TMI Blog2019 (10) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... g goods out of India to a place outside India . In view of the above we are satisfied that supply by the DFS of the Petitioner to the outbound passenger constitutes exports by the DFS. Consequently, in terms of section 16(1) of the IGST Act, it becomes a zero rated supply - the Respondent-Authority has erroneously held that the Petitioner does not satisfy the crucial test of sending of the goods to foreign destination where they would be received as imports , to deny the benefits of zero rated supply. The import of goods in terms of section 2(10) of the IGST Act means bringing the goods into India from a place outside India. As per Section 7(2) of the IGST Act, goods imported into the territory of India, till such time it crosses the customs frontier of India, shall be treated to be a supply of goods in the course of inter-State trade and commerce. As per Section 2(4) of the IGST Act, the customs frontier of India means the limits of a customs area as defined in section 2 of the Customs Act. The duty free warehouse and DFS of the petitioner are only within the limits of the customs area and therefore, the goods lying therein do not cross the customs frontier and consequently, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jadeja, Mr. Varun Satiya, Mr. Arun Unnikrishnan i/b Crawford Bayely Co., for the Petitioner. Mr. Jitendra Brijbhushan Mishra for Respondent No. 1. Mr V. A. Sonpal, Special counsel with Mr. Himanshu Takke, Ms. Jyoti Chavan AGP for the Respondent-State. Mr. Vijay Jain i/b Mr. Sriram Sridharan for Respondent No. 5. Judgment [Per Ranjit More, J.] : 1. The criminal application bearing No.8 of 2019 is filed by the original petitioner seeking review of the order passed by us on 6th February 2019 in Criminal Public Interest Litigation No.14 of 2019. By the said order, we have dismissed the said PIL. Review is sought by the Applicant-Petitioner placing heavy reliance on an adjudication order passed by the Deputy Commissioner of Sales Tax, being Order-in-Original No. DC-E-636 / LTU-3 / Order of GST Refund Application / 2018-19 / B-355 Mumbai dated 10th January 2019. By the said order, the Deputy Commissioner of Sales Tax has denied to refund the input tax credit (for short ITC ) pursuant to sale of duty free goods from the duty free shops (for short, DFS ) at the departure area of airport. 2. The Petitioners in Writ Petition No.1511 of 2019 have taken exception to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input services such as leave and licence arrangements of areas/space, maintenance services, CHA services, professional services, etc., from different service providers located inside or outside the DFS area. (c) There are three types of transactions which are in issue - (I) Sales by DFSs to departing passengers. (ii) Sales by DFSs to arriving passengers. (iii) Receipt of input services by DFSs. (d) The words import and export are defined in the Customs Act, 1962. These words are identically defined in the Integrated Goods and Services Tax Act, 2017 (for short, the CGST Act ). (e) DFSs are located in customs station as defined in section 2(13) of the Customs Act, 1962. The Petitioner DFS has been issued a special warehouse licence under section 58A of the Customs Act. Both DFS and special warehouse are part of the customs area as defined in the Customs Act. The special warehouse, wherein the warehoused goods are stored before its sale from the DFS is unique and different from the other normal warehouses wherein other importers store their goods. It is for this reason that the special warehouse license is granted to the Petitioner under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FS whereupon the sale is declared void and refund is given. (k) This is further strengthened with the aid of paragraph 4.3 of the Public Notice bearing no. 154/2004 dated 22nd July 2004 relating to Customs Procedures for Operation of DFS, which reads as under- 4.3 Customs supervision over sales shall be to ensure that persons other than an International passenger do not purchase goods from the DFS and passengers who purchase goods from DFS either board the aircraft leaving India or are cleared duly in the usual manner by customs. This may also be with reference to sale voucher issued. (l) Since 1st July 2019, undisputedly no tax paid indigenous goods are being procured by the Petitioner and being supplied to outbound international tourist. Notifications issued under section 55 of the CGST/SGST Act are thus not applicable, which is an optional provision applicable only qua the indigenous goods, and not applicable to imported/ warehoused goods sold from or in the customs area. Hence, the provisions of Rule 89 would continue to apply to the refund of ITC for zero rated supplies of imported/ warehoused goods by the DFS. (m) Since the Petitioner primarily procures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., and not directly concerning GST laws. (iv) It was also submitted that as provided in Section 1(2) of the CGST Act, the said Act extends to the whole of India and as per Section 1(2) of the MGST Act, it extends to the whole of State of