Delhi HC Allows Import of Goods without payment of IGST to the extent of Advance Authorization obtained before GST Rollout [Read Order]

In a significant ruling, Justices S Muralidhar and Prathba M Singh has granted an interim relief to the petitioners to import goods without payment of Integrated Goods and Services Tax (IGST) to the extent of advance authorization scrip obtained by them prior to July 1^st.

The order would be a major relief to the exporters who are under a threat of losing working capital on a daily basis due to the payment of IGST post implementation of the Goods and Services Tax (GST).

The petitioner, in the instant case was granted with Advance Authorization as per the Foreign Trade Policy 2015 – 2020.

In terms with the FTP, the Advance Authorization licence is issued to a manufacturer exporter or merchant exporter having past export performance in at least two preceding financial years.

The petitioners were aggrieved with the Notification No. 26/2017-Customs dated 29th June 2017, issued by the Government post GST regime, wherein an additional levy of IGST was made for imports made after 1 st July 2017.

The grievance of the Petitioner is that it holds export orders placed on it prior to 1st July 2017 for the fulfilment of which it has to undertake imports of inputs. According to them, with the change brought about by the GST regime, the Petitioner would have no option but to pay IGST out of its sources causing a working capital blockage. The Petitioner would have to rely upon borrowings as it has already exhausted its overdraft limits with the banks. The prospect of the IGST being ultimately refunded some time in future is of little consolation to the Petitioner who seeks liquidity to discharge the additional levy of IGST failing which its imports will get blocked.

It is in this factual background, the petitioners impugned the the applicability of levy of IGST even to imports that are made for fulfilment of export orders that have been placed on and accepted by the Petitioner prior to 1st July, 2017. Also, the Petitioner is seeking to only avail the credit outstanding in respect of advance authorizations issued to the Petitioner prior to 1st July 2017.

The Court, being satisfied that there is prima facie case in the petitioners case, directed the Government to allow the Petitioner to continue making the imports under the Advance Authorization licenses issued prior to 1st July, 2017in terms of their quantity and value subject to terms.

Accordingly, it made the following directions.

• The Petitioner will be permitted to clear the consignments of imports constituting inputs for the fulfilment of its export orders placed on it prior to 1st July 2017 without any additional levies, and subject to the quantity and value as specified in the advance authorization licenses issued to it prior to 1st July 2017.
• The above clearance would be subject to (a) verification by the Customs Department that it is in conformity with the quantity and value as mentioned in the Advance Authorization license and (b) ensuring that the extent of credit is available vis-a-vis such Advance Authorization licenses issued prior to 1st July 2017.
• The above interim direction is further subject to the Petitioner furnishing an undertaking by way of an affidavit filed in this Court within one week from today to the effect that in the case of the Petitioner ultimately not succeeding in this writ petition, or failing to fulfil its export obligations, it is liable to pay the entire IGST as was leviable, together with whatever interest as the Court may determine at the time of final disposal of the writ petition.
• The Petitioner will furnish to the Customs Department the entire list of its Advance Authorizations that are valid as on 1st July 2017 and a list of the export orders placed on the Petitioner prior to 1st July 2017.
• It is made clear that the above interim direction will only apply to those imports which are made by the Petitioner for fulfilment of its export orders placed with it prior to 1st July 2017 and not to any export order thereafter.

Advocates Abhishek Rastogi and Rashmi Deshpande from Khaitan & Co appeared for the petitioners.

Read the full text of the Order below.