Circular No. 16/2023-Customs dated 07th June, 2023

Key Pointers – 

• The FTP amended on 13.10.2017 and in existence till 09.01.2019 had provided that imports under Advance Authorization for physical exports are also exempt from whole of the integrated tax and compensation cess, as may be provided in the notification issued by Department of Revenue, and such imports shall be subject to pre-import condition.
• Hon’ble Supreme Court has allowed the appeal of Revenue directed against a judgement and order of Hon’ble Gujarat High Court which had set aside the said mandatory fulfilment of pre-import condition. As such, 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.
• The matter has been examined in the Board for purpose of carrying forward the Hon’ble Supreme Court’s directions, the following procedure can be adopted at the port of import:
• Imports that could not meet the said pre-import condition and are hence required to pay IGST and Compensation Cess along with applicable interest.
• The assessment group at POl shall cancel the OOC and indicate the reason in remarks. The BE shall be assessed again so as to charge the tax and cess, in accordance with the above judgment. The payment of tax and cess, along with applicable interest, shall be made against the electronic challan generated in the Customs EDI System.
• On completion of above payment, the port of import shall make a notional OOC for the BE on the CustOlTlS EDI System.
• Accordingly, the input credit with respect to such assessed BE shall be enabled to be available subject to the eligibility and conditions for taking input tax credit under Section 16, Section 17 and Section 18 of the CGST Act, 2017 and rules made thereunder.
• Further, in case such input tax credit is utilized for payment of IGST on outward zero-rated supplies, then the benefit of refund of such IGST paid may be available to the said registered person as per the relevant provisions of the CGST Act, 2017.