Delhi High Court Quashes MOOWR Instructions Denying Benefit To Solar Power Generation Units
The Delhi High Court has held that the statutory scheme underlying the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR) cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65 of the Customs Act, 1962. The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the activities undertaken by...
The Delhi High Court has held that the statutory scheme underlying the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR) cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65 of the Customs Act, 1962.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the activities undertaken by the writ petitioners are in aid of the objective of the country transitioning towards renewable energy sources so as to meet the targets of switching to a cleaner energy source. This is clearly an aspect that cannot possibly be doubted, even by the respondent department.
The batch of writ petitions was filed challenging the validity of instructions dated July 9, 2022, issued by the Central Board of Indirect Taxes and Customs in exercise of powers conferred by Section 151A of the Customs Act, 1962. The instructions pertaining to the warehousing of imported capital goods used in the generation of solar power and the asserted inapplicability of the Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 are framed in the backdrop of Section 65 of the Customs Act, 1962.
The petitioners have challenged various Show Cause Notices that came to be issued in purported implementation of the Instruction and which call upon them to explain why the license for warehousing as granted in terms of the MOOWR Regulations was not cancelled.
The petitioner contended that the instruction is contrary to Section 151A. The Instruction compels and commands the Customs authorities to cancel all licenses pertaining to solar generation units, thus impeding the statutory discretion that otherwise stands conferred upon them.
The petitioners have also assailed the Instruction on the Anvil of the Proviso to Section 151A, with it being urged that the Board stand statutorily injuncted from framing an order, instruction, or direction that would compel an officer of Customs to make a particular assessment or one that may interfere with the discretion that otherwise stands entrusted in it. The customs authorities stand deprived of the right to examine or adjudge the validity of the licenses held by the petitioners, and the instructions urge them to take emergent steps to cancel all existing licenses.
The petitioners contended that the instruction is in essence a direction to the customs officials to not only refrain from granting any fresh licenses but to also review existing licenses. Thus depriving the petitioners of the opportunity to explain why their licenses granted under the MOOWR Regulations were valid.
The petitioner contended that the act of grant of the MOOWR license is a judicial function performed by an officer of customs. A fortiori, the cancellation of a license would also be liable to be viewed as a judicial act since, prior to the taking of that decision, the officer of customs would be bound to carry out an inquiry and investigation in consonance with the principles of natural justice. The grant of a license under the MOOWR Regulations must be held to be a judicial act.
The department contended that solar cells are classified under Tariff Entry 8541 42 00, whereas solar modules are placed in Tariff Entry 8541 43 00 of the First Schedule to the Customs Tariff Act, 1975. Prior to April 1, 2022, solar cells and solar modules attracted Nil Basic Customs Duty. The solar power developers were abusing the MOOWR Regulations by continuing to house the imported capital goods and not clearing them for home consumption, consequently escaping the liability of 12% GST as well as 18% of the import GST in addition to BCD. MNRE, along with that communication, is also stated to have forwarded a representation of the Indian Solar Manufacturers' Association requesting the Department of Revenue to prevent solar power producers from misusing the provisions of the MOOWR Regulations. The learned ASG submitted that it was in the aforesaid backdrop that the Board came to issue the impugned instruction on July 9, 2022.
Section 61 enables a person to import capital or other goods and place them in a licensed warehouse pursuant to permission that may be granted and to undertake “manufacturing processes or other operations." Prior to the amendments that were introduced in Section 61 by Act 28 of 2016, capital goods, “goods other than capital goods,” and “any other goods” could have been placed in a warehouse for periods stipulated in that provision. In the case of capital goods, Section 61(1)(a) placed an outer time limit of five years, subject to extensions that the Principal Commissioner of Customs or Commissioner of Customs could grant upon sufficient cause being shown. Therefore, prior to 2016, there was a specified time limit of five years for which capital goods could have been housed or placed in a warehouse.
Post the 2016 amendments, an importer of capital goods now stands enabled to retain them in a warehouse till they are ultimately cleared for home consumption. In terms of Section 61(1)(a), the facility is extended to capital goods intended for use in either a 100% export-oriented undertaking, an electronic hardware technology part unit, a software technology part unit, or “any warehouse wherein manufacture or other operations may have been permitted” in terms of Section 65. The 2016 Amendments thus constitute a radical departure from the position obtained under Section 61 prior thereto.
The court noted the absence of any avowed intent imbuing Section 65, which could be justifiably construed as an intendment to exclude a particular category of manufacturing activity from its ambit in clear or unequivocal terms.
“As we read Section 65, it becomes apparent that the owner of any warehoused goods may, in terms of the permission granted, store or house those goods and carry on any manufacturing process or other operations. A plain reading of Section 65 suggests that a manufacturing process may be undertaken in a licensed warehouse, and the same could extend to any category of goods. The provision does not use words of qualification or limitation insofar as either the nature of goods or manufacturing activity is concerned,” the court said.
The court clarified that it may be open for the respondent department to adopt appropriate remedial measures if they are of the opinion that solar power generation, by virtue of permissions granted under Section 65, is negatively impacting local generators or distorts the “level playing field." The Court observed that it would clearly not be justified in deploying principles of purposeful interpretation to correct that projected and asserted anomaly.
Counsel For Petitioner: Senior Advocate Sujit Ghosh, with Advocates Mannat Waraich, Shubh Dixit and Ananya Goswami
Counsel For Respondent: N. Venkataraman, ASG along with Ms. Amritha Chandramouli, Mr. Rahul Vijaya Kumar, Mr. Chandrashekara Bharathi, Ms. Kushi S., and Mr. Shivshankar G., Advs.
Case Title: Acme Heergarh Powertech Private Limited Versus CBIC
Citation: 2024 LiveLaw (Del) 574
Case No.: W.P.(C) 10537/2022 & CM APPL. 31692/2022 (Amendment), CM APPL. 63917/2023(Direction)