Maharashtra. The DFS is located in Maharashtra limits and within India, since the international Airport itself is in India, and, therefore, the operations of the Petitioner are in taxable territory , where supplier and receiver are located in India at the time of supply. The taxable territory is defined in Section 2(109) of the Act as a territory to which the provisions of the Act apply. The non-taxable territory is defined in section 2(79) of the Act, as a territory outside the taxable territory. (v) It was contended on behalf of the Respondents that though under the Customs Act, 1962, the sale by DFS is treated as export , and the bills issued by DFS are treated as shipping bills, the same can not be ipso facto applicable under the GST laws. The CGST Act, the MGST Act, the IGST Act, Articles 246A and 279A of the Constitution of India are collectively Code in themselves, and there is no warrant to refer to any past or present s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Custom Act 1962 , (viii) Next, it was urged that the issues that tax burden would increase the price of the products and the DFS would not be competitive in International market, are wholly irrelevant. To take home their contentions, the learned counsel for the Respondents pressed into service following decisions / cases : (a) M/s. Deepmani vs. State of Maharashtra (Sale Tax Reference No.9 of 2002); (b) Burmah Shell Oil Storage and distributing Co. of India Ltd. vs. CTO [(1961) 1 SCR 902]; (c) Madras Marine Co. vs. State of Madras [(1986) 63 STC 0169 (SC)]; (d) Narang Hotels and Resorts Pvt. Ltd. vs. State of Maharashtra [(2004) 135 STC 289 (Bom)]; (e) Commissioner of Sales Tax vs. M/s. Pure Helium (India) limited [(2012) 49 VST 17]; (f) Commissioner of Sales Tax Maharashtra State vs. Radhasons International (Reference Application No. 46 of 2008); (g) K. Gopinath Nair vs State of Kerala 1992(4) SCC701, and (h) Decision of Authority for Advance Rulings in the matter of Rod Retail Private Limited dated 27th March 2018 vide AR No. 01/DAAR/2018 in Application No. 01/DAAR/2017. 8. Before we proceed further, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the matter of DFSs at international airport at Bengaluru. In that case, the assessment orders passed by the Assistant Commissioner of Commercial Taxes, Bengaluru were challenged in a writ petition before the High Court of Karnataka. The said writ petition was dismissed on the ground of availability of alternate remedy. Writ appeal preferred there-against was also dismissed. However, civil appeal there-against was entertained by the Supreme Court, inter alia, on finding that when the legal position is very clear and the law is also in favour of appellant, it would not be in the interest of justice to relegate the appellant to the statutory authorities. Then, the Supreme Court has observed thus : 11. So as to substantiate his submission, the learned counsel relied upon several judgments including the judgments delivered in State of Travancore-Cochin v. Bombay Co. Ltd.-AIR 1952 SC 366, State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory AIR 1953 SC 533, J. V. Gokal Co. (p) Ltd. v. CST AIR 1960 SC 595 and Kiran Spg. Mills v. Collector of Customs-AIR 2000 SC 3448. 17. In our opinion, the facts stated by the counsel are not much in dispute. It is an admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree shops owned by the appellant which are not within the customs frontiers of India. 22. Looking to the aforestated simple and factual legal position, in our opinion, it would not be much useful to discuss the judgments which have been referred to by the learned counsel appearing for the appellant. In our opinion, the legal position is so clear that it was not necessary for the learned counsel to refer to any judgment and merely by showing the aforestated factual aspects and legal provisions to the authority concerned, the appellant could have convinced the authority concerned that the sale effected at the duty-free shops of the appellant could not have been taxed by the State of Karnataka. 26. The learned counsel again submitted that in the course of import means the transaction ought to have taken place beyond the territories of India and not within the geographical territory of India . We do not agree with the said submission. When any transaction takes place outside the customs frontiers of India, the transaction would be said to have taken place outside India. Though the transaction might take place within India but technically, looking to the provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clearly a foreign destination. The outbound passenger only acts as a carrier on behalf of the DFS, till reaching the final destination in a foreign country. 13. Further, the judgment of a co-ordinate Bench of this Court in the matter of Radhasons International (supra) relied upon by the Respondents, in paragraph 76 thereof clearly shows that the facts therein were distinguishable from the facts in the case judgment of Supreme Court of India in the matter of M/s. Hotel Ashoka (Indian Tourism Development Corporation Limited) (supra). 