Page 57 - GSTL_16 April 2020_Vol 35_Part 3

2020 ] PRINCE SPINTEX PVT. LTD. v. UNION OF INDIA 271
vestment made by the MRF in the form of industrial development in the
State, contribution to labour and employment and also a huge benefit to the
State exchequer in the form of the State’s share, i.e. 40% of the Central Ex-
cise duty paid on compound rubber of Rs. 177 crores within the State of
Kerala. The impugned action on the part of the State Government is highly
unfair, unreasonable, arbitrary and, therefore, the same is violative of Arti-
cle 14 of the Constitution of India. The action of the State cannot be permit-
ted to operate if it is arbitrary or unreasonable. This Court in E.P. Royappa v.
State of Tamil Nadu, 1974 (4) SCC 3, observed that where an act is arbitrary,
it is implicit in it that it is unequal both according to political logic and con-
stitutional law and is therefore violative of Article 14. Equity that arises in
favour of a party as a result of a representation made by the State is found-
ed on the basic concept of “justice and fair play”. The attempt to take away
the said benefit of exemption with effect from 15-1-1998 and thereby de-
prive MRF of the benefit of exemption for more than 5 years out of a total
period of 7 years, in our opinion, is highly arbitrary, unjust and unreasona-
ble and deserves to be quashed. In any event the State Government has no
power to make a retrospective amendment to SRO 1729/93 affecting rights
already accrued to MRF thereunder.”
3.9 It was, accordingly, urged that the petition deserves to be allowed
in terms of the reliefs as prayed for in the petition.
4. Opposing the petition, Mr. Parth Bhatt, Learned Senior Standing
Counsel for the respondent No. 1, invited the attention of the Court to the For-
eign Trade Policy, 2015-2020 and more particularly, to Chapter 5 thereof, which
makes provision for Export Promotion Capital Goods (EPCG) Scheme. Reference
was made to para 5.01 of Chapter 5 of the Foreign Trade Policy, which makes
provision for the EPCG Scheme, to submit that prior to the commencement of the
GST regime, para 5.01(a) allowed import of capital goods for pre-production,
production and post-production at zero customs duty. Alternatively, the authori-
sation holder could also procure capital goods from indigenous sources in ac-
cordance with paragraph 5.07 of the Foreign Trade Policy. It was pointed out that
the duty exemption scheme under the EPCG Scheme is made applicable by issu-
ing a corresponding notification, accordingly, the provisions of the EPCG
Scheme were implemented vide Customs Notification No. 16/2015-Cus., dated
1st April, 2015. It was submitted that after the commencement of the GST regime,
Notification No. 16/2015 came to be amended vide Notification No. 26/2015-
Cus., dated 29-6-2017 by substituting the words and figure “under Section 3”
with the words and figures and brackets “under sub-sections (1), (3) and (5) of
Section 3” in the opening paragraph. It was pointed out that while making the
aforesaid amendment, sub-sections (7) and (9) of Section 3 of the Customs Tariff
Act were not included. It was submitted that similarly, in paragraph 2 of the said
notification in condition (6) for the words and figure “under Section 3”, the
words and figures and brackets “under sub-sections (1), (3) and (5) of Section 3”
came to be substituted; however, sub-sections (7) and (9) of Section 3 were not
included, which indicates that there was no intention to grant exemption from
payment of IGST on import of capital goods.
4.1 It was submitted that to comply with the provisions of Notification
No. 26/2015-Cus., dated 29-6-2017, the DGFT issued Trade Notice No. 11/2018,
dated 30-6-2017 which stipulated that “Importers would need to pay IGST and take
input tax credit under the GST rules.” It was submitted that, therefore, when the
petitioner filed Bill of Entry on 3-8-2017, exemption from payment of IGST was
not granted.
GST LAW TIMES  16th April 2020  177