FINANCE ACT, 2024-RETROSPECTIVE EXEMPTION TO TARIFF RATE QUOTA IMPORTS OF CRUDE SOYABEAN OIL AND CRUDE SUNFLOWER SEED OIL
The Finance Act, 2024 has granted retrospective exemption to TRQ imports of the products from 1st April 2023 to 30th June 2023
Tariff Rate Quota (“TRQ”) is a mechanism that allows a set quantity of specific products to be imported at lower custom duty rates than the much higher duty rate normally applicable to that product under the First Schedule to the Customs Tariff Act, 1975. The TRQ is primarily introduced for agricultural products such as cereals, meat, fruit and vegetables, and dairy products are the most common.
In India, TRQ is a scheme formulated by the Director General of Foreign Trade (“DGFT”) under Para 2.60 of the Handbook of Procedure. It is implemented by the Ministry of Finance (“MoF”) by way of exemption notifications, to permit duty-free import of certain specified goods up to limited quantities.
The Finance Act, 2024 has granted retrospective exemption for TRQ imports of Crude Soya-bean oil and Crude Sunflower Seed oil (“the products”) made during the period between 01st April 2023 and 10th May 2023 in an attempt to align the Customs Exemption Notification with the Public Notices issued by DGFT and rectify the anomaly created last year.
Introduction:
The products attract a high rate of Basic Customs Duty (“BCD”) under the First Schedule to the Customs Tariff Act, 1975. However, a general exemption from payment of BCD is available to the products under Notification No. 48/2021-Cus. dated 13.10.2021. For Agriculture Infrastructure and Development Cess (“AIDC”) on the products, Notification No. 49/2021-Cus. dated 13.10.2021 provides a concessional rate of 5%. The sequence of events leading to the proposal in the recent Budget is captured below.
Tariff Rate Quota for the products:
Vide Public Notice No. 10/2015-20 dated 24.05.2022, DGFT formulated ‘Tariff Rate Quota Scheme’ (“TRQ scheme”) for the products. Further, it was provided1, inter alia, that TRQs issued for the financial year 2022-23 shall be valid for clearance of import of the products for a period of one year or till 30th June 2023, whichever is earlier.
Issuance of Notification No. 30/2022-Cus. dated 24.05.2022 by MoF to provide duty exemption to the products imported under TRQ scheme:
To implement the TRQ scheme, the MoF issued Notification No. 30/2022-Cus. dated 24.05.2022, providing for exemption to the products from whole of AIDC, inter alia2, when imported against TRQ authorization. At the time of issuance, the Notification specifically provided that the exemption will be available for imports made up to 31.03.2024.
Issuance of Public Notice No. 60/2015-20 dated 01.03.2023 by DGFT confining the TRQ scheme for the products for the FY 2022-23:
Thereafter, DGFT issued Public Notice No. 60/2015-20 dated 01.03.2023 stating that import of products under the TRQ Scheme would be permitted only in cases where the Bill of Lading is dated on or before 31.03.2023 and the Bill of Entry for import is filed on or before 30.06.2023. Till this point, the Public Notices issued by DGFT were aligned with the Customs Exemption Notifications.
Issuance of Notification No. 15/2023-Cus. dated 03.03.2023 by MoF curtailing the period of exemption for TRQ imports of Crude Sunflower seed Oil from March 31, 2024, to March 31, 2023:
However, in March 2023, the MoF issued Notification No. 15/2023-Cus. dated 03.03.2023 curtailing the period of exemption for TRQ imports of Crude Sunflower seed Oil from March 31, 2024, to March 31, 2023.
Disjunction between Public Notice No. 60/2015-20 dated 01.03.2023 issued by DGFT and Notification No. 15/2023-Cus. dated 03.03.2023 issued by MoF:
Thus, while Public Notice No. 60/2015-20 dated 01.03.2023 issued by DGFT permitted TRQ imports of Crude Sunflower seed Oil till 30.06.2023 (where Bill of Lading is dated on or before 31.03.2023), Notification No. 30/2022-Customs dated 24.05.2022 as amended3 by the MoF curtailed the period of exemption for TRQ imports of Crude Sunflower seed Oil by a full year from March 31, 2024, to March 31, 2023.
This resulted in a scenario where importers were extended the benefit of importing the products under the TRQ license up to 30.06.2023 (where Bill of Lading is dated on or before 31.03.2023) but the corresponding Customs Exemption Notification No. 30/2022-Cus. granted exemption only up to 31.03.2023.