14. Moreover, the decision of Authority for Advance Rulings in the matter of Rod Retail Private Limited dated 27th March 2018 vide AR no. 01/DAAR/2018 in Application No. 01/ DAAR/2017 which is relied upon by the Respondents was thereafter explained by the Central Board of Indirect Taxes Customs ( CBIC ) by issuing a clarification dated 29th May 2018 stating that advance ruling in the matter of Rod Retail Private Limited is not applicable to DFS and that the dispensation allowed to the DFS will not be effected in any manner. Further, CBIC also clarified that as per section 103 of Central Goods and Service Tax Act, 2017, this advance ruling appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 5(2) read with Section 19(1) of the Sale of Goods Act, 1930, that the condition of sale/declaration printed on the invoice of DFS, pursuant to signatures by the outbound passenger and cashier, acts as a contract agreeing that the property in the goods purchased from DFS passes to such outbound passenger only when such outbound passenger lands at the final destination. Section 5(2) and Section 19(1) of the Sale of Goods Act, 1930 read as under- 5. Contract of sale how made- (1) . (2) Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. 19. Property passes when intended to pass- (1) Where there is a contract for the sale of specific or ascertained goods the Property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. 19. In this context, in fact the judgment of this Court in the matter of Narang Hotels and Resort Pvt. Ltd. (supra), which has been relied upon by the Respondents actually supports th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of Aarish Altaf Tinwala (supra) and this position has been affirmed by the Supreme Court by rejecting the writ petition filed against this central government order vide its order dated 10th May 2019 in Writ Petition (c) No.564 of 2019. Hence by legal fiction, the supply of goods from arrival DFS would also be an export of goods under the IGST Act, and hence, a zero rated supply. Since the zero-rated supply qualifies for 100% ITC, the Petitioner is eligible for the refund thereof. 23. With effect from 1st February 2019, in view of the CGST (Amendment) Act, 2018, supply of warehouse goods before clearance for home consumption have been notified/ classified as activities or transactions which shall not be treated as a supply of goods. Accordingly, effective from 1st February 2019, sale of goods from arrival DFS falls under entry 8(a) of Schedule III to CGST/SGST Act; and further, section 17(2) of the CGST Act is amended according to which reversal of ITC pertaining to activity specified in Schedule-III is not required. Accordingly, the Petitioner is to claim ITC pertaining to arrival FS also. Once this ITC is eligible, refund of entire ITC pertaining to departure and arrival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the customs area, DFS is neither liable to pay customs duty, nor IGST. 28. We also find merit in the contention of the Petitioner that both before and after the introduction of GST, the sales to arriving passengers continue to be sales in and/or from the custom area, as at the point of sale in DFS, the goods have neither crossed the customs frontier nor have they been cleared for home consumption by DFS. Accordingly, neither customs duty, nor Integrated Tax, is payable by DFS. 29. Furthermore, we find merit in the contention of the petitioner that arriving passenger s baggage is exempt from the integrated tax in view of the Customs Notification No. 43/2017-Cus dated 30th June 2017 and IGST Notification No. 2/2017 IGST (rate) dated 28th June 2017. In view of the above exemption read with the duty free allowance available under the Baggage Rules applicable to arriving passengers, neither customs duty (upto the permitted baggage allowance) nor IGST is levied on such goods. Such import of goods by arriving passengers across custom frontier as passenger baggage is therefore an exempt supply under the GST, hence no IGST is payable by either the DFS on its imports, or on supply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Act, 1878 and Section 3 of the Central Excise Act, 1944 [(1964) 3 SCR 787 at page 823] Sea Customs Case as being the taxable event. The taxable event, therefore, being the day of crossing of customs barrier, and not on the date when the goods had landed in India or had entered the territorial waters. .. . 33. In Garden Silks Mills Ltd. Vs. Union Of India [1999 (113) ELT 0358 (SC)] the Supreme Court has held thus : 16 .. It would appear to us that the import of goods into India would commence when the same cross into the territorial waters but continues and is completed when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed. 34. Needless to say that if the duty free shop, which caters to the outgoing or incoming international passengers, is subjected to local taxes by the State, the tax burden will increase and the price of the goods, which are supposed to be free of taxes and duties, will go up, and the same would prevent the duty free shops in India from competing with DFSs at international airports elsew ..... X X X X Extracts X X X X X X X X Extracts X X X X
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