M/s. Vasu Clothing Private Limited Versus The Union of India and Others
GST
2018 (12) TMI 1352 – MADHYA PRADESH HIGH COURT – [2019] 61 G S.T.R. 144 (MP), 2019 (22) G. S. T. L. 163 (M. P.)
MADHYA PRADESH HIGH COURT – HC
Dated:- 17-12-2018
Writ Petition No. 17999/2018
GST
Shri Justice S.C. Sharma And Shri Justice Virender Singh
For the Petitioner : Shri Vikram Nankani, learned Senior Counsel with Shri Raktim Gogoi, Shri Alok Barthwal, Shri Kartikeya Singh and Shri Varun Saluja, learned counsel
For the Respondents : Shri Prasanna Prasad, learned counsel
ORDER
The petitioner before this Court is a Private Limited Company incorporated under the Companies Act, 1956 having its registered office at 75, Readymade Complex, Industrial Area, Pardeshipura, Indore has filed this present petition seeking indulgence of this Court for grant of relief from payment of goods and service tax by way of exemption and on the goods and service supply to the Duty Free Shops (DFSs) at t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
Free Operator as an “importer”. The imported goods are warehoused at a bonded warehouse (customs warehouse) and the bill of entry also discloses that the goods imported are for “sale only for Duty Free Shop / Export”.
04-It has been further stated that the Duty Free Operator also takes on rent a private bonded warehouse located near the airport as well as certain shops called “Duty Free Shops” at the arrival and departure terminals of international airports in India. The goods are sold to international passengers without payment of duties and taxes. It has been further contended that the Duty Free Operator is granted special warehouse license under Section 58-A of the Customs Act, 1962 for depositing notified class of goods and such warehouse are kept locked by the proper officer and no entry of any person or removal of goods therefrom are allowed without the permission of the proper officer.
05-It has been further stated that Duty Free Operators transfers the goods from customs war
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
the warehouse for home consumption (under Section 68) or for export (under Section 69) or for removal to another warehouse or otherwise provided under the Act.
07-The petitioner's contention is that the goods are sold to international passengers at the departure terminal Duty Free Shops and the operator has cleared the goods only for export under Section 69 of the Act. It has been further contended that duty free purchases made from Duty Free Shops at international airports in India are generally paid for in approved currency including foreign currency and this uniqueness brings in valuable foreign currency reserves into the country and there is a significant growth in such sale.
08-The petitioner has further stated that prior to implementation of GST legislation, the duty free operations in India were exempted from payment of Customs Duty, Countervailing Duty (CVD), Special Additional Customs Duty (SACD), Excise Duty, VAT / Sales Tax, OCTROI, etc. The petitioner's contentio
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
arrival halls of international airports and to passengers going out of India at the Duty Free Shops located in the departure halls of international airport in the country.
10-It has been further stated that Central Board of Excise and Customs issued a notification on 23/05/2013 granting exemption in respect of payment of taxes subject to certain terms and conditions in respect of certain goods. It has also been brought to the notice of this Court that earlier also notification dated 19/05/1989 has been issued and there were exemptions available to specified goods falling under Chapter 85, when removed for sale from Duty Free Shops at customs airports and since the notification by Government of India was to extend the benefit on all goods, the Central Board of Excise and Customs issued a notification on 23/05/2013 and rescinded the earlier notification.
11-The petitioner has also referred to various other notifications issued from time to time by Central Board of Excise and Customs (C
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
is appointed or licensed under the provisions of Sections 57 or 58 of the Customs Act, such godown or retail outlet shall be deemed to be registered as warehouse under Rule 9 of the Central Excise Rules, 2002. By the CBEC circular No.970/04/2013-CX, dated 23/05/2013 the procedure governing the movement of excisable indigenous goods to the Warehouses or retail outlets of Duty Free Shops was laid down.
13-The petitioner has further stated that in the year 2017 the Central Goods and Services Tax Act, 2017 (CGST) and the Integrated Goods and Services Tax Act, 2017 (IGST) were enacted.
