HC holds Customs officer is empowered to assess IGST exemption on import of goods

This Tax Alert summarizes a recent ruling^[1] of the Kerala High Court (HC). The issue involved was whether the assessing officer under Customs Act, 1962 (Customs Act) is empowered to make assessment regarding claim of exemption of Integrated tax (IGST) on import of goods under section 28 of Customs Act.

Assessee paid basic customs duty (BCD) and social welfare surcharge (SWS) on imported goods and claimed exemption of IGST. On post clearance audit, it was noticed by the department that the goods were not exempted. Accordingly, assessment order was passed under section 28 denying the IGST exemption. 

Aggrieved, the assessee filed a writ petition before the Kerala HC on the ground that the impugned order is without jurisdiction in as much as it has been passed by an authority which is not empowered to assess the tax levied under the provisions of IGST Act. 

Section 2(15) of Customs Act defines duty as customs duty and Section 2(2) defines assessment as “determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 or under any other law for the time being in force”, with reference to…...

Revenue placed reliance on Kerala HC ruling in case of Canon India Private Limited^[2] , to contend that the assessing authority under the provisions of Section 28 is empowered to assess evasion/non-payment of not only Customs duty but, also of any other tax, cess or duty levied on imported goods. 

HC observed that section 2(2) empowers the assessing authority to determine the dutiability of any goods and the amount of duty/tax, cess or any sum so payable under the Customs Act or Customs Tariff Act or under any other law for the time being in force, with reference to exemption or concession of duty, tax or cess, consequent upon any notification issued under such laws.

Accordingly, HC held that the assessing officer under Customs Act is empowered to assess IGST exemption.

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It is relevant to note that Mumbai CESTAT, in a similar matter, observed that proper officer under Customs Act invoking power of assessment would be in excess of jurisdiction to venture into determination of rate of duty under IGST law. The officers with jurisdiction to intrude into such cases are central tax officers.

Delhi CESTAT in another case observed that the word “duty” referred in Customs notification refers only to basic customs duty and doesn’t include IGST on import of goods. Presently, this case is pending before Supreme Court [2021 (52) G.S.T.L. J22 (S.C.)]

Further, the question whether IGST levy on import of goods is under Customs Act or under IGST Act, is also pending before Bombay HC.

[1] TS-581-HC-2023
[2] 2021 KHC 6151