Cus - Export duty - Raw sugar imported against advance authorization on condition of re-export had no impact on domestic sugar price - reintroduction of exemption is to be viewed as clarificatory or curative in nature: HC
By TIOL News Service
AHMEDABAD, NOV 08, 2017: PETITIONERS have established a refinery in Kutch district and are engaged in the business of manufacturing, marketing and selling white refined sugar and its byproducts. The petitioners import raw sugar against advance authorization without payment of duty on the condition that refined sugar would be re-exported within stipulated time.
The issue involved is of collection of export duty on the petitioners' re-export of such imported raw sugar during the period between 16.06.2016 and 05.07.2016.
The Petitioners have prayed for a declaration that no export duty was recoverable on the petitioners' export of sugar against valid advance authorization during the impugned period.
The background:
+ With effect from 01.03.2011 raw sugar, white sugar or refined sugar were placed in the Second Schedule of the Customs Tariff Act at Sr. No.9A inviting 20% of export duty. The Government of India had issued an exemption notification dated 01.03.2011 exempting various products from payment of export duty. Raw sugar, white or refined sugar did not find place in this exemption notification. However, the Government of India issued a later notification dated 01.03.2013 amending the said exemption notification dated 01.03.2011 by virtue of which raw sugar, white or refined sugar were added in the exemption notification inviting nil duty. Thus, from 01.03.2013 export duty on raw sugar, white sugar or refined sugar was fully exempt.
+ It appears that in the months of May and June, 2016, due to shortage in the domestic market, local sugar prices were surging. To control the local sugar prices therefore, the Government of India decided to withdraw the exemption of duty on export of sugar.
+ These reasons culminated into the Government of India issuing a notification dated 16.06.2016 by which, the entry at Sr. No.9A pertaining to raw sugar or white or refined sugar in the exemption notification dated 01.03.2011 came to be omitted. Effect of this notification dated 16.06.2016, therefore, was that export of sugar would now invite duty at the prescribed rate with no exemption.
+ The petitioner and other similarly situated re-exporters of sugar were aggrieved by this decision of the Government of India. Their contention was that the withdrawal of exemption from payment of duty on export of sugar was aimed at controlling the price of sugar in domestic market which had nothing to do with re-export of sugar after its import and value addition. The petitioners, therefore, made representations to the Government of India.
+ These representations, apparently, yielded a positive result when the Government of India issued a notification dated 06.07.2016 adding entry 63 in the exemption notification dated 01.03.2011 exempting sugar exported against a valid advance authorization from payment of entire export duty, of course, with certain conditions.
Interregnum:
+ The interregnum period between 16.06.2016 and 05.07.2016 is what concerns the petitioners.
+ The competent authority issued a SCN dated 27.12.2016 alleging as to why the export duty of Rs.4.21 crores not be confirmed with interest and penalty.
At this stage, the petitioners have filed the present petition.
Main contention of the petitioners is that withdrawal of the exemption on export of sugar by notification dated 01.03.2013 had a specific purpose viz. of controlling the domestic price. It has nothing to do with export of sugar imported against advance authorization. The error was pointed out by the petitioners to the Government which promptly issued a fresh exemption notification covering such exports . However, the shortgap of time between the two notifications was left uncovered. This, according to the petitioners, was a pure oversight and the exemption notification dated 06.07.2016 should, therefore, be treated as clarificatory or curative in nature.
The counsel for the Revenue emphasised that the notifications have to be read as they stand; that for the period between 16.06.2016 to 06.07.2016, there was no exemption from payment of duty on export of sugar for any purpose.
The High Court considered the submissions and inter alia observed -
"15. The crux of the issue is that the Government of India withdrew the exemption from payment of duty on export of sugar with the objective of controlling the domestic sugar prices. This had nothing to do with the exporters such as the petitioners. Raw sugar imported against advance authorization on the condition of reexport had no impact on domestic sugar price. Impounding export duty on such exports would not serve the purpose of controlling local sugar prices. Apparently since inadvertently the withdrawal of exemption also hit the exports of sugar against advance authorization, the Government of India on the representations made by the trade, quickly reintroduced the exemption limited to such class. Very clearly thus, the Government of India was correcting an inadvertent error or an unintentional withdrawal of the exemption. If that be so, the exemption notification dated 06.07.2016 must be viewed as clarificatory or curative in nature. Any other view would leave the said class of exporters uncovered for a period of about three weeks allowing the department to levy the export duty which is a wholly unintended consequence of the Government of India policy."
Mentioning that the above opinion has been formed on the basis of precedence of the Supreme Court and the High Court in W.P.I.L. Ltd. = 2005-TIOL-51-SC-CX-LB, Ralson (India) Ltd. = 2015-TIOL-32-SC-CX , Gujarat Paraffins Pvt. Ltd. = 2012-TIOL-375-HC-AHM-CX , the petition was allowed in part.
The High Court declared that the exemption notification dated 06.07.2016 with all its terms and conditions would apply for the period between 16.06.2016 to 06.07.2016 also; that subject to fulfillment of conditions contained in the said notification, the export of sugar made by the petitioners and other similarly situated exporters would continue to enjoy exemption from payment of export duty even during such period.
The competent authority shall, if needed, adjudicate the show cause notice on the basis of this declaration, the High Court added.
The Petition was disposed of.
(See 2017-TIOL-2335-HC-AHM-CUS)
