23 May 2024
The Delhi High Court has held the benefits under the Manufacture and Other Operations in Warehouse Regulations, 2019 to apply to solar power producing units. The instructions of the Central Board of Indirect Taxes excluding such units from availing of these benefits and the show cause notices issued by licensing authorities following these instructions were struck down.
In a relief to solar power producing units, the Delhi High Court upheld the applicability of the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR) to such units. It quashed the instructions (Instructions) issued by the Central Board of Indirect Taxes and Customs (CBIC) that directed licensing authorities to review and take action against the permissions already granted to them. The licensing authorities were also refrained from granting fresh permissions.
Introduced in 2019, MOOWR is a duty deferment scheme allowing the import of capital goods and inputs for manufacturing and other operations into a customs bonded warehouse without upfront payment of customs duties. Instead, customs duties are payable only if the imported capital goods and inputs are being cleared from the warehouse for home consumption.
Several solar power producers obtained the necessary permissions to set up power production units under MOOWR and started importing capital goods, such as solar panels and other equipment for power generation, without upfront payment of customs duties. Since the only output product of these producers is electricity (which is exempt from customs duties), the solar power producers were not paying any customs duties on their production, even when such electricity was being cleared for home consumption. There was also a possibility of producers re-exporting the capital goods outside India after their use in the production of electricity, without paying any customs duties on them. Due to this, effectively, such producers would not pay any customs duties throughout the life cycle of the production of electricity by them under MOOWR.
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