Supplies Amid Imports and IGST over Inter-State Trade & Supplies have similar Tax Rate: CESTAT [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) Delhi Bench has ruled that the same tax rate applies to Integrated Goods and Service Tax ( IGST ) throughout interstate commerce and supply during imports.

Using 13 Advance Authorizations, JLC Electromet Private Limited, the appellant/assessee, imported and cleared items without paying the integrated goods and services tax or the basic customs charge. Following an investigation, the Directorate General of Revenue Intelligence4 concluded that although the appellant had properly claimed exemption from BCD, it had falsely claimed exemption from IGST because the scheme's exemption from IGST was contingent on "actual user" conditions, which the appellant had, without question, not met.

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The appellant paid interest-bearing IGST on the imported consignments. DRI then sent out a show-cause notice, which led to the order. The appellant acknowledges that it was liable for IGST and that it had misrepresented the exemption; as a result, it paid the IGST after DRI made the correction.

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 The sole argument is that, even though it paid the IGST late, it was exempt from paying interest since, according to section 3 of the Customs Tariff Act of 1975, IGST is an Additional Duty of Customs, and interest laws do not apply to Additional Duty of Customs.

It was observed that the IGST paid on goods supplied during international trade should not be treated any differently than the IGST paid on goods supplied between states. Section 50 of the CGST Act of 2017 stipulates interest in the event that IGST is not paid on time.

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In exercising its authority under Article 246 read with entry 83 of List I (Union List) of the Seventh Schedule to the Constitution, the two-member bench of Justice Mr. Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has noted that additional customs duties are imposed on import or export transactions under the Customs Tariff Act, 1975. In order to execute the authority granted by Article 269 of the Constitution, IGST is imposed on the supply during imports under Section 3 of the Customs Tariff Act, 1975 read with Section 5 of the IGST Act.

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While the Finance Commission's recommendations resulted in the additional duty of customs being credited to the Consolidated Fund of India and the divisible pool of tax revenues being split between the States and the Union, the Parliament's decision on the GST Council's recommendations resulted in the IGST not being credited to the Consolidated Fund of India.

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While granting the appeal, the tribunal determined that the Commissioner had not applied the duty rate stipulated in section 50 of the CGST Act, which was extended to the IGST under section 20 of the IGST Act. Rather, he affirmed interest as it applies to Customs Act section 28AB. The demand of interest needs to be set aside.

To Read the full text of the Order CLICK HERE

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