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TMI Blog2018 (11) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... henceforth for the purposes Of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST ACT". 02. FACTS AND CONTENTION - AS PER THE APPLICANT Written Submission (Summarised) * Your honour the issue raised before the authority is related to DFIA license whether its a "Duty credit Scrips" as defined under GST and accordingly the rate will prevail. * During the previous discussion response submitted by the respondent was that DFIA is different from Duty free credit scripts on the following grounds viz..... * Duty credit scrips are issued under MEIS and SFIS scheme * It is issued to exporter under FTP (Foreign trade Policy) and is freely transferable. * Duty credit scrip's can be used for payment of specified duties of the customs on the imported goods. * DFIA is a duty exemption scheme and does not give any credit of duty. * In response to above we hereby submit as under.... * Duty Free Import Authorization is issued to allow duty free import of inputs. In addition, import of oil and catalyst which is consumed / utilized in the process of production of export product, May also be allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment that DFIA is duty exemption scheme and does not give any duty credit. The meaning of word credit as defined in legal dictionary is as under: 'credit' (Delayed payment), noun advance, chance to borrow money on time, confidence, future payment, installment buying, loan opportunity to obtain goods on time, permission to defer payment, purchase on time, purchase on trust, reliance Associated concepts: confirmed credit, consumer credit, contingent creditors, credit agreement, credit association, credit bureau, credit rating, credit union, creditor and debtor, creditor of bankrupt, creditor of estate, creditor's bill, creditor's committee, creditor's reference, creditor's suits, establishment of credit, extension of credit, general creditors, judgment creditors, junior creditors, letter of credit, line of credit, paper credit, personal credit, preferred creditors, renewal of credit, secured creditors, unconditional credit. It is therefore submitted that use of word credit in chapter 3 and authorization/remission in chapter 4 has same meaning i.e. reward/ advantage given to give boost to export. 5. Further Department view that difference between the 'Duty Credit Scrips' and DF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of money that is given to someone. Publicly acknowledge a contributor's role in the production of. b.. Remit means To transmit (money) in payment ITO refrain from exacting (a tax or penalty), The act of reducing or Canceling the amount of money that you owe. A remission is conventional when it comes about through an express grant to the debtor by a creditor. It is tacit when the creditor makes a voluntary surrender of the original title to the debtor under private signature constituting the obligation. c. scrip means a certificate entitling the holder /authorisation/license. D. FEATURFS OF DUTY CREDU SCRIPS DERIVED FROM FTP No where Duty credit scrip is specifically defined. However reading from FTP following Clear inferences can be drawn. 1. They are issued to exporters only. 2. The scrip allows duty deduction (non-payment of taxes) of a specified amount in the scrip. 3. The scrips value or tax reduction is expressed as a percentage of export turnover of the exporter. 4. The scrip value usually varies between 3 per cent to 5 per cent under Foreign Trade Policy 2015-20. Basically, duty free scrips are paper authorizations that allow the holder to import input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BMISSIONS 1. At the outset it is submitted that there is no dispute that the scrip DFIA is covered under HSN code: 4907 which read as 4' Duty Credit Scrip" 2 Question ultimately boils down to the issue whether DFIA license is Duty Credit Scrip. 3 It is submitted that we disagree with department view for the reasons as under: A. MEIS and DFIA are under different chapter. It is submitted that this makes no difference as rational behind the issue of both scrips need to be taken into considerations. B. Under Duty Credit Scrip any OGL can be imported. In Our opinion DIFA license also allows to import only OGL items. Hence this view expressed by the department is incorrect. C. Department view is that the Duty Credit Scrip can be used for payment of specified duties and under DFIA they say it is duty remission. We do not understand how these two benefits are different. Essence of the benefits is reward in duty payment. 4. It is submitted that rationale behind issuing such scrip's need to be taken into consideration. Press release issued by the GST council explains the rationale behind this. Also FTP policy enumerates both the schemes MEIS and DFIA as export incentive. Copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for helping this sector. This Committee had five senior Government functionaries from the Centre and an equal number from the States as members. 3. After wide ranging discussions with major Export Promotion Councils including FIEO, AEPC, GJEPC, EEPC, CLE, CHEMEXIL, PARMAEXCIL and Handicrafts EPC etc. and interacting with all stakeholders the Committee presented its recommendations to the Council today. 