The petitioner in the month of June, 2018 keeping in view the notifications issued from time to time by the Central Board of Excise and Customs contacted one of the Duty Free Operators namely “Flemingo Travel Retail Limited”, which operates Duty Free Shops at Delhi and Mumbai International Airport and requested that the petitioner being one of the premier exporters of garments in India would like to retail
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
at an Indian Duty Free Shop without payment of duties and taxes. The petitioner has prayed for following relief:-
“(i)Issue a writ of Mandamus or any other appropriate Writ, Order or Direction in the nature of Mandamus, ordering and directing any supply of goods and services made by an Indian supplier to the duty free shops in India to be treated as an export without payment of CGST and IGST, since, the duty free shops at international airports in India are located beyond the customs frontier of India and any transaction that takes place in a duty free shop is said to have taken place outside India.
(ii)Issue a writ of Mandamus or any other appropriate Writ, Order or Direction in the nature of Mandamus, ordering and directing supply of goods and services made by an Indian supplier to the duty free shops in India to be without payment of CGST and IGST, since, transaction undertaken at duty free shop is treated as an export of goods or services.
(iii)Issue a writ of Mandamus or any
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
at sale from Duty Free Shops in the past has helped to maximize non-aeronautical revenues at airports, which ultimately bring down aeronautical tariffs for the passengers and ultimately the Government of India is the biggest gainer as it has and will receive significantly large funds from the supplies made from Duty Free Shops at international airport in India as revenue share. The revenue so generated can be utilized by the Government of India to provide air connectivity to far flung corners of the country where private investment may not be forthcoming due to long gestation periods.
18-It has been stated that on account of enactment of GST, the benefits of earlier circulars / notifications is not available and therefore, an appropriate writ, order or direction be issued granting exemption from payment of CGST / IGST / SGST. It has also been stated that various global brands from all over the world can be sold in Indian Duty Free Shops without payment of any taxes and duties and the
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
arned counsel for the petitioner has placed reliance upon judgments delivered in the case of reported in , reported in , reported in , passed by apex Court in Special Leave to Appeal (Civil) No.2436/2010 decided on 12/03/2010, passed by Bombay High Court in Writ Petition No.2578/2009 decided on 17/03/2010, reported in , reported in and passed by Bombay High Court in Writ Petition No.8034/2018 on 28/11/2018.
21-A detailed and exhaustive reply has been filed on behalf of the revenue and the respondents have vehemently opposed the reliefs prayed by the petitioner.
The contention of learned counsel for the respondent is that present petition has been filed seeking issuance of a writ to enact a subordinate legislation of a particular nature and a prayer has been made for issuance of a writ, order or direction directing the supply of goods and services to Duty Free Shops in India to be treated as an export without payment of CGST and IGST.
22-It has been argued that keeping in view the ca
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
claim of the petitioner deserve to be dismissed.
24-The respondents have also stated that a similar issue was examined by the Authority on Advance Ruling and the same was analyzed in back drop of the judgment passed by the Hon'ble Supreme Court in the case of (Supra) and the respondents have quoted the relevant portion of the Rule and their contention is that by no stretch of imagination the petitioner can be exempted from payment of CGST / IGST / SGST.
25-The respondents have argued before this Court that so far as point of sale is concerned the case goods are being manufactured at Indore, price of the goods is being received at Indore and they are being dispatched to Duty Free Shops, which is certainly within the territory of India and the person, who is purchasing the goods from the Duty Free Shop is the exporter or the person, who has purchased the goods, meaning thereby, the Duty Free Shop is an exporter and not the petitioner.
26-It has also been argued that exemptions ca
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
h exemption as prayed by the petitioner.
28-It has been further contended by the respondents that the judgment of the Hon'ble Supreme Court in the case of (Civil Appeal No.2560/2010) reported in was delivered under the erstwhile VAT regime wherein the authority of State to levy VAT on sale of goods taking place at DFS located at international airports was challenged. Sales Tax / VAT Acts of various States have been subsequently subsumed under the GST Law. Also, the present petition does not relate to levy of VAT on sale of goods. Instead, it challenges the discontinuation of exemption that existed under erstwhile Central Excise regime wherein the supply of domestically manufactured goods to DFS was exempted from the payment of Central Excise Duty vide notification No.19/2013-CE (Non-Tariff). However, exemption from payment of GST for such supplies has not been provided under the current GST regime.
