The Delhi High Court has quashed a Customs Circular and Show Cause Notice ( SCN ) that imposed restrictions on the establishment of Solar Power Plants under the Manufacturing and Other Operations in Warehouse (MOOWR) License as per Section 65 of the Customs Act.
The MOOWR scheme serves as a duty deferment initiative permitting manufacturers to import raw materials and capital goods without immediate payment of customs duty.
To be eligible for the scheme, you must hold a warehouse license under section 58 of the Act. The application process involves filling an online form and submitting a bond to the Commissioner of Customs. You will also need to provide documents such as:
Initially introduced in 1966 and later reintroduced in 2019 to aid the Make in India initiative, the scheme aims to enhance India’s competitiveness as a manufacturing hub and attract investment to the country.
The MOOWR scheme offered several advantages to manufacturers. Here are the primary benefits:
1. Deferred Customs Duty: The scheme allows for the postponement of Customs Duty on imported raw materials and capital goods, with no Customs duty applicable if these goods are subsequently exported.
2. No Time Limit and Renewal Requirement: There is no time constraint for storing goods under the MOOWR scheme, and the license does not require periodic renewal.
3. Simplified Approvals: The scheme provides a single contact point for approvals, streamlining the process for manufacturers.
4. Flexible Location: Manufacturers have the flexibility to choose the location of their unit, with no physical control imposed by Customs and no export obligations.
5. Easy Transfers and Minimum Investment: Warehouse-to-warehouse transfers are facilitated under the scheme, and there is no minimum investment threshold for establishing a MOOWR unit.
The circular had raised concerns and uncertainties regarding the eligibility and procedural aspects of availing benefits under the MOOWR License for such projects. The Delhi High Court decision to quash the Customs Circular and SCN comes as a relief to stakeholders in the renewable energy sector, particularly those involved in setting up Solar Power Plants.
In addition it was observed ancillarily that, “Before closing the matter, we take note of an additional issue pertaining to the demand of a provisional bond for release of goods which had been raised by the respondents and stood raised in W.P. (C) 12386/2022. We had while dealing with the aforesaid issue and while considering C.M. 36603/2023 (Application for Directions) passed detailed orders on 04 August 2023. We do not deem it necessary to observe any further in this respect. The respective parties would proceed further in accordance with the directions which had been issued on this batch. Consequently, W.P.(C) 12386/2022 shall stand disposed of finally in terms of that order.”
It was also noted that, “In W.P. (C) 10838/2022, the respondents have in terms of an order dated 19 July 2022 proceeded to cancel the license held by the petitioner. Quite apart from the said order being devoid of reasons, it would not sustain in light of the conclusions recorded hereinabove.”
It was observed that, “Undisputedly, the activities undertaken by the writ petitioners are in aid of the objective of the country transitioning towards renewable energy sources so as to meet the targets of switching to a cleaner energy source. This is clearly an aspect which cannot possibly be doubted even by the respondents. What was however sought to be canvassed was the resultant distortion of the level playing field with the respondents alleging that the petitioners are deriving an undue advantage of the MOOWR Regulations having established a solar generation unit with the aid of duty free imports at a cost far lesser than that which a domestic producer may incur in the course of establishing a comparable generating facility.”
It was remarked that, “The construction of a statute cannot be guided or influenced by the subsequent experience of the executive or of discerned inequitable results. As we have found hereinabove, the statutory scheme underlying the MOOWR Regulations cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65. The contemporaneous literature also fails to lend credence to the submission of the respondents.”
The Bench held that, “The impugned Instruction of the Board dated 09 July 2022 insofar as it mandates review of existing licenses and taking of ―follow-up action is hereby quashed.”
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