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 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...

Delhi High Court Quashes MOOWR Instructions Denying Benefit To Solar Power Generation Units

Mariya Paliwala

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