29-Learned counsel for the respondent submits that according to sub-section (5) of
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ply to a DFS by an Indian supplier is not to 'a place outside India', therefore, such supplies do not qualify as 'Export of Goods' under GST. Consequently, such supplies cannot be made without payment of duty by furnishing a Bond / Letter or Undertaking (LUT) under Rule 96-A of the CST Rules, 2017. Also, he cannot claim refund of unutilized Input Tax Credit (ITC) under Section 54 of the CGST Act, 2017.
30-It has been argued by learned counsel that in alternative and without prejudice to whatever has been stated above, under the GST law, the power to grant exemption to such supplies or to clarify such issues is vested with the GST Council (a constitutional body constituted under Article 279-A of the Constitution of India) which comprises of the Union Finance Minister and the Finance Minister of all the States and it is not within the domain of this Court to issue such exemption notifications.
31-The respondents have placed reliance upon the judgments delivered in the c
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
al excise duty (entry 84 of Union List), and service tax (entry 97 of Union List). Although entry 92C was inserted in the Union List of the Seventh Schedule of the Constitution by the Constitution (Eighty-eighth Amendment) Act, 2003 for levy of taxes on services, it was not notified. So tax on services were continued to be levied under the residual entry, i.e. entry 97, of the Union List till GST came into force. The Union also levied tax called Central Sales Tax (CST) on inter-State sale and purchase of goods and on inter-State consignments of goods by virtue of entry 92A and 92B respectively. CST however is assigned to the State of origin, as per Central Sales Tax Act, 1956 made under Article 269 of the Constitution.
35-On the State side, the most important sources of tax revenue were tax on sale and purchase (entry 54 of the State List), excise duty on alcoholic liquors, opium and narcotics (entry 51 of the State List), Taxes on luxuries, entertainments, amusements, betting and gam
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
well as the States and for the purpose of introducing goods and services tax, amendment of the Constitution conferring simultaneous power on Parliament as well as the State Legislatures to make laws for levying goods and services tax on every transaction of supply of goods or services was necessary.
37-The Constitution (115th Amendment) Bill, 2011, in relation to the introduction of GST, was introduced in the Lok Sabha on 11/03/2011. The Bill was referred to the Standing Committee on Finance on 29/03/2011. The Standing Committee submitted its report on the Bill in August, 2013. However, the Bill, which was Lok Sabha. pending in the Lok Sabha, lapsed with the dissolution of the 15th
38-The Constitution (122nd Amendment) Bill, 2014 was introduced in the 16th Lok Sabha on 19th December, 2014. The Constitution Amendment Bill was passed by the Lok Sabha in May, 2015. The Bill was referred to the Select Committee of Rajya Sabha on 12/05/2015. The Select Committee submitted its Report on t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
the course of inter-State trade or commerce which shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. It also provides that Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.
d)Article 270 has been amended to provide for distribution of goods and services tax collected by the Union between the Union and the States.
e)Article 271 has been amended which restricts power of the Parliament to levy surcharge under GST. In effect, surcharge cannot be imposed on goods and services which are subject to tax under Article 246-A.
f)Article 279-A has been inserted to provide for the constitution and mandate of GST Council.
g)Article 366 has been amended to excl
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
at these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council.
40-After the constitutional amendment, the Central Government introduced The Central Goods and Services Tax Act, 2017, The Integrated Goods and Services Tax Act, 2017, The Union Territory Goods and Services Tax, 2017, The Goods and Services Tax (Compensation to States) Act, 2017 in Lok Sabha on 27/03/2017. After a long discussion in Parliament, the Lok Sabha has passed these bills on 29/03/2017, while Rajya Sabha passed them on 06/04/2017. The President of India assented them on 12/04/2017 and the law enacted are known as CGST Act, 2017 (12 of 2017), the Integrated GST Act, 2017 (13 of 2017), the Union Territory GST Act, 2017 (14 of 2017) and the GST (Compensation to States) Act, 2017 (15 of 2017).
41-The petitioner before this Court has made a prayer for directing the respondents to treat the goods supplied to the petitioner as a
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
to be implied. One can only look fairly at the language used (Principles of Statutory Interpretation by Justice G.P. Singh, Tenth Edition, General Principles of Strict Construction).
