Never-ending tale of “Pre–Import Condition”

In a world where global trade has become the backbone of the economy, the import/export industry plays a vital role in keeping the wheels of commerce turning. From exotic fruits to cutting-edge technology, goods traverse the globe in a complex dance of logistics, regulations, and the occasional mishap.

Governments have a significant role to play in boosting exporters. With their assistance, exporters can navigate the challenges of the global marketplace with a smile, knowing that their governments have their back. But at present, Industry is going through a challenging environment wherein the exporters are dealing with revenue-neutral and irrational provisions such as “Pre-Import” or Rule 96(10). Seeing the chaos at ground level, wherein the assessee is piled up with multiple notices, Raids & Summon hearings, it seems like the government is concerned.

Recently, The Hon’ble Supreme Court's in its judgment dated 28.04.2023 in the matter of Civil Appeal No. 290 of 2023 (UOI and others vs. Cosmo Films Ltd.) confirmed that mandatory fulfillment of ‘pre-import condition' incorporated in para 4.14 of FTP 2015-20 vide the Central Government (DGFT) Notification No. 33/2015-20 dated 13.10.2017 and reflected in the Notification No. 79/2017-Customs dated 13.10.2017, relating to Advance Authorization scheme.

This implies that the relevant imports that do not meet the said pre-import condition requirements are to pay IGST and Compensation Cess to that extent.

While allowing the appeal of Revenue, the Hon'ble Supreme Court has however directed the Revenue to permit a claim of refund or input credit (whichever is applicable and/or wherever customs duty was paid).

We are entailing this write-up not to debate the Supreme Court’s judgment but the way forward in the matters related to the regularization of the “Pre-import” issue.

Now, in this regard, the government has issued a Circular No. 16/2023-Cus dated 7th June 2023 stating the below-mentioned key points/procedure: -

(a)?ICES does not have functionality for payment of customs duties on a bill of entry (BE) (unless it has been provisionally assessed) after giving the Out-of-Charge (OOC) to the goods. In this situation, duties can be paid only through a TR-6 challan.

Keeping the above aspects in view, noting that the order of the Hon’ble Court shall have bearing on importers other than the respondents, and to carry forward the Hon'ble Court's directions, the following procedure can be adopted at the port of import (POI):

1.????The importer (not limited to the respondents in judgment) may approach the concerned assessment group at the POI with relevant details for purposes of payment of the tax and cess along with applicable interest.

2.????The assessment group at POI shall cancel the OOC and indicate the reason in remarks. The BE shall be assessed again to charge the IGST and cess.

3.????The payment of tax and cess, along with applicable interest, shall be made against the electronic challan generated in the Customs EDI System.

4.????on completion of the above payment, the port of import shall make a notional OOC for the BE on the Customs EDI System [to enable transmission to GSTN portal of, inter alia, the IGST and Compensation Cess amounts with their date of payment (relevant date) for eligibility as per GST provisions].

Our 2 Cents

1.????Even today, no one knows the exact definition of “Pre – Import Condition”! i.e. Calculation of the Violation to be done based on the Bill of Entry or Advance Authorization wise?

2.????What if, one has already paid the IGST through TR-06 Challan?

3.????And even if paid through TR-06, on what basis it has been said that, the TR-06 challan is not a valid document for claiming the credit?

As per Rule 36 of the CGST Rule, 2017 in this regard states, a bill of entry or any similar document prescribed under the Customs Act, 1962, or rules made thereunder for the assessment of integrated tax on import. TR-06 is a valid document for assessment of “payment of IGST”, thus a valid document for availment of Credit.

4.????If any Show Cause Notice was issued earlier, then the same will be dropped off.

5.????If anyone pays by following the above-mentioned procedure, can take credit and avail of the refund as per Rule 89(4B) or 89(4), as it may apply to the assessee.

6.????We do not wish to make it a debate of “Whether IGST is a Custom Levy or GST Levy’ but one important judgment by the Bombay High Court in the case of Mahindra and Mahindra Limited v. Union of India, 2022 (10) TMI 2022 concerning “Interest Levy” on such payments must be considered.

We have written our suggestions to CBIC, and assisted numerous Export Promotion Councils in writing said representations for seeking clarifications.

Thus, we believe that the matter affects the exporter/importer community at large, thus a proper clarification is needed.

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