Indirect tax board asks officials to file review pleas on export scheme

The indirect tax board has asked senior officials to file review petitions on any court order against its move to limit tax benefits under an export incentive scheme in the goods and services tax (GST) regime. 

Two courts — the Gujarat High Court and the Madurai Bench of the Madras High Court — have given conflicting orders on the issue.

The issue revolves around utilisation of advance authorisation licenses under the GST regime. 

These licenses entitle the holders to import goods at zero duty for the purpose of exports.

The Central Board of Indirect Taxes and Customs (CBIC) and the Directorate General of Foreign Trade (DGFT) restricted the use of these licenses by imposing the condition of “pre imports.”

This means that these licenses are vaild only if goods have been imported prior to exports. 

This also meant that licenses could be used for only those lots of exports for which imports are made and not afterwards.  This condition was not there in the pre-GST tax regime.

Based on the pre-import condition, the directorate of revenue intelligence (DRI) had issued notices to exporters, who used the licenses but have not so far imported goods. 

This infuriated exporters as they said the new restrictions defeat the very purpose of licenses and moved various courts, including the Gujarat High Court, the Punjab and Haryana High Court, the Orissa High Court and the Madurai Bench of the Madras High Court.

As the number of petitions rose in courts, the government lifted the condition. However, it was done from the prospective effect or from January 10, 2019. The condition of pre-import was effective from October 13, 2017.

While the Gujarat High Court had struck down the constitutional validity of the pre-import condition, the Madurai Bench had allowed the issuance of notices. Petitioners filed a review petition in the Madurai Bench as well.

Sources said that now the CBIC has written to principal chief commissioners, chief commissioners and others to cite the Madurai Bench order in courts when petitions come up for hearing.

In case of an adverse court order, the CBIC asked the officials to forward special leave petitions (SLPs) to the board, the sources said. SLPs are filed in the Supreme Court.

Abhishek Rastogi, counsel for petitioners in the high courts and partner in Khaitan & Co, said, “The matter is set to conclude at various high courts and hence the Supreme Court, at some stage, will have to decide both arbitrariness and vagueness of the pre-import conditions.”