The Delhi High Court has ruled that the statutory framework of the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR) does not exclude solar power generation under Section 65 of the Customs Act, 1962. This judgement brings significant relief to the solar industry.
The division bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that the activities undertaken by the petitioners support the country’s transition to renewable energy. The court noted that this objective is vital and undeniable, even to the respondent department.
The writ petitions challenged the validity of instructions dated July 9, 2022, issued by the Central Board of Indirect Taxes and Customs ( CBIC ) under Section 151A of the Customs Act, 1962. These instructions related to the warehousing of imported capital goods for solar power generation and claimed that MOOWR regulations did not apply in this context, based on Section 65 of the Customs Act, 1962.
Petitioners, represented by Sujit Ghosh, Mannat Waraich, Shubh Dixit, and Ananya Goswami, argued that the instructions violated Section 151A, compelling Customs authorities to cancel all licenses for solar generation units, thus removing the statutory discretion otherwise conferred upon them. They also contended that the instructions directed Customs officials not only to refrain from granting new licenses but also to review and potentially cancel existing ones, denying them the opportunity to justify their licenses under MOOWR.
The petitioners emphasised that granting and cancelling MOOWR licenses are judicial functions of customs officers, requiring adherence to principles of natural justice through inquiry and investigation.
N. Venkataraman, along with Amritha Chandramouli, Rahul Vijaya Kumar, Chandrashekara Bharathi, Kushi S., and Shivshankar G, representing the department, countered that solar cells and modules, classified under different tariff entries, previously attracted no Basic Customs Duty (BCD) but were misused under MOOWR regulations to avoid taxes. The CBIC issued the impugned instruction to prevent this abuse, following representations from the Indian Solar Manufacturers’ Association.
Section 61 of the Customs Act allows the importation of capital goods into licensed warehouses for manufacturing or other operations. Post-2016 amendments, capital goods can remain in warehouses until cleared for home consumption, a significant change from the earlier five-year limit.
The court found no intent in Section 65 to exclude specific manufacturing activities from its ambit. The court clarified that any category of goods could undergo manufacturing processes in licensed warehouses under Section 65, without limitations on the nature of goods or activities.
While the respondent department can adopt remedial measures if solar power generation under Section 65 negatively impacts local generators, the court stated that it should not interpret Section 65 to address such concerns.
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