Madras High Court Quashes Customs Notice on GST for Auctioned Goods

Court Rules Customs Authorities Exceeded Jurisdiction in Directing Non-Collection of GST on Auctioned Cargo

In a significant ruling, the Madras High Court has quashed a Public Notice issued by the Customs Authorities that directed custodians not to collect GST on auctioned goods. The court, presided over by Justice N. Anand Venkatesh, declared the notice dated February 12, 2021, as being beyond the jurisdiction of the Customs Authorities and contrary to the statutory provisions under the Central Goods and Services Tax (CGST) Act, 2017, and the Customs Act, 1962.

The case was brought to the court by the National Association of Container Freight Stations and a company, challenging the notice issued by the Joint Commissioner of Customs. The petitioners argued that the notice was unlawful as it prevented the collection of GST on goods sold through auctions, which they claimed amounted to rendering a service that should be subject to GST. The court upheld this view, stating that once customs duty is paid upon import, the subsequent auction sale constitutes a separate supply of goods transaction, which is liable for GST.

Justice Venkatesh emphasized that the auctioned goods, once sold, lose their character as imported goods and the buyer should be treated as a recipient liable to pay GST. The court further noted that the Customs Authorities overstepped their bounds by issuing a directive affecting GST collection, a matter outside their jurisdiction.

The judgment clarified that the IGST paid on import and the GST on auction sales are distinct transactions under different legislative provisions. It underscored that the Customs Authorities do not possess the authority to issue public notices affecting GST collection, as these fall under the purview of the CGST Act, 2017.

The ruling also quashed a consequential notice issued by the Customs authorities, reinforcing the court's stance on jurisdictional overreach. This decision is expected to impact how GST is handled in similar future transactions involving auctioned goods.

Bottom Line:

Customs Act and GST Laws - Public Notice issued by Customs Authorities directing custodians not to collect GST on auctioned goods held to be beyond jurisdiction and contrary to statutory provisions under CGST Act, 2017 and Customs Act, 1962.

Statutory provision(s): Customs Act, 1962 Sections 48, 150, 152, 157, 158, 159; CGST Act, 2017 Sections 3, 7(1), 9(1), 15.

M/s. National Association of Container Freight Stations v. Joint Commissioner of Customs (CH-IV), (Madras) : Law Finder Doc Id # 2797337