Indirect Tax & ​Foreign Trade Insights - Issue 16

Indirect Tax_Sharp & Stellar_Issue_16.pdf

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Highlights

• GST applicable on amounts collected for sinking fund by RWA: WB AAAR

• Referral services to foreign universities qualifies as export of services: TS AAR

• Provisional attachment ceases after expiry of one year from the date of order: Allahabad HC

• Solar power generating unit, eligible to avail benefits under the MOOWR scheme: Delhi HC

• Amendments to Duty Drawback effective from May 05, 2024

• QCO exemption provided by Notification 71/2023 not available to AA issued on or before March 11,2024

Insights

The Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme is an initiative introduced by the Indian government under the Customs Act. Under this scheme, manufacturing and other operations can be carried out in a bonded warehouse, allowing businesses to defer the payment of customs duties until the goods are removed from the warehouse for sale in the domestic market.

This scheme provides benefits to businesses by reducing the cost of capital and facilitating ease of doing business. Businesses that wish to utilize the MOOWR scheme must comply with certain regulations and procedures outlined by the customs authorities. These regulations govern various aspects such as the types of operations allowed in the warehouse, record-keeping requirements, security measures, and procedures for removal of goods from the warehouse.

Overall, the MOOWR scheme aims to promote manufacturing activities and boost exports by providing a conducive environment for businesses to carry out value addition and other operations within the country.

The CBIC, via Instruction No. 13/2022-Customs dated 09/07/2022, had limited the scheme's benefits to solar power generating units, arguing that they failed to meet a crucial requirement: affixing a one-time lock on goods sent for export, as mandated by MOOWR regulations. As electricity cannot be secured with a one-time lock upon removal from the warehouse, solar projects were denied MOOWR benefits.

Now the Delhi High Court has overturned these instructions from the CBIC, offering a reprieve to solar power firms embroiled in a legal dispute regarding eligibility for the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme. This scheme permits importers to defer custom duties on goods used in manufacturing processes.

The court ruled that Section 65 of the Customs Act does not exclude solar generation, rendering the CBIC's instructions invalid due to their lack of statutory basis. Consequently, solar projects housed in warehouses can continue to avail themselves of the benefits under the MOOWR Scheme.

Period Covered: May 06, 2024, to May 12, 2024