Case law

Supreme Court of India · 28 Apr 2023

Union Of India vs Cosmo Films Limited

Legal principle

A tax exemption is a concession, not a right: there is no constitutional entitlement to refund or exemption, a concession can be withdrawn at any time, and conditional exemption notifications (including the pre-import condition for IGST and cess under Advance Authorisations) are valid if within the authority's jurisdiction.

Court decision

The Supreme Court allowed the Revenue's appeals and set aside the Gujarat High Court judgment, upholding the validity of the mandatory pre-import condition in the notifications dated 13.10.2017. It held the 10.01.2019 withdrawal could not be given retrospective effect from 13.10.2017. However, as the respondents had enjoyed interim orders, the Revenue was directed to permit them to claim refund or input credit (wherever customs duty was paid) by approaching the jurisdictional commissioner with documentary evidence within six weeks, to be examined case-by-case on merits, with procedure to be prescribed by circular.

Facts

Manufacturer-exporters imported inputs into India under Advance Authorisations (AA) under the Foreign Trade Policy 2015-2020 and claimed exemption from IGST (leviable under Section 3(7), Customs Tariff Act, 1975) and GST compensation cess (under Section 3(9)) via Notification No. 18/2015-Customs as amended by Notification No. 79/2017-Customs, both conditions dated 13.10.2017 requiring physical exports and fulfilment of a 'pre-import condition'. The DRI, Kolkata investigated and found that exporters had exported goods in anticipation of authorisation (exports first, imports later), so the pre-import condition was not satisfied and the IGST/cess exemption was inadmissible. Aggrieved manufacturer-exporters challenged the condition before the Gujarat High Court, which set it aside as arbitrary and unreasonable. The Union of India appealed to the Supreme Court.

Key provisions