44-The Hon'ble Supreme Court has enunciated in similar words the principle of interpretation of taxing laws as under:-
“Bhagwati, J. stated the principles as follows : “In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter” [A. V. Fernandez Vs. State of Kerala, AIR 1957 SC 657, p. 661].
Shah, J., has formulated the princi
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
h Tax, Gujarat Vs. Ellis Bridge Gymkhana, AIR 1998 SC 120, pp. 125, 126].
The statute governing the field does not provide any such exemption as prayed by the petitioner.
45-The relevant statutory provisions, which are necessary for adjudicating the present controversy reads as under:-
“Article 269(1) and Article 286(1) of the Constitution of India:-
(i)Article 269(1) before amendment on 08/09/2016 : Taxes on the sale or purchase of goods and taxes on the consignment of goods shall be levied and collected by the Government of India but shall be assigned and shall be deemed to have been assigned to the States on or after the 1st day of April, 1996 in the manner provided in clause (2).
Explanation.-For the purposes of this clause,-
(a)the expression “taxes on the sale or purchase of goods” shall mean taxes on sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce;
(b)the expression “taxes on the
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
cted by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
(2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.
(3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.
(4) The provisions of sub-section (3) shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
oms Act, 1962 (52 of 1962).
Sections 2(4), 2(5), 2(23) and 16(1) of the Integrated Goods and Services Tax Act, 2017:-
2(4).”customs frontiers of India” means the limits of a customs area as defined in section 2 of the Customs Act, 1962 (52 of 1962);
2(5).”export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;
2(23).”zero-rated supply” shall have the meaning assigned to it in section 16;
16(1).”zero rated supply” means any of the following supplies of goods or services or both, namely:
(a)export of goods or services or both; or
(b)supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
Section 2(56) of the Central Goods and Services Tax Act, 2017:-
2(56).”India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic z
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
over, such waters.
(2)The limit of the territorial waters is the line every point of which is at a distance of twelve nautical miles from the nearest point of the appropriate baseline.
(3)Notwithstanding anything contained in sub-section (2), the Central Government may, whenever it considers necessary so to do having regard to International Law and State practice, alter, by notification in the Official Gazette, the limit of the territorial waters.”
46-Undisputedly, the petitioner is supplying goods to Duty Free Shops and as per Section 2(5) of IGST Act, 2017 export of goods takes place only when goods are taken out to a place outside India. India is defined under Section 2(27) of Customs Act,1962 as “India includes territorial waters of India”. Similarly under the CGST Act, 2017 under Section 2(56) “India” means the territory of India including its territorial waters and the air-space above its territory and territorial waters and therefore, the goods can be said to be exported o
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ritime Zones Act, 1976, and the air-space above its territory and territorial waters and therefore, the export of goods can be treated and it is complete only when the goods crosses air space limits or its territory or territorial waters of India.
49-Undisputedly, in light of the definition as contained under the IGST Act, 2017 a Duty Free Shop situated at the airport cannot be treated as territory out of India. The petitioner is not exporting the goods out of India. He is selling to a supplier, who is within India and the point of sale is also at Indore as the petitioner is receiving price of goods at Indore.
50-The petitioner is a manufacturer and exporter of garments in India and specializes in manufacturing of high quality products for children with customer base in Middle East, South Africa and USA. He intends to supply goods to Duty Free Shops (DFSs) situated in the duty free area at international airports. The petitioner is aggrieved by the fact that the benefit available to h
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ment to grant or to continue to grant a concession except to enjoy benefits of concession during the period of its grant. The apex Court in paragraph No.10 and 11 of the aforesaid judgment has held as under:-
“10. The question referred to this bench, as noticed, is whether the State would be estopped from altering/modifying the benefit of concessional tariff by means of the impugned G.O No. 861 dated 30.4.1982 on the principle of promissory estoppel. In fact, insofar as the caustic soda unit of M/s. Kothari Industrial Corporation Ltd., subsequently taken over by Southern Petro Chemical Industrial Corporation Ltd., is concerned, strictly speaking, the above question would not even arise inasmuch as at the time when the unit was set up and had started commercial production, the Act had not yet come into force. The promise, if any, was made by the letter dated 29.6.1976 on the terms noticed above, namely, the tariff payable by the industry was to be at a rate less than what was applicab
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rs cannot raise plea of estoppel against the Notification dated 7.8.2000 reducing hill development rebate to 0% as there can be no estoppel against the statute.”
