CBIC circular on pre-import violation cases

The Central Board of Indirect Taxes and Customs (CBIC) has issued circular no.16/2023-Cus, dated June 7, 2023, prescribing the procedures for the payment of Integrated Goods and Services Tax (IGST) and compensation cess (CC) by the importers who have violated the pre-import condition and taking input tax credit (ITC) of the same, in respect of imports made between October 13, 2017, and January 9, 2019, without payment of IGST and CC under advance authorisations. The circular is issued following the directions of the Supreme Court in the case of Cosmo Films Ltd. [2023 (5) Centax 286 (SC)].

The circular is useful because it applies not only to the parties who litigated on the pre-import issue but also to those who did not do so. The payment of IGST and CC will be only for the relevant imports that could not meet the pre-import condition. There could be situations where many items were imported under a single bill of entry (B/E) but the import of, say only one item, did not meet the pre-import condition. Also, even where the B/E covered only one item, it is possible that only a part of the imports did not meet the pre-import condition. The importers must approach the Customs assessment group at the port of import with the relevant details for payment of IGST and CC along with applicable interest only on that much quantity of imports that did not meet the pre-import condition.

The CBIC says that the Customs will cancel the ‘out of charge’ order granted at the time of clearance of the goods and then reassess the B/E to charge the IGST and CC. Thereafter, the importer can pay the IGST, CC and applicable interest through the electronic challan generated in the Customs EDI system. After that, the Customs at the port of import will make a notional ‘out of charge’ for the B/E on the Customs EDI system, so as to enable transmission of the IGST and CC amounts and their date of payment to the GSTIN portal for eligibility of ITC as per the GST laws. This procedure can be applied only once to a B/E and so, the importers must assess their liabilities correctly before approaching the Customs for reassessment. The circular says that if such ITC is utilized for payment of IGST on zero-rated supplies, then the refund of such IGST will be available. That, of course, goes without saying.

 The CBIC has let the exporters take the call on whether the pre-import condition is violated when the goods imported after exports under one advance authorisation are used in the manufacture of goods exported under another advance authorisation. The circular says that TR-6 challan is not a document on the basis of which ITC can be taken. So long as payment through the TR-6 challan is allowed, I don’t think ITC can be denied.