2024-VIL-455-DEL-CU
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CUSTOMS High Court Cases

Customs – Duty deferment on import of capital goods and inputs intended for use in solar power projects - Benefit of bonded warehouses for solar power projects - Challenge to validity of Instruction dated 09 July 2022 pertaining to the warehousing of imported capital goods used in the generation of solar power and inapplicability of the Manufacture and other Operations in Warehouse (No.2) Regulations, 2019 – HELD - mere fact that input-output ratio norms may not apply in the case of generation of electricity would not be determinative of the controversy which stands raised as those norms are prescribed to take care of contingencies where a part of the imported goods get consumed in the process of manufacture. They would similarly also not be attracted in the case of manufacture of textiles or automotive parts as discussed hereinabove. The inapplicability of those factors in the case of generation of electricity, thus is neither an oddity nor can it be said to be a legislative oversight - Section 61 of the Customs Act, 1962 clearly envisages both capital and non-capital goods being imported and housed in a warehouse for the purposes of manufacturing activity being undertaken in terms of permissions granted under Section 65 of the Customs Act. The statute enables capital goods being housed in the warehouse till such time as they may be cleared for home consumption. While Section 61, prior to the 2016 amendments envisaged the maximum retention period to be five years, post amendment, that stipulation came to be substituted with the Legislature permitting the retention of those goods without any maximum time frame operating. The clear and unambiguous scheme which thus emerges from a reading of Sections 61 and 65 is of the importer being enabled to bring into the country capital goods which may be utilized in connection with manufacture or other operations in a licensed warehouse and the resultant goods alone being subjected to tax - The words “other operations” must be acknowledged as representing the legislative intent to be the undertaking of an activity which may not necessarily answer to the attributes of manufacturing as generally understood - the statutory scheme underlying the MOOWR Regulations cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65 - The impugned Instruction of the Board dated 09 July 2022 insofar as it mandates review of existing licences and taking of “follow-up” action is quashed – the writ petitions are allowed - Interpretation of expression “in relation to” as appearing in Section 65 of the Customs Act – HELD - The expression “in relation to” only appears to suggest a causal link existing between the imported capital goods and the manufacturing activity that may be undertaken in the warehouse. If the words “in relation to” are acknowledged to convey an intent to establish a connection or an association between two things or pertain to an article or goods, it would be apparent that Section 65 clearly intended to create an indelible link between the “manufacturing process or other operations” that may be undertaken with the imported goods. Those goods, as we have found hereinabove, could be either capital or non-capital goods, consumables, components or even raw materials. The provision thus essentially connects the manufacturing process and the imported article. However, bearing in mind the intrinsic characteristics of capital goods, we would be unjustified in reading Section 65 as envisaging capital goods themselves undergoing a process of transformation or manufacture. As long as those goods are found to have contributed to or formed part of a process of manufacture, the qualifying criteria for the applicability of Section 65 would stand fulfilled - Purposive interpretation of Statute – The language in which Sections 61 and 65 are couched does not give rise to any ambiguities. This is also not a case where a plain grammatical construction leads to an apparent contradiction or a position of irreconcilability between two provisions present in the same enactment. These conclusions are based on a harmonious construction of Sections 61 and 65 along with the contemporaneous material which accompanied the promulgation of the MOOWR scheme - The entire plank of the argument against solar power generation being permissible under Section 65 was based on the inequitable impact that such activity was likely to have on domestic industry and local generators. However, that is an aspect pertaining to policy and which cannot constitute a legitimate basis for the Court to reconstruct a statutory provision. The respondents essentially bid to introduce a condition of ineligibility in the garb of statutory interpretation. It would be wholly incorrect to recreate or reassemble Section 65 so as to exclude a particular category of activity based upon the experience of its working or its perceived negative impact on domestic industry - While and hypothetically, it may be open for the respondents to adopt appropriate remedial measures if they be 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”, this Court would clearly not be justified in deploying principles of purposive interpretation to correct that projected and asserted anomaly.
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