CBIC should clear the air quickly on pre-import issues

On April 28, the Supreme Court, in the case of Cosmo Films Ltd [2023 (5) Centax 286 (SC)], upheld the pre-import condition in respect of imports made between October 13, 2017, and January 9, 2019, without payment of Integrated Goods and Services Tax (IGST) under advance authorisations.

The court gave the exporters who had violated the pre-import condition six weeks to regularise the matter by payment of IGST on their imports and claim refund or input tax credit (ITC) of the same. The court also instructed the government to prescribe the procedure to be followed, through a circular. More than five weeks have passed since the court directions but the government has still not issued any circular in the matter.

The exporters need clarity on several points. Can violation of pre-import condition be alleged when an exporter first exports the finished products and then imports the inputs without IGST payment under one advance authorisation but uses such inputs for making finished goods that are exported in discharge of export obligation against another advance authorisation? Will interest be payable when there are judgments saying that no interest is payable in a revenue-neutral situation, such as payment of GST that can be taken as ITC? Can the government invoke extended period of limitation and whether penalty is payable, when it is a matter of interpretation where two high courts have expressed different opinions that were finally resolved through the said Supreme Court judgment? Whether the IGST payment can be made through TR-6 challans or will the bills of entry be required to be re-assessed? If the IGST payment is made through TR-6 challans, will the government object to taking ITC on the basis of such challans, given that challans are not specified as documents on the basis of which ITC can be taken and any payment through challan may not get auto-populated in GSTR-2A? 

Besides clarity on the above issues, the exporters are anxious to know whether the government will restrict its instructions on procedures only to those who litigated on the issue and obtained stay on IGST payment from high court or cover even others who have violated the pre-import condition. They are also worried that after expiry of six weeks from the said Supreme Court judgment, the field formations of the Central Board of Indirect Taxes and Customs (CBIC) will initiate coercive measures to recover IGST, interest and penalties from them.      

It is difficult to understand why the government has not yet come out with a circular prescribing the procedures that the exporters have to follow. Of course, the issues are complex but the government, as the party that created the problem by introducing an unfair condition in the first place, should have thought of the complexities that would arise. The prolonged delay now creates an impression that the government is suffering from “winner’s remorse”.  

In any case, there is no time to lose. The government must quickly issue necessary instructions and help the exporters regularise in accordance with the Supreme Court’s order. They need time to find necessary money and pay the IGST. Having won the case at the highest judicial forum, the government must now avoid vindictiveness and show some magnanimity. After a prolonged lose-lose stand, the government must now see how both sides can win.

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Email : tncrajagopalan@gmail.com