Issues faced by importers for TRQ imports of the products and payment of AIDC at 5%:
As a result, even for TRQ imports of the products in April 2023 till 10th May 2023, importers were constrained to discharge AIDC at 5%4 as against a complete exemption from payment of the same. For BCD however, importers could claim alternative exemption under Notification No. 48/2021-Cus. dated 13.10.2021 which provided a complete exemption from payment of BCD for the products.
Issuance of Notification No. 37/2023-Cus. dated 10.05.2023 to provide duty exemption to the products imported under TRQ scheme from May 11, 2023, till June 30, 2023:
Subsequently, in May 2023, the MoF issued Notification No. 37/2023-Cus. dated 10.05.2023 to provide for exemption to the products from the whole of BCD and AIDC. However, the Notification was issued with a stipulation that the Notification would come into force prospectively from 11th May 2023 and that it would not apply to imports after the 30th of June 2023.
This led to unintended withdrawal of duty-exemption for TRQ imports of the products during the period between 1st April 2023 and 10th May 2023 even in cases where Bill of Lading was filed before 31st March 2023.
Our comments:
This anomaly has been rectified by the Finance Act, 2024 which has granted retrospective exemption to TRQ imports of the products from 1st April 2023 to 30th June 2023. Section 105(1) of the Finance Act, 2024 states that Notification No. G.S.R.356(E) i.e., Notification No. 37/2023-Cus. dated 10.05.2023 shall be deemed to have come into force with effect from 1st April 2023 and remain in force during the period from 1st April 2023 till 30th June 2023.
Section 105(4) of the Act states that refund shall be made of the whole of duty and cess, which has been collected, but which would not have been so collected, had the Exemption Notification been in force during the afore-mentioned period.
Most importantly, the proviso to Section 105(4) of the Act states that the person claiming the refund of such duty and cess must make an application in this behalf to the jurisdictional Assistant/Deputy Commissioner of Customs on or before 31st March 2025.
Way Forward:
The retrospective exemption and refund of duties & cess proposed in the Finance Bill, 2024, for TRQ imports of the products, has come into force on 16th August 2024 with the passing of the Finance Act, 2024.
Be that as it may, it would be worthwhile to note that the Karnataka High Court in Union of India v. Yokogawa Bluestar Limited [2001 (129) E.L.T. 598 (Kar.)], held that any delay in issuing Customs Exemption Notification would not come in the way of claiming duty-exemption in terms of the Export Import Policy and further held that that the Ministry of Commerce cannot challenge the decision of the Court when it is their policy that is being implemented by extending duty-exemption.
The Kerala High Court in M Far Hotels Limited v. Union of India [2011 (270) E.L.T. 158 (Ker.)] held that benefit of duty-credit under the Foreign Trade Policy would be available even in the absence of a Notification issued under the Customs Act, 1962.
Generally, in cases deemed fit, retrospective amendments have been introduced in the past vide various Finance Acts to rectify anomalies, for example the exemption provided for import of “Polytan in powder or granule form in Section 133 of Finance Act, 2001 and to import of barge mounted power plants in Section 130 of Finance Act, 2002. It is important to note that in the case of barge mounted power plants, retrospective exemption was granted without making the refund claim subject to the provisions of unjust enrichment under section 27 of the Customs Act, 1962.
Thus, in cases concerning retrospective exemption (including the present amendment), any excess duty paid by importers becomes refundable and they can claim a refund of the same without seeking modification of the assessment, as mandated in in ITC Ltd. v. CCE [2019 (368) E.L.T. 216 (S.C.)]. This is primarily due to the fact that the entitlement to a refund in these cases would be by virtue of the Finance Act.
Having said that, it remains to be seen how the provisions relating to unjust enrichment would be satisfied by importers claiming refunds.
Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.
1. Public Notice No. 15/2015-20 dated 14.06.2022
2. Notification No. 30/2022-Cus. dated 24.05.2022 provided exemption to TRQ imports of the products from whole of BCD and AIDC. However, since Notification No. 48/2021-Cus. dated 13.10.2021 also provides complete exemption from BCD to the same products, specific reference is made to grant of exemption from AIDC.
3. as amended by Notification No. 15/2023-Cus. dated 03.03.2023
4. In terms of Notification No. 49/2021-Cus. dated 13.10.2021