4. The Council identified the major difficulties constraining the export sector are on account of delays in refunds of IGST and input taxes on exports and working capital blockage as exporters have to upfront pay GST on inputs and capital goods for export production or for procuring goods for export. Another difficulty was that the duty credit scrips such as MEIS was losing value due to its reduced usability as it could no longer be used to pay ICST / GST. 5. The Council was unanimous that it is in the national interest to take all possible measures to support the exporting community, which earns valuable foreign provides significant employment especially in the small and medium sector. Accordingly, the Council approved the following package of relief and incentives for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o improve India's competitiveness. 6. The Council is confident that these measures would provide immediate relief to the export sector and enhance export competitiveness of India. The Council also decided to continue to monitor the situation closely so that going forward all required support continues to be extended to this important sector. Additional Submissions on 06.08.2018 In the case of Spaceage Syntex Pvt. Ltd. In the course of hearing before your honour on 1st August, 2018 following points were discussed: A. ENTRY NO. 4907 1. Entry No. 4907 read as "Duty Credit Scrips" 2. We were in agreement that DFIA license falls under this entry, but differed on the point whether DFI'A license is "Duty Credit Scrips"? 3. Entry No. 4907 "Duty Credit Scrips" is without any prefix or suffix. No were reference to Chap.3 and/or Chap.4 of FTP is indicated. Hence it is too understood in broader perspective. 4. It was explained that nowhere duty credit scrips are defined. Your honour is of the opinion that MEIS & SEIS are only Duty Credit Scrips, as these words appears in Para 3.02 of FTP 1915-20. 5. It is submitted that MEIS / SEIS / DFIA are the schemes under FTP and authorisatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EIS". Thus the intention of the legislature is to include similar scrips for exemption. (Copy enclosed.) A long title of a Legislation may not control, circumscribe or widen the scope of the legislation, if the provisions thereof are otherwise clear and unambiguous, but if the terms of the legislation are capable of both a wider and a narrower construction, that construction which would be in tune with the avowed Object manifested in the preamble or declared in the long title, ought to be accepted. 13. Circulars / notifications have statutory legal backing and emanate through delegated legislation or subordinate legislation. Compliance in accordance with them is mandatory. Judicial authorities are duty bound to act upon the true intention of legislature. 14. In the background of above discussion we submit that it is incorrect to ignore notifications / circulars and simply rely on exact words without considering the context. 15. Schemes under chapter 3 and chapter 4 grant the benefit of Duty exemption, and hence need to be considered as duty credit scrips. 16. Letter received by Surshti Trading from superintendent clarifies that advance authorisation are also included in duty c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium sector. It is incorrect to ignore the intention of the legislature. 4. The rule of interpretation for exemption is: an exemption clause in taxing statue must be, as far as possible, construed liberally and in favour of the assessee, provided no violence is done to the language used. C. In the background of above submissions we pray as under: a. The authorities should not interpret the words Duty Credit Scrips in narrower sense. Interpretation should be broad based and convincing taking into consideration circumstantial clarifications / notifications issued. It is submitted that the directory publications are issued in support of the main provision and cannot be ignored all together b. It is submitted that in case your honour has different opinion, 30 days time be given to seek further clarification from GST council. A letter is already forwarded to joint Secretary, GST and also to DGFT. Copies attached. c. It is submitted that clarification be sought by the authority from CST council considering far reaching effects on industry as the issue relates to export promotion which is of national interest / importance. d. Advance ruling being judicial authority ; we request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n most of the cases is in the range of 2% to 5% of the realised (FOB value) ( in free foreign exchange). These scrips are issued to exporters as an incentive for them as the export industry has huge potential for employment creation in India. 4. The exporter to whom the Duty Credit Scrip has been issued can use the Duty Credit Scrip for the payment of 1. Basic Custom Duty. 2. Safeguard Duty. 3. Transitional Product Specific Safeguard Duty. 4. Anti-Dumping Duty. 5. With effect from 13.10.2017 GST on "Duty Credit Scrips" classified under CSH No.4907 is NIL as per Serial No.122A inserted vide Notification No.35/2017-Central Tax(Rate) dated 13.10.2017. Currently there is zero GST on Supply of these Scrips and can be used to pay Customs Duties, Composition fee, Application fee under Foreign Trade Policy(FTP). 