Madras High Court
Ge India Industrial Pvt. Ltd vs Union Of India Represented By Its on 7 September, 2021
WP No.4156 of 2014
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 07-09-2021
CORAM
THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAM
WP No.4156 of 2014
GE India Industrial Pvt. Ltd.,
401, 402, 4th Floor,
Aggarwal Millennium Tower,
E-1,2,3, Netaji Subhash Place,
Wazirpur,
New Delhi – 110 034 Represented by
its Vice President Mr.Atul Gupta. .. Petitioner
vs.
1.Union of India Represented by its
Secretary, Ministry of Finance,
Department of Revenue,
North Block,
New Delhi – 110 001.
2.Central Board of Excise and Customs,
Department of Revenue,
Ministry of Finance,
Represented by its Chairman,
North Block,
New Delhi – 110 001.
1/26
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WP No.4156 of 2014
3.Commissioner of Customs and Central Excise,
M.H.U. Complex,
692, Anna Salai,
Nandanam,
Chennai-600 035.
4.Specified Officer,
J Matadee Free Trade Zone,
Mannur Village,
Sriperumbudur Taluk,
Kanchipuram District,
Tamil Nadu – 602 105.
5.Authorised Officer,
J Matadee Free Trade Zone,
Mannur Village,
Sriperumbudur Taluk,
Kanchipuram District,
Tamil Nadu – 602 105. .. Respondents
Writ Petition is filed under Article 226 of the Constitution of India,
praying for the issuance of a Writ of Certiorari, calling for the records
culminating in the Circular No.44/2013 – Customs dated 30.12.2013 of the
second respondent and the consequential Letter No.JMFTWZ/DHL/
MISC/GE-2014 dated 03.02.2014 of the fourth respondent, signed by the
fifth respondent, purportedly issued on the basis thereof and quash them as
being legally and constitutionally invalid, being ultra vires the provisions of
the Customs Act, 1962 and being unconstitutional as being violative of
Article 14 and 19(1)(g) of the Constitution of India.
2/26
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For Petitioner : Mr.Tushar Jarwal for
Mr.Rahul Sateeja,
Mr.Deepak Thackur,
Mr.Vrinda Bagaria and
Mr.B.Giridhara Rao.
For Respondents : Mr.T.Pramodkumar Chopda,
Senior Panel Counsel.
ORDER
The writ on hand is filed questioning the validity of the Circular
No.44/203-Customs dated 30.12.2013 issued by the second respondent and
the consequential letter No.JMFTWZ/DHL/MISC/GE-214 dated 03.02.2014
passed by the fourth respondent and quash the same.
2. The petitioner is a Private Limited Company engaged, inter
alia, in the business of manufacturing, trading, services of many products,
including equipment for Wind Operated Electricity Generators. The petitioner
regularly imports goods, which are used by it for its manufacturing purposes.
The petitioner imports the goods through JMFTWZ unit of DHL Logistics
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Private Limited, located in the Free Trade Warehousing Zone (FTWZ). The
petitioner clears the goods to its units located in the Domestic Tariff Area
(DTA) as stock transfers for the purpose of trading as well as carrying out
certain manufacturing activities. The petitioner states that a FTWZ is a
Special Economic Zone (SEZ), wherein mainly trading, warehousing and
other activities related thereto are carried out.
3. The learned counsel, appearing on behalf of the petitioner,
mainly contended that the Advance Ruling dated 27.05.2013 in petitioner's
own case had been ignored by the respondents, while passing the impugned
order dated 03.02.2014. The Notification dated 16.05.2005 with reference to
the Bill of Entries (8 in Nos.) from 10.01.2014 to 28.01.2014 were not
considered with reference to the Advance Ruling rendered in the case of the
petitioner. During the pendency of the writ petition, another 13 Bill of Entries
were filed by way of miscellaneous application in the writ petition.
4. The petitioner has stated that the implication of the Advance
Ruling with reference to the provisions of the Customs Act, 1962 (hereinafter
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referred to as the 'Act', in short) and its binding nature is the question. Despite
the fact that the said Advance Ruling is binding on the respondents, they have
ignored it without any valid reason and therefore, the impugned order is
untenable and in violation of the provisions of the Act.
5. The learned counsel for the petitioner reiterated that process
is to clear the goods by way of stock transfer to the own manufacturing unit
of the petitioner. An admitted fact is that when the nature of stock transfer is
not disputed between the parties, the application of Advance Ruling cannot
be denied and therefore, the petitioner is eligible for exemption and such an
exemption is rejected contrary to the Advance Ruling rendered.
6. The learned counsel for the petitioner drew the attention of
this Court with reference to the Advance Ruling in Rule No.AAR/
Cus/01/2013 dated 27.05.2013, wherein the petitioner was granted
exemption. The process to clear the goods by way of stock transfer was
considered by the Authority for Advance Ruling. Therefore, the Authorities
have no reason to take a decision which is not in consonance with the
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Advance Ruling, which was issued based on the nature of stock transfer.
7. The learned counsel for the petitioner relied on Section 28E of
the Act, wherein sub-clause (b) defines the 'Advance Ruling'. Section 28J of
the Act, speaks about the 'applicability of Advance Ruling'.
8. It is contended that under the said provision, it is binding on
all the Authorities across the country and therefore, the respondents cannot
adopt any other opinion, which is in contravention to the findings given by the
Advance Ruling Authority. It is further contended that the manner in which
the order impugned passed would show that the respondents had not shown
any sanctity on the Advance Ruling, more specifically, in the case of the
petitioner. Thus, at the outset, the impugned order is void in limine and
therefore, preferring an appeal in the present case would be a futile exercise.
9. In support of the said contention, the learned counsel for the
petitioner relied on the judgment in the case of Union of India vs.
Ahmedabad Electricity Company Ltd [2003 (158) ELT 3 (SC)], wherein
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the Supreme Court held that once the circular is under challenge in the writ
proceedings, preferring an appeal would be a futile exercise, as the Appellate
Authority may not be in a position to quash the circulars. In such
circumstances, the writ petition is entertainable and compelling an aggrieved
person to go before the Appellate Authority, would do no service to the cause
of justice. Therefore, it is contended that the subsequent judgment of this
Court and in various other judgments, the Apex Court repeatedly held that no
fruitful purpose would be served in such circumstances by directing the
petitioner to approach the Appellate Authorities, in view of the fact that in the
present case the circular itself is under challenge.
10. Though the learned counsel for the petitioner referred line of
judgments on this, the principles are not in dispute that when the provisions of
the Act or the Rules or the circulars issued by the Ministry of Finance is
under challenge, then the Subordinate Authorities may not be in a position to
contravene or take a different view than that of the issues decided and
communicated by way of circulars. Thus, it is not necessary to repeat all
those judgments as the principles are not disputed on this aspect.
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11. The learned counsel for the petitioner is of an opinion that
the circular impugned issued is in violation of the Notification dated
16.05.2005 as it contravenes the decision taken by the Government of India.
12. The learned Senior Panel Counsel, appearing on behalf of
the respondents, disputed the contentions raised on behalf of the petitioner,
by stating that the binding nature of the Advance Ruling has been erroneously
interpreted by the petitioner. The applicability of the Advance Ruling as
contemplated under Section 28J of the Act is to be applied in all respects,
'The Principal Commissioner of Customs' within whose jurisdiction the issue
falls and it cannot be construed that such Advance Ruling would be binding
all over India against all the Authorities and in such circumstances, it may not
be possible and there may not be any further scope for adjudication of facts
and circumstances of each case. Thus, the Legislative intention in adopting
the language employed is 'The Principal Commissioner of Customs' or 'The
Commissioner of Customs'. Thus, it is to be applied with reference to the
person whose case the Advance Ruling is given and also the nature of the
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subject, which was discussed. Thus, it is contended that such Advance
Rulings are to be confined only with reference to the party against whom such
Advance Ruling is delivered and with reference to the Authority, who was a
party to that proceedings. In other words, it is contended that the Advance
Ruling may not have such general implications, so as to bind all the Customs
Authorities across the country. That is not the Legislative intention and in the
event of such an interpretation, the very purpose and the object of
adjudication under the provisions of the Act, would be defeated.
