Jaipur:<\/strong> In a significant ruling on customs duty and the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR), the Rajasthan High Court has rejected the Customs Department\u2019s demand for nearly \u20b92.88 crore in interest on solar modules imported for a solar power project.<\/p>\n\n\n\n A Division Bench of Justice Arun Monga and Justice Ashutosh Kumar upheld the CESTAT order in favour of M\/s Acme Aklera Power Technology Pvt. Ltd., holding that the 90-day interest trigger under Section 61 of the Customs Act, 1962 does not apply to capital goods covered by the manufacturing warehouse provisions.<\/p>\n\n\n\n The company had imported 8,37,288 solar modules for its power project and stored them in a customs-bonded warehouse under the MOOWR scheme.<\/p>\n\n\n\n However, around 5.82% of the modules could not ultimately be installed because of a subsequent change in the project design and shortage of land for accommodating the mounting structures.<\/p>\n\n\n\n The company thereafter cleared the unused modules for home consumption by filing Ex-bond Bills of Entry and paid the applicable customs duty.<\/p>\n\n\n\n The Customs Department nevertheless treated the modules as having overstayed the permissible warehousing period and demanded interest on the corresponding customs duty. The High Court’s ruling turned on the amendment to Section 61 of the Customs Act, 1962, brought about by the Finance Act, 2016.<\/p>\n\n\n\n The Bench noted that under the amended provision, capital goods warehoused in a facility permitted for manufacturing under Section 65 can remain warehoused \u201ctill their clearance.\u201d<\/p>\n\n\n\n The Court held that the provision does not prescribe an outer time limit for such capital goods.<\/p>\n\n\n\n Accordingly, the 90-day period relied upon by the Customs Department has no application to capital goods falling under Section 61(1)(a).<\/p>\n\n\n\n The Court explained that the fixed one-year period and the consequent 90-day interest trigger continue only for the separate category of goods covered under Section 61(1)(c).<\/p>\n\n\n\n That provision does not govern capital goods falling within the manufacturing warehouse category under Section 61(1)(a).<\/p>\n\n\n\n The Bench therefore held that there could be no question of \u201coverstaying\u201d a prescribed warehousing period when the statute itself does not prescribe such a period for the capital goods in question.<\/p>\n\n\n\n The Court also rejected the Department’s argument that the unused modules should subsequently be treated as ordinary goods that had exceeded the permissible warehousing period.<\/p>\n\n\n\n The Bench held that the relevant consideration is the purpose and intended use of the goods at the time of import, rather than whether every imported item was ultimately installed.<\/p>\n\n\n\n In the present case, the inability to use a small portion of the modules resulted from subsequent project changes and land constraints, circumstances that could not reasonably have been anticipated when the goods were imported.<\/p>\n\n\n\n The subsequent clearance of the unused modules on payment of customs duty also did not alter their original classification for determining liability to interest.<\/p>\n\n\n\n The High Court further rejected the Department’s reliance on a 2019 CBIC circular, observing that the circular itself distinguishes between goods used for manufacturing operations under Section 65 and goods cleared \u201cas such\u201d for other purposes.<\/p>\n\n\n\n The Court held that a departmental circular cannot override the statutory provisions or revive an interest liability that Parliament had consciously removed through the amended law.<\/p>\n\n\n\n The Bench also found the three Supreme Court decisions cited by the Department distinguishable. The legal position changed after the 2016 amendment, particularly with respect to capital goods used in manufacturing warehouses.<\/p>\n\n\n\n The Court also noted that customs duty on the imported goods was deferred, not waived. Once the unused modules were cleared for home consumption, the company paid the applicable duty.<\/p>\n\n\n\n Therefore, there was no loss of customs revenue warranting the interest demand.<\/p>\n\n\n\n Finding no substantial question of law arising from the CESTAT’s order, the Division Bench dismissed the Customs Department’s appeal and upheld the relief granted to Acme Aklera Power Technology Pvt. Ltd.<\/p>\n","protected":false},"excerpt":{"rendered":" MOOWR Warehouse Capital Goods Can Remain Warehoused till Clearance; HC Upholds CESTAT Relief to Solar Power Company Jaipur: In a significant ruling on customs duty and the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR), the Rajasthan High Court has rejected the Customs Department\u2019s demand for nearly \u20b92.88 crore in interest on solar modules … Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":9364,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wppp_is_locked":false,"_wppp_selected_plans":[],"footnotes":""},"categories":[29,69],"tags":[],"class_list":["post-9504","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-top-stories","category-rajasthan-high-court"],"_links":{"self":[{"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/posts\/9504","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/comments?post=9504"}],"version-history":[{"count":1,"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/posts\/9504\/revisions"}],"predecessor-version":[{"id":9505,"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/posts\/9504\/revisions\/9505"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/media\/9364"}],"wp:attachment":[{"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/media?parent=9504"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/categories?post=9504"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lawsandlegals.com\/english\/wp-json\/wp\/v2\/tags?post=9504"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Dispute Over Unused Solar Modules<\/h3>\n\n\n\n
The importer successfully challenged the demand before the Commissioner (Appeals) and subsequently before the CESTAT, following which the Department approached the High Court.<\/p>\n\n\n\nNo Fixed Time Limit for MOOWR Capital Goods<\/h3>\n\n\n\n
90-Day Interest Rule Applies to a Different Category<\/h3>\n\n\n\n
Later Non-Use Does Not Change Character of Imported Goods<\/h3>\n\n\n\n
CBIC Circular Cannot Override the Customs Act<\/h3>\n\n\n\n
Old Supreme Court Rulings Do Not Apply<\/h3>\n\n\n\n
Those judgments had been rendered under the pre-amendment version of Section 61, when fixed warehousing periods applied to the relevant categories of goods.<\/p>\n\n\n\nNo Loss of Revenue; \u20b92.88 Crore Interest Demand Rejected<\/h3>\n\n\n\n