Exempt basic customs duty cannot be notionally added to the value for IGST computation.

In brief

The question

Whether BCD exempted under Notification No. 19/2015-Customs could nevertheless be added at the tariff rate to the value for calculating IGST on the imported goods

The court held

The Tribunal held that the exempted BCD could not be included at the tariff rate when computing IGST.

It also directed

It set aside the Commissioner (Appeals)’s order and allowed TGI International’s appeals.

01Facts

TGI International filed 105 Bills of Entry for importing polyester-viscose fabrics under valid Duty Free Import Authorisations (DFIAs), claiming full exemption from Basic Customs Duty (BCD) under Notification No. 19/2015-Customs dated 1 April 2015.

p. 2 · ¶ 1.2–1.5

Although the claimed BCD was nil, the customs EDI system included BCD at the tariff rate when calculating the IGST base, and TGI paid the resulting IGST.

p. 2 · ¶ 1.2–1.5

The Commissioner (Appeals) rejected TGI’s appeals against the assessments.

p. 2 · ¶ 1.2–1.5

TGI appealed to the Tribunal.

p. 2 · ¶ 1.2–1.5

02Issues

i.Whether BCD exempted under Notification No. 19/2015-Customs could nevertheless be added at the tariff rate to the value for calculating IGST on the imported goods

pp. 4–6 · ¶ 5–7

ii.Whether the Commissioner (Appeals) was correct in finding that the BCD had been debited against the DFIA authorisations

p. 5 · ¶ 6

03Law Applied

Section 3(7) of the Customs Tariff Act, 1975 provides for IGST on imported goods, while Section 3(8) requires the IGST value to include the value determined under Section 14 of that Act and any customs duty “chargeable” on the goods under Section 12 of the Customs Act, 1962.

p. 4 · ¶ 5

Sections 12 and 25 of the Customs Act establish the customs-duty levy and the Central Government’s power to exempt goods from that duty, including by notification.

p. 5 · ¶ 7

Accordingly, where an exemption applies, only the duty chargeable after giving effect to that exemption—not the unadjusted tariff-rate duty—is added to the IGST value.

p. 5 · ¶ 7

The Tribunal relied on Morarjee Brembana Ltd. v. Commissioner of C. Ex., Nagpur, 2003 (154) E.L.T. 500 (Tri.-Mumbai), and Parasrampuria International v. Commissioner of C. Ex., Indore, 2004 (173) E.L.T. 142 (Tri.-Del.), which support adding only the effective customs duty.

pp. 6–7 · ¶ 8.1–8.2

Provisions in the judgment · 6 · Linked ones open on LawLens

Customs Act,1962 Section 12 Section 14 Section 25 Section 128

Customs Tariff Act, 1975 Section 3

Integrated Goods and Services Tax Act, 2017 Section 5

04Reasoning

The Tribunal found that the appellant had satisfied the conditions for the DFIA exemption and that the BCD payable under the authorisations was nil.

p. 5 · ¶ 6

The Bills of Entry recorded “zero” in the duty-debit column; the authorisations reflected the permitted value and quantity, not a debit of duty.

p. 5 · ¶ 6

The Commissioner (Appeals)’s contrary finding was therefore unsupported by the record.

p. 5 · ¶ 6

Because the applicable exemption reduced the BCD chargeable on the goods to nil, the tariff-rate amount could not be notionally added to the IGST value.

p. 7 · ¶ 8.3

The Tribunal distinguished Poddar Pigments Ltd., relied on by the Revenue, because that case concerned interest on delayed IGST payment, not the BCD component of the IGST value.

p. 7 · ¶ 8.3