13. The learned Senior Panel Counsel for the respondents
reiterated by stating that the circular impugned is also made clear that it was
issued to avoid double taxation. When the circular was issued on the basis of
the issue raised, whether the benefit of exemption from SAD (Special
Additional Duty) under this Notification would be available when a DTA unit
imports goods and routes it through SEZ/FTWZ for self-consumption i.e., in
the nature of stock transfer from SEZ/FTWZ. Therefore, the circular and its
application is to be decided based on certain facts and circumstances
prevailing in a particular stock transfer and for that purpose, an adjudication
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is imminent.
14. In the present case, the petitioner has challenged the order
passed based on the representation submitted by the petitioner and the
adjudication is yet to be completed. If at all the petitioner is of an opinion that
he is entitled for an exemption, the petitioner is at liberty to place all these
factors along with the judgments, enabling the Authorities to adjudicate the
facts and circumstances involved in the case of the petitioner.
Contrarily, in this writ petition, the petitioner cannot claim exemption directly
and in such an event, the respondents are deprived from adjudicating the
disputed issues. This apart, the petitioner in order to get further clarification
or otherwise, may approach the Appellate Authorities.
15. The learned Senior Panel Counsel, appearing on behalf of
the respondents, drawn the attention of this Court with reference to the
decision made by the Advance Ruling Authority in Ruling
No.AAR/Cus./01/2013 dated 27.05.2013. The said Ruling unambiguously
states that the answer to the question formulated by the applicant as on the
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facts as projected by the applicant is in the affirmative. However, as noted
supra, if at the time of adjudication, the Adjudicating Authority finds that the
claim of stock transfer of goods is not legally supportable, it would be open to
the Authority to arrive at such conclusion as is available in law. Thus, liberty
is granted to adjudicate the facts.
16. In the present case, Advance Ruling was given with
reference to the transaction within the State of Maharashtra with reference to
the Maharashtra Value Added Tax Act. Thus, the facts and circumstances
with reference to the Tamil Nadu Value Added Tax Act may be different,
which requires an elaborate adjudication by the Authorities Competent. Thus,
the respondents have not violated either the provisions of the Customs Act or
the findings of the Advance Ruling Authority and therefore, the writ petition
is liable to be rejected.
17. Considering the arguments as advanced on behalf of the
parties to the lis on hand, let us consider the scope of Section 28J of the
Customs Act, 1962, which reads as under:-
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“28J. Applicability of advance ruling.—
(1) The advance ruling pronounced by the
Authority under section 28-I shall be binding only
— (a) on the applicant who had sought it;
(b) in respect of any matter referred to in sub-
section (2) of Section 28H;
(c) on the Principal Commissioner of Customs or
Commissioner of Customs, and the customs
authorities subordinate to him, in respect of the
applicant.
(2) The advance ruling referred to in sub-
section (1) shall be binding as aforesaid unless
there is a change in law or facts on the basis of
which the advance ruling has been pronounced.”
18. Sub-section (1) denotes that the Advance Ruling pronounced
by the Authority under Section 28J shall be binding only with reference to
sub-clauses (a), (b) and (c). Therefore, the applicability of the Advance
Ruling cannot be expanded beyond the scope of Section 28J of the Customs
Act.
19. The contention that the Advance Ruling is applicable against
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all the Authorities all over the Nation, deserves no merit consideration.