In light of the aforesaid judgment, the concessions / exemptions granted earlier during the pre-GST regime cannot be claimed as a matter of right.
53-In addition, the petitioner in paragraph 7(i) of the petition has prayed this Court to issue a writ of mandamus ordering and directing that any supply of goods and services made by and Indian supplier to the DFSs in India to be treated as export since the DFS are located beyond the customs frontier of India and any transaction that takes place in a DFS is said to have taken place outside India. Further, in para 7(ii) of the petitioner it has been prayed to allow supply of goods and services by an Indian supplier to the DFS without payment of GST as the transaction undertaken at DFS is treated as an export of goods or services.
54-As per Section 2(5) of the Integrated Goods an
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
s the supply to a DFS by an Indian supplier is not to 'a place outside India', therefore, such supplies do not qualify as 'export of goods' under GST. Consequently, such supplies cannot be made without payment of duty by furnishing a bond/letter of undertaking (LUT) under rule 96-A of the CGST Rules, 2017. Also, he cannot claim refund of unutilized input tax credit (ITC) under Section 54 of the CGST Act, 2017.
55-In light of the above, the petitioner is liable to pay GST on supply of indigenous goods to DFS. Whether, transaction under taken at a DFS (i.e. sale of goods to outgoing passengers) are to be treated as export of goods or services does not form part of the instant writ petition.
56-The judgment relied upon by the learned counsel in the case of (Supra) is not at all applicable in the peculiar facts and circumstances of the case. The Duty Free Shop is situated within India and it is not at all situated outside of India / beyond air-space or territorial waters
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
226 from the purview of the Section. Even then general principles of respondent judicata are applicable to such proceedings also though S. 11 as such is not applicable. Though a decision to inter parties may not be respondent judicata even under general principles which do not take in the rigour of S. 11, the law laid down by the High Court is binding on it. Decisions may be on questions of facts, questions of law or on mixed question of fact and law. If a decision on facts is rendered by applying the relevant provisions of law to the facts the binding nature of the decision on that point will come to an end when the law is changed subsequently. That is because the law as then stood alone was interpreted in relation to the facts. When the law is changed the cause of action itself is changed. Though the former decision which has become final may continue to bind the parties thereto, when the law is changed and thus the cause of action became different, the new law will have to be applie
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
esaid judgment, as no such exemption is available to the petitioner in light of the GST Act, 2017, the judgment relied upon by the petitioner is of no help and the petitioner cannot escape from the liability of payment of GST.
59-Reliance has also been placed in the case of reported in . Paragraph No.21 of the aforesaid judgment reads as under:-
“21. For resolving such inter se conflicts, one other test may also be applied through the persuasive force of such a test is but one of the factors which combine to give a fair meaning to the language of the law. That test is that the later enactment must prevail over the earlier one. Section 14A and Chapter IIIA having been enacted with effect from December 1, 1975 are later enactments in reference to Section 19 of the Slum Clearance Act which, in its present form, was placed on the statute book with effect from February 28, 1965 and in reference to Section 39 of the same Act, which came into force in 1956 when the Act itself was passed. T
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
cal crystalliser. The only argument on behalf a Narne Tulaman Manufacturers Pvt. Ltd. was that it was liable to excise duty in respect of the indicating system that it manufactured and not the whole weighbridge. The contention that weighbridges were not 'good' within the meaning of the Act was not raised and no evidence in that behalf was brought on record. We cannot assume that weighbridges sand on the same footing as mono vertical crystallisers in that regard and told that because weighbridges were held to be exigible to excise duty so must mono vertical crystalliser. A decision cannot be relied upon in support of a proposition that it did not decide.”
In light of the aforesaid judgment, the issue involved in the present case has not been decided in the case of M/s. Hotel Ashoka (Supra) as it was not a case of supplier supplying goods to a Duty Free Operator.
61-Similarly the judgment delivered by the Bombay High Court in the case of (Supra) does not deal with the subject i
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =