Legal principle

For imported warehoused goods, the taxable event is the crossing of the customs barrier, i.e., filing of a bill of entry for home consumption under section 68 of the Customs Act; until then, sales of warehoused goods from duty free shops beyond the customs frontiers attract neither customs duty nor IGST and cannot be taxed or denied ITC refund.

Court decision

The court allowed Writ Petition No. 1511 of 2019, quashing and setting aside the adjudication order dated 10 January 2019 and the impugned show cause notices, holding that neither customs duty nor integrated tax is payable by the DFS and that the Petitioner is entitled to refund of ITC (with Rule 89 continuing to apply to refund of ITC for zero-rated supplies of imported/warehoused goods). In W.P. No. 1535 of 2019 the court refrained from declaring the concession fee exempt, directing instead that the Petitioner pay GST on MIAL's services, take ITC of the entire amount, and claim refund under Rule 89. The criminal application (review) was dismissed as infructuous, and the State's prayer for a stay of the judgment was refused.

Facts

Flemingo Travel Retail Limited operates duty free shops (DFS) in the international arrival and departure areas of Mumbai International Airport (MIAL), located beyond the customs frontiers of India. The goods sold are almost entirely (about 98%) imported/warehoused goods, stored in a special warehouse licensed under section 58A of the Customs Act, 1962 and moved to the DFS under customs supervision, without ever being cleared for home consumption under section 68. The Deputy Commissioner of Sales Tax, by Order-in-Original dated 10 January 2019, denied the Petitioner refund of input tax credit (ITC) on sale of duty free goods from the departure-area DFS, and show cause notices were also issued. A connected petition (W.P. 1535/2019) challenged MIAL's collection of GST on the concession/minimum guaranteed fees payable by Flemingo under a concession agreement dated 17 February 2014. The Petitioner also sought review of the dismissal of its PIL, relying on the same adjudication order.

Key provisions

• Section 68, Customs Act, 1962 — Clearance of warehoused goods for home consumption
• Section 2(11), Customs Act, 1962 — Definitions
• Section 60, Customs Act, 1962 — Permission for removal of goods for deposit in warehouse
• Section 3(12), Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 20, Customs Act, 1962 — Re-importation of goods
• Section 12, Customs Tariff Act, 1975 — Repeal and saving
• Section 46, Customs Act, 1962 — Entry of goods on importation
• Section 59, Customs Act, 1962 — Warehousing bond