However, the applicability and its binding nature are to be confined with
reference to the conditions stipulated under Section 28J of the Act.
Accordingly, the Advance Ruling is binding on the applicant, who had sought
it and in respect of any mater referred to in sub-section (2) of Section 28H.
Section 28H of the Act, speaks about the 'application for Advance Ruling'.
Therefore, it denotes that the issue raised in the application filed under
Section 28H of the Act and the decision rendered in respect of such issue
alone is binding. Sub-section (2) of Section 28H provides the question on
which the Advance Ruling is sought for shall be in respect of six sub-clauses
i.e., (a) to (f), which are extracted as under:-
“(2) The question on which the advance
ruling is sought shall be in respect of, —
(a) classification of goods under the Customs
Tariff Act, 1975 (51 of 1975);
(b) applicability of a notification issued
under sub-section (1) of section 25, having a
bearing on the rate of duty;
(c) the principles to be adopted for the
purposes of determination of value of the goods
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under the provisions of this Act.
(d) applicability of notifications issued in
respect of tax or duties under this Act or the
Customs Tariff Act, 1975 (51 of 1975) or any tax
or duty chargeable under any other law for the
time being in force in the same manner as duty of
customs leviable under this Act or the Customs
Tariff Act;
(e) determination of origin of the goods in
terms of the rules notified under the Customs
Tariff Act, 1975 (51 of 1975) and matters relating
thereto.
(f) any other matter as the Central
Government may, by notification, specify.”
Thus, application may be submitted for Advance Ruling under Section 28H of
the Act and the question on which the Advance Ruling is sought for shall be
in respect of sub-clauses contemplated under (a) to (f) alone.
20. Coming back to Section 28J of the Act, the binding nature is
to be confined only in respect of any matter referred to in sub-section (2) of
Section 28H. Thus, matters discussed and findings offered beyond the scope
of sub-section (2) of Section 28H by the Advance Ruling Authority are not
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binding. Those findings are also not falling within the ambit of Section 28J, so
as to form an opinion regarding the binding nature. Thirdly, sub-clause (c) to
sub-section (1) of Section 28J contemplates the Advance Ruling shall be
binding on the Principal Commissioner of Customs or Commissioner of
Customs and the Customs Authorities subordinate to him, in respect of the
applicant.
21. Therefore, the Advance Ruling and its applicability is
restricted on The Principal Commissioner of Customs or Commissioner of
Customs and the Customs Authorities subordinate to him, in respect of the
applicant. The word 'in respect of the applicant' could not be broadened, so as
to include the transactions of the applicant in various other States or Union
Territories or otherwise, wherein the Local Tax Laws are different and
distinct.
22. Even in cases, where principles of law is decided by the
Advance Ruling Authority, then such principles may have persuasive value
and cannot have binding authority, more specifically, with reference to
Section 28J of the Customs Act. In case the petitioner persuades the
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principles decided by the Advance Ruling Authority in respect of certain
transactions in other States and more specifically, with reference to the Local
Tax Law in force in that particular State, then the Authorities may consider
the same, however, cannot be construed as binding with reference to Section
28J of the Act. The Authorities Competent in such circumstances are bound
to apply the principles with reference to the facts and circumstances
established and independently. Thus, adjudication in such circumstances are
of paramount importance, more specifically, with reference to the facts and
circumstances as well as the Local Tax Law applicable to the particular State
or Union Territories, as the case may be.
23. As far as the case of the petitioner is concerned, it is
contended that the petitioner clears the goods to its units located in the
Domestic Tariff Area (DTA) as stock transfers for the purpose of trading as
well as carrying out certain manufacturing activities. The Notification dated
16.05.2005 unambiguously states that no exemption shall be applicable in
such goods when sold in Domestic Tariff Area (DTA), are exempted by the
State Government from payment of Sales Tax or Value Added Tax.
