While considering a batch of writ petition filed challenging the validity of Instruction under instructions dated July 9, 2022, issued by the Central Board of Indirect Taxes and Customs ( CBIC ) in the exercise of powers conferred by Section 151A of the Customs Act, 1962, the Delhi High Court has held that the statutory scheme underlying the Manufacture and Other Operations in Warehouse Regulations, 2019 ( MOOWR ) cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65 of the Customs Act, 1962.
A batch of writ petitions was filed challenging the validity of instructions dated July 9, 2022, issued by the Central Board of Indirect Taxes and Customs in the exercise of powers conferred by Section 151A of the Customs Act, 1962. The instructions were about the warehousing of imported capital goods used in the generation of solar power and the asserted inapplicability of the Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 are framed in the backdrop of Section 65 of the Customs Act, 1962.
The petitioners have challenged various Show Cause Notices that came to be issued in purported implementation of the Instruction and which call upon them to explain why the license for warehousing as granted in terms of the MOOWR Regulations was not cancelled. It was contended that the instruction is contrary to Section 151A. The Instruction compels and commands the Customs authorities to cancel all licenses pertaining to solar generation units, thus impeding the statutory discretion that otherwise stands conferred upon them.
Further challenged the Instruction on the Proviso to Section 151A of the act, with it being urged that the Board stand statutorily injuncted from framing an order, instruction, or direction that would compel an officer of Customs to make a particular assessment or one that may interfere with the discretion that otherwise stands entrusted in it. The customs authorities stand deprived of the right to examine or adjudge the validity of the licenses held by the petitioners, and the instructions urge them to take emergent steps to cancel all existing licenses.
On the other hand, the department contended that solar cells are classified under Tariff Entry 8541 42 00, whereas solar modules are placed in Tariff Entry 8541 43 00 of the First Schedule to the Customs Tariff Act, 1975. Prior to April 1, 2022, solar cells and solar modules attracted Nil Basic Customs Duty. The solar power developers were abusing the MOOWR Regulations by continuing to house the imported capital goods and not clearing them for home consumption, consequently escaping the liability of 12% GST as well as 18% of the import GST in addition to BCD.
MNRE, along with that communication, is also stated to have forwarded a representation of the Indian Solar Manufacturers’ Association requesting the Department of Revenue to prevent solar power producers from misusing the provisions of the MOOWR Regulations. The ASG submitted that it was in the aforesaid backdrop that the Board came to issue the impugned instruction on July 9, 2022.
A division bench of Justice Yashwant Varma and Justice Ravinder Dudeja noted that the absence of any avowed intent imbuing Section 65, which could be justifiably construed as an intendment to exclude a particular category of manufacturing activity from its ambit in clear or unequivocal terms.
It was clarified by the court that it may be open for the respondent department to adopt appropriate remedial measures if they believe that solar power generation, under permissions granted under Section 65, is negatively impacting local generators or distorts the “level playing field.”
The Court observed that it would clearly not be justified to deploy principles of purposeful interpretation to correct that projected and asserted anomaly.
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