The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the Import of Urea on high Seas Sale from State Trading Enterprises (STE) is not violative of ITC policy and quashed the penalty under section 112(a)(i) of the Income Tax Act,1961.
Before 28-4-2015, under Heading No. 3102 1000 of the ITC (HS) Policy, the import of Urea was allowed through STEs viz. STC, MMTC and Indian Potash Limited. The Government of India, Ministry of Chemical and Fertilizers had permitted the Appellant, Sunita Commercials P Ltd to import Technical Grade Urea through any STEs (i.e. MMTC, IPL, STC).
The Appellant purchased on High Seas, consignments of Urea imported by the STE viz. MMTC sought clearance thereof with customs by filing Bills of Entry and the proper officer of customs granted clearance to the said goods.
There is no restriction in the IT (HS) Policy or in the Foreign Trade Policy for effecting High Seas purchase of Urea imported by STEs and such imports are to be construed as “through” STEs. Further, apart from the submission that section 112(a)(i) of the Income Tax Act has no application in absence of any prohibition against the import of Urea.
The purchase from the foreign suppliers was made by STE viz. MMTC and Indian Potash Ltd and the goods were shipped by the foreign suppliers to MMTC/ Indian Potash Ltd and the Appellants have purchased the said goods on High Seas from the MMTC/Indian Potash Ltd.
It was observed that Heading No.3102 1000 of the ITC (HS) Policy 2009-2015, does not stipulate that Urea was allowed to be imported only by State Trading Enterprises and the said Heading allows the import of Urea through STC, MMTC and Indian Potash Limited.
A Coram comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) observed that when the import is allowed “through” STC, MMTC and Indian Potash, it means that so long as the purchase of the Urea from the foreign supplier is effected by STC, MMTC or Indian Potash and payment to the foreign supplier is made by STC, MMTC or Indian Potash, who in turn sell the same to a party in India whether on High Seas or otherwise, the import is clearly through STC, MMTC or Indian Potash.
While allowing the appeal, the Tribunal set aside the impugned Orders vide which penalty under section 112(a)(i) of the Act on the appellants was upheld.
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