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24. As far as the Advance Ruling is concerned, the facts would
reveal that the Ruling was given based on the Maharashtra Government
Notification and the Maharashtra State Value Added Tax Act. The findings
would further reveal that the applicant proposes to clear the goods by way of
stock transfer to their own manufacturing unit located in Pune, Maharashtra
and pay the duties of Customs in terms of Section 30 of SEZ Act and
proposes to avail the benefit of exemption Notification No.45/2005 Customs
dated 16.05.2005 that exempts goods cleared from the SEZ to DTA from
payment of whole of the additional duty of Customs leviable under Section
3(5) of the Customs Tariff Act, 1975 subject to the fulfilment of conditions
mentioned in the proviso of the aforesaid Notification. Thus, stock transfer in
that particular case was within the State of Maharashtra with reference to the
exemption Notification No.45/2005 dated 16.05.2005.
25. The issue considered by the Advance Ruling Authority is
that “Whether the goods stock transferred by the applicant from the SEZ unit
to its DTA unit would be eligible for exemption from the payment of SAD
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under Notification No.45/2005 Customs dated 16.05.2005”.
26. No doubt, the said Notification is relied on by the petitioner
in this writ petition also. However, the stock transfer made with reference to
the Maharashtra Value Added Tax Act, is also to be taken note of. With
reference to the said issue, the Advance Ruling Authority made a finding that
when such goods are sold in Domestic Tariff Area (DTA), are exempted by
the State Government from payment of Sales Tax or Value Added Tax. Such
an exemption is not available and this finding would be applicable with
reference to the State of Maharashtra under the Tax Law in force in the State
of Maharashtra. That was further clarified under Serials 82 and 103 of the
Schedule C of Maharashtra Value Added Tax Act (MAVT Act) the parts and
components of wind operated electricity generators are subject to tax @ 5%.
Therefore, it was considered as not a sale as defined under Section 2(24) of
the MAVT Act. Under these circumstances, the Advance Ruling Authority
formed an opinion clearly stating that “if during any proceeding initiated
under the MAVT Act, it is found that the claim of the applicant is not
factually supportable, the Revenue Authority can decide that issue in
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accordance with law”.
27. It is therefore made clear that the present Advance Ruling
relied on being rendered by treating the transaction on the factual scenario as
projected by the applicant and not on analysis of the factual position. It is
significant to note that Section 6(A) of the Central Sales Tax Act deals with
the burden of proof etc., in case of transfer of goods claimed otherwise than
by way of sale. To put it differently, Section 6A of the Central Sales Tax Act,
mandates that stock transfer of goods is not covered within the definition of
'sale' and as such Central Sales Tax is not levied on stock transfer of goods.
28. A close reading of the above finding would clarify that the
Revenue authority can decide the issue in accordance with law and the Ruling
itself is confined by treating the transaction on the factual scenario as
projected by the applicant and not on analysis of the factual position. Thus,
the Advance Ruling Authority themselves confined the scope of the Advance
Ruling, so as to avoid any undue usage in respect of other transactions made
by the applicant. When such a clarification is rendered in unequivocal terms,
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it is necessary that a factual adjudication is warranted.
29. The final decision of the Advance Ruling Authority would
also clarify that the answer to the question formulated by the applicant on the
facts as projected by the applicant is in the affirmative. However, as noted
supra, if at the time of adjudication, the Adjudicating Authority finds that the
claim of stock transfer of goods is not legally supportable, it would be open to
the Authority to arrive at such conclusion as is available in law. The
application of Advance Ruling Authority itself is narrowed down with
reference to the transaction established before the Advance Ruling Authority
and undoubtedly, not intended for its application in respect of the other
Customs Authorities or in respect of different business/sale transactions.
