Madras HC Quashes Customs Public Notice, Holds Dept Lacked Jurisdiction to Direct on GST Collection [Read Order]
The Court found that the impugned Public Notice was contrary to the CBIC circular it relied upon and was issued wholly without jurisdiction or authority.
The Madras High Court has quashed a Public Notice issued by the Customs Department, which had directed Container Freight Stations (CFS) not to collect Goods and Services Tax (GST) on the sale of uncleared cargo through auction, holding that the notice was issued without jurisdiction.
National Association of Container Freight Stations, the petitioners, who are Container Freight Stations (CFS), challenged the impugned Public Notice issued by the 1st respondent, the Joint Commissioner of Customs. The notice directed CFSs not to collect GST on the sale of uncleared/unclaimed cargo auctioned under Section 48 of the Customs Act, 1962, stating that the bid amount was inclusive of IGST and demanding GST again would amount to double taxation. A consequential notice dated 22.12.2021 was also challenged.
Counsel for the petitioners submitted that the Customs authorities lacked the jurisdiction to issue directions on the levy of GST. They argued that the auction of goods by a CFS constitutes a "supply of goods" under Section 7(1) of the CGST Act, making the transaction liable to GST. It was further contended that the CFS acts as a service provider, and the goods lose their character as "imported goods" once the title is transferred to the auction purchaser.
Per contra, the learned Senior Panel Counsel for the respondents argued that the bid amount in the auction is a "cum-duty" value, inclusive of customs duty and IGST. Therefore, demanding GST again on the same bid amount would amount to double taxation. The respondents maintained that the Public Notice was issued in accordance with a CBIC circular and merely clarified existing legal provisions, and that no sale occurs between the CFS and the highest bidder.
A single bench of Justice N. Anand Venkatesh, after considering the arguments, held that the primary issue was whether the Customs Department had the jurisdiction to issue a public notice concerning the collection of GST. The Court observed that a public notice issued under the Customs Act is confined to clarifying customs procedures and cannot extend to other enactments like the CGST Act.
The Court distinguished between the levy of IGST on the import of goods and GST on the subsequent supply of those goods through auction, holding them to be separate transactions. It was observed that when goods are auctioned, the CFS becomes the supplier and the bidder the recipient, making the transaction assessable under the CGST Act. The Court found that the impugned Public Notice was contrary to the CBIC circular it relied upon and was issued wholly without jurisdiction or authority.
The Court held that the impugned Public Notice was contrary to Sections 3, 7(1) and 9(1) of the CGST Act, 2017 and Sections 157, 158 and 159 of the Customs Act, 1962. Accordingly, the Court quashed the Public Notice dated 12.02.2021 and the consequential notice dated 22.12.2021. All writ petitions were allowed with no costs.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