6. The basic issue to be decided in the application is whether the DFIA (Duty Free Import Authorisation) will be covered under 'Duty Credit Scripts' as envisaged in the Serial No. 122A of Notification 1/2017 Central Tax (Rate) inserted vide Notification No.35/2017-Central Tax(Rate) dated 13.10.2017 ? The answer to this question is negative due to following reasons 6.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 14, whether GST is applicable on Sale and/or Purchase of DFIA licences, the answer is "Yes". (ii) Answer to question number 2 framed by the applicant in Point no-16, is Duty Free Import Authorisation (DFIA) is not "Duty Credit Scrip" and hence buying and selling of DFIA is taxable under GST and will fall under HSN 4907. The NIL GST Rate is not applicable simply because exemption under Notification No.35/ 2017-Central Tax(Rate) dated 13.10.2017 is limited only to 'Duty Credit Scrips' which are different than DFIA. 04. HEARING The case was taken up for preliminary hearing on dt. 13.06.2018, with respect to admission or rejection of the application when Sh. Anil Vishwakarma, C.A. appeared and requested for admission of application as per their contentions in ARA application, The jurisdictional officer Ms. Hema Venktesh, Supt. appeared and made written submissions. The application was admitted and final hearing was held on 17.07.2018, Sh. Anil Vishwakarma, C.A. appeared and made oral and written submissions. As requested another opportunity was given wherein Sh. V. D. Lagu, C.A. alongwith Sh. Pravin Mehta, Director and Sh. Mozar Dhalu appeared and made oral and written submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition or where SION prescribes 'Actual User' condition or pre import condition for such an input. 9. Applicant shall file online application to Regional Authority concerned before starting export under DFIA and Export shall be completed within 12 months from the date of online filing of application and generation of file number. While doing export/supply, applicant shall indicate file number on the export / supply documents viz. Shipping Bill / Bill of Export / Tax invoice for supply prescribed under CST rules. 10. Wherever SION permits use of either (a) a generic input or (b) alternative input, the specific input together with quantity [which has been used in manufacturing the export product] should be indicated / endorsed in the relevant Shipping Bill / Bill of Export / Tax invoice for supply prescribed under GST rules. Only such inputs may be permitted for import in the authorisation in proportion to the quantity of these inputs actually used/ consumed in production, within overall quantity against such generic input/alternative input. In addition, if in any SION, a single quantity has been indicated against a number of inputs (more than one input), then quantities of such inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts or goods, including capital goods and also payment of Central excise duties on domestic procurement of inputs or goods. B. Objective of the MEIS is to promote the manufacture and export of notified goods/ products to certain notified markets and such export shall be rewarded under MEIS. Such reward would be calculated on realised FOB value of exports in free foreign exchange, or on FOB value of exports as given in the Shipping Bills in freely convertible foreign currencies, whichever is less, unless otherwise specified (Hence it can be said that the duty credits scrips issued are on value basis and not quantity based. C. As per para 3.06 of the FTP certain exports categories /sectors shall be ineligible for Duty Credit Scrip entitlement under MEIS D. Under SEIS Service Providers of eligible services shall be entitled to Duty Credit Scrip at notified rates (as given in Appendix 3D) on net foreign exchange earned. E. For duty credit scrips there are Status Categories like One Star Export House, Two Star Export House, etc. which are differentiated in the basis of turnover value of exports. To sum up, Duty credit scrips are issued under MEIS and SEIS scheme and can be used to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remission. The applicant has also submitted that the GST Council had observed that the duty credit scrips such as MEIS was losing value due to its reduced usability as it could no longer be used to pay IGST / CST. Hence it clearly appears that it was only the duty credit scrips which were loosing their value and not DFIA because DFIA does not envisage payment of duty at all. DFIA is connected with duty free imports. This is definitely a major difference between the two. The applicant has also submitted that to restore the lost incentive on sale of duty credit scrips, it was proposed by the Council that the GST on sale purchase of these duty credit scrips was being reduced from 5% to 0%. To sum up, we find, in view of the discussions made above that, Duty Credit Scrips and DFIAs are not one and the same or similar at all. They are different incentives given to exporters with different conditions and have been separately defined and explained in different Chapters of the FTP. Even though both are an incentive to exporters to promote and increase exports from the country, both the schemes are used in different circumstances and in different manner. When the FTP itself has segregated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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