30. The binding nature is to be decided with reference to the
nature of decisions by the Advance Ruling Authority. It is not as if that every
finding of the Advance Ruling Authority is binding on all the Authorities
across the country. The application of mind by the Competent Authority is the
scope under the Customs Act in each and every case and the binding nature is
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undoubtedly confined in certain circumstances and more specifically, based
on the nature of the decision rendered by the Advance Ruling Authority.
When the Advance Ruling Authority themselves clarified that the decision is
given to the answer to the question formulated by the applicant on the facts as
projected by the applicant and further, it is clarified that it would be open to
the party to arrive such a conclusion at the time of adjudication, there is no
ambiguity in respect of the decision as such Advance Ruling cannot have any
binding nature under Section 28J of the Customs Act, as far as the case of the
petitioner is concerned.
31. As far as the circular impugned is concerned, the issue raised
before the Department of Revenue, Ministry of Finance was that whether the
benefit of exemption from SAD (Special Additional Duty) under this
Notification would be available when a DTA unit imports goods and routes it
through SEZ/FTWZ for self-consumption i.e., in the nature of stock transfer
from SEZ/FTWZ. It was clarified that the benefit of SAD exemption on
goods cleared from the SEZ/FTWZ unit into DTA unit on stock transfer basis
for self-consumption i.e., otherwise than for sale as such, is not available
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under Notification No.45/2005-Customs dated 16.05.2005. In such cases,
SAD would be leviable. The said circular cannot be construed as
contravening the Notification No.45/2005, as the said Notification dated
16.05.2005 clarifies that no such exemption shall be applicable in such goods
when sold in Domestic Tariff Area (DTA), are exempted by the State
Government from payment of Sales Tax or Value Added Tax. The
clarification is issued based on the Notification in order to form an opinion
that Notification cannot be blindfoldedly applicable in all cases wherein the
benefit of SAD exemption on goods cleared from the SEZ/FTWZ unit into
DTA unit on stock transfer basis for self-consumption i.e., otherwise than for
sale as such, is not available under Notification No.45/2005-Customs dated
16.05.2005. Therefore, one cannot arrive a conclusion that the clarification is
running counter to the Notification. However, application of Notification
requires an adjudication of facts and on such adjudication if the applicant is
entitled for exemption or not, is to be decided based on the Notification and
on connected provisions.
32. As rightly pointed out by the learned Senior Panel Counsel
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for the respondents, the order impugned dated 03.02.2014 is issued based on
the complaint given by the petitioner vide letter dated 31.01.2014 regarding
denial of exemption from payment of additional duty of customs (SAD)
leviable under Section 3(5) of the Customs Tariff Act, 1975. However, the
issues are yet to be adjudicated as during the pendency of the writ petition
also, the petitioner filed other Bill of Entries, which all are pending for
adjudication. Thus, the Authorities Competent are bound to consider the
disputed facts between the parties and take a decision on merits and in
accordance with law by following the procedures as contemplated.
33. However, with reference to the challenge made in the writ
petition, this Court do not find any infirmity, as such, in respect of the circular
dated 30.12.2013 and the order passed, which is impugned. Thus, the
Competent Authority is bound to conduct adjudication by following the
procedures as contemplated and in accordance with law. It is made clear that
the bonds furnished by the petitioner are subject to the final orders to be
passed by the Authorities Competent.
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34. With the above observations, the writ petition stands
disposed of. However, there shall be no order as to costs.
07-09-2021
Index : Yes/No.
Internet : Yes/No.
Speaking Order/Non-Speaking Order.
Svn
To
1.The Secretary,
Union of India,
Ministry of Finance,
Department of Revenue,
North Block,
New Delhi – 110 001.
2.The Chairman,
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Central Board of Excise and Customs,
Department of Revenue,
Ministry of Finance,
North Block,
New Delhi – 110 001.
3.Commissioner of Customs and Central Excise,
M.H.U. Complex,
692, Anna Salai,
Nandanam,
Chennai-600 035.
S.M.SUBRAMANIAM, J.
Svn
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07-09-2021
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