Article

Union Budget 2024-25 – Introduction of ‘fetters’ to beneficial character of MOOWR scheme

By Dhruv Matta and Namrata Singhal

The article in this issue of Indirect Tax Amicus attempts to explore the ramifications of a specific legislative change introduced in the Union Budget 2024-25 vide Clause 101 of Finance (No.2) Bill, 2024 which seeks to amend Section 65 of the Customs Act, 1962. Section 65 covers Manufacture and Other Operations in Warehouse Regulations (MOOWR) scheme. The proposed amendment empowers the Central Government to notify certain manufacturing processes and other operations in relation to a class of goods that shall not be permitted in a MOOWR unit. The article discusses the background leading to this amendment while it observes that this change may dent the viability of the scheme. According to the authors, the amendment should have provided license holders an opportunity to switch to other schemes like EPCG/Advance Authorizations. Alternatively, grandfathering clauses could be envisaged to not adversely impact the vested rights of license holders.

Goods and Services Tax (GST)

Notifications and Circulars

• Union Budget 2024 – Highlights of changes proposed in GST regime
• GST and Customs law – Reference to old criminal laws to be read as referring to new laws

Ratio decidendi

• Refund of ITC on exports – ‘FOB value’ and not ‘net realized value’ to be considered – Bombay High Court
• Blocking of Electronic Credit Ledger without issuance of show cause notice is wrong – Telangana High Court
• Disallowing debit of electronic credit ledger under Rule 86A – CBIC Instruction dated 2 November 2021 is not applicable to State GST unless adopted by the State – Orissa High Court
• Transitional credit – No time-limit prescribed under Section 140(5) for filing application for extension for recording of invoices in books of account – Bombay High Court
• Payment of tax during search, i.e., before completion of search, is not voluntary payment – Calcutta High Court
• No interest from date of deposit in electronic cash ledger (ECL) till date of filing of return – Amount in ECL is in nature of advance tax which can only be utilised for payment of tax – Gujarat High Court
• Transportation of imported machinery from Customs port to own factory – Penalty for absence of e-way bill imposable only under second limb of Section 129(1)(a) – Bombay High Court
• Appeal to Appellate Authority – Substitution of Rule 108(3) by Notification dated 26 December 2022, is applicable retrospectively – Karnataka High Court
• Appeal to Appellate Authority – Section 5 of Limitation Act cannot be invoked to condone delay – Patna High Court
• Discount given by supplier post supply is not service provided by purchaser to supplier – Madras High Court
• No penalty for mentioning different dates on e-way bill and tax invoice, which is a bona fide typographical error – Allahabad High Court
• Non-furnishing of certified copy of order in English prejudices assessees right – Andhra Pradesh High Court
• Refund of IGST on exports – Claim under Rule 96 instead of Rule 89 is not fatal – Madras High Court
• Scrutiny of returns – Non-issuance of ASMT-10 notice vitiates scrutiny process including discrepancies noticed, though such notice is not a mandatory pre-requisite for adjudication – Madras High Court
• Seizure order when vehicle was not on regular route or on different route, is not correct -Allahabad High Court
• Recovery of retention bonus, joining bonus, tuition assistance program, and work from home allowance from employees is not taxable – Karnataka AAR
• Value of materials and cost of installation borne by the recipient when not includible – Uttar Pradesh AAR

Customs

Notifications and Circulars

• Union Budget 2024 – Highlights of changes in Customs law and duty rates
• Compensation Cess exemption on imports by SEZ unit or developer for authorised operations – Retrospective applicability proposed
• Defence imports – Exemption extended till 30 June 2029
• Provisional attachment of bank account under Customs Section 110(5) – CBIC issues detailed Instructions
• EPCG Scheme – Procedural aspects relaxed

Ratio decidendi

• No penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 for non-fulfilment of export obligation by EOU – Karnataka High Court
• Withdrawal of ex-bond Bills of Entry and reinstatement of into-bond Bills of Entry when permissible – CESTAT Kolkata
• Time of publication of notification in gazette, and not only date of its publication, is important – Bombay High Court
• Delay in issuance of project authority certificate is not fatal – Refund of duty paid earlier permissible as exemption eligible – Gujarat High Court
• Transponder, Muxponder and Optical splitter cards are classifiable as ‘parts’ under TI 8517 70 90 – CESTAT New Delhi
• ‘Injection Stretch Blow Moulding Machine’ is classifiable as ‘Blow Moulding Machine’ and not as ‘Injection Moulding Machine’ – Not liable to anti-dumping duty – CESTAT Ahmedabad

Central Excise, Service Tax and VAT

Ratio decidendi

• Valuation – Section 4A (MRP based valuation) not applicable for HDPE bag containing 100 poly packs containing 33+1 smaller packs – Supreme Court
• Front cover, middle cover and back cover of cellular phones are classifiable under TI 8517 70 90 – Supreme Court upholds CESTAT decision
• No service tax on expenses for establishing and running representative offices outside India – Supreme Court upholds CESTAT decision
• No intellectual property service for allowing use of trademark by proprietorship concern owned by wife – CESTAT Chennai

Cenvat credit on capital goods handed over to supplier for installation – CESTAT Kolkata