cus was allocated soon post to that, and imports under the EPCG Scheme were exempted from additional duty.

The petitioner claimed that on the date July 1, 2017, when Notification No. 16/2015-Cus became effective and the new revision on October 13, 2017, it paid IGST on the capital goods that has been imported.

The court sees, the basic structure of GST was not provided with the exemptions, however, the GST council sees to allot the exemption via IGST, Cess, etc. under Section 6 of the IGST Act, 2017 read with Section 25 of the Customs Act, 1962, for importing the goods for the exporters taken the scheme of the advance authorization/export promotion capital goods or 100% export-oriented units up to March 31, 2018, and to carry on the current monitoring scheme for the exports.

The court clarified that “Notification No.79/2017-Cus, dated 13th October 2017 has to be read as clarificatory or curative in nature, inasmuch as, it would, otherwise, leave a whole class of importers who had imported capital goods uncovered during the period 1st July 2017 to 13th October 2017, allowing the Department to levy additional duty under Sub Section (7) and Sub Section (9) of the Customs Tariff Act on such imports, despite the fact that the Foreign Trade Policy 2015-2020 envisaged imports under the EPCG Scheme at zero customs duty”.

The court ruled the refund would get processed and paid with the interest if any within 4 weeks of the applicant reversing the entries of the claim of the subject credit and debiting the specified amount via credit ledger.