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					</table><p>The <a href="https://delhihighcourt.nic.in/" target="_blank" rel="noopener">Delhi High Court</a> has quashed a Customs Department circular and show cause notices issued by the Central Board of Indirect Taxes and Customs (CBIC) revoking the permission for solar developers to warehouse imported solar modules to defer paying basic customs duty (BCD) on solar cells and modules effective from April 1, 2022.</p>
<p>The Manufacturing and Other Operations Warehousing Regulation (MOOWR) under the Customs Act 1962 allows developers to declare their solar projects as bonded warehouses, import solar modules free of duty, deposit them in the warehouse /project area, construct solar projects, and generate power. No duty was payable as long as the modules did not leave the bonded premises (project area).</p>
<p>This afforded a way of circumventing the 40% BCD on solar modules. However, CBIC issued a directive holding that MOOWR did not apply to solar projects and already issued warehouse licenses to be reviewed and canceled.</p>
<p>In July 2022, CBIC <a href="https://www.mercomindia.com/cbic-revokes-customs-duty-deferment-on-imported-solar-modules-in-warehouses/" target="_blank" rel="noopener">argued</a> that manufacturing and operations in a bonded warehouse benefit from duty deferment, where both BCD and Integrated Goods and Service Tax (IGST) on imports are deferred. This deferment applies until the goods are released for domestic consumption and does not involve any time limit or interest on the deferred duty. However, it was noted that some solar projects, treating imported solar modules as capital goods, obtained permission under Section 65 of the Customs Act, 1962 for warehousing, which allowed them to defer duties.</p>
<p>The MOOWR Regulations 2019, governing these operations, require that final goods be removed from the warehouse with a one-time lock on the transport vehicle. Since the final goods in these cases are electricity, which cannot be physically locked during transport, these solar projects do not meet the requirements of MOOWR 2019.</p>
<p>The CBIC had pointed out that electricity was not exempted although there was a provision to exempt certain goods from these regulations. The permissions granted to these solar projects under Section 65 were not applicable under MOOWR 2019 regulations.</p>
<p>The petitioners– special purpose vehicles of <a href="https://avaada.com/" target="_blank" rel="noopener">Avaada</a> and <a href="https://www.acme.in/" target="_blank" rel="noopener">ACME</a>– argued before the Delhi High Court that the CBIC&#8217;s directive compels customs authorities to cancel all licenses for solar generation units, which they claim goes against the discretionary power granted to these authorities under the Customs Act. They asserted that the directive went against Section 151A, which prohibits the CBIC from issuing directives that interfere with the discretionary powers of customs officers.</p>
<p>The petitioners argued that neither the Customs Act nor the MOOWR Regulations exclude solar power generation from their scope.</p>
<p>The Court acknowledged the CBIC&#8217;s authority to issue broad policy directives but found fault with specific directives regarding solar power generating units. The instruction went beyond clarification and directed the authorities to review and potentially cancel permissions granted to solar power-generating units.</p>
<p>The Court questioned whether the cancellation of licenses was justified, especially if the license holders did not contravene any provisions or conditions. It highlighted that the applicants transparently declared their intent to generate electrical energy when applying for licenses, indicating no concealment or violation.</p>
<p>The High Court noted that the instruction seemed to dictate that electricity generation falls outside the regulations, which exceeded the CBIC&#8217;s advisory role under Section 151A.</p>
<p>The Court also stated that circulars cannot impose conditions that restrict the scope of exemptions or notifications. Circulars should not foreclose the discretion of quasi-judicial authorities.</p>
<p>Subscribe to Mercom&#8217;s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates </a>to stay informed about critical updates from the renewable industry.</p>


Delhi High Court Quashes CBIC’s Revocation of Duty Deferment for Solar Projects


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					</table><p>The Central Board of Indirect Taxes and Customs (<a href="https://www.cbic.gov.in/" target="_blank" rel="noopener">CBIC</a>) has revoked the permission granted to solar developers to warehouse imported solar modules to defer payment of the basic customs duty (BCD) on solar cells and modules effective from April 1, 2022.</p>
<p>CBIC stated that manufacturing and other operations in a bonded warehouse is a duty deferment program. So, both BCD and Integrated Goods and Service Tax (IGST) on imports stand deferred. In the case of goods other than capital goods, import duties —both BCD and IGST— stand deferred until they are cleared from the warehouse for home consumption, and no interest is payable on duty. The duty deferment is without any time limitation.</p>
<p>CBIC noticed that a few solar projects applied for permission under section 65 of the Customs Act, 1962 for the warehousing of imported solar modules and declared them as capital goods. A few jurisdictional commissioners granted such permissions.</p>
<p>However, under the Manufacture and Other Operations in Warehouse (no.2) Regulations, 2019 (MOOWR 2019), the removal of final goods from the warehouse requires affixing a one-time-lock to the load compartment of the transport in which such goods are removed.</p>
<p>Since the goods here refer to electricity, affixing a one-time-lock to the load compartment of the means of transport is not possible. The final goods fall squarely outside the scope of MOOWR 2019 because of the inability to satisfy the essence of the prescribed condition.</p>
<p>Under Regulation 20, considering the nature of goods, their manner of transport or storage, the CBIC may exempt a class of goods from the provisions of MOOWR 2019. But CBIC had neither exempted goods of the nature of electricity from MOOWR 19 nor issued regulations relating to the removal of electricity.</p>
<p>Therefore, CBIC has notified that the permissions granted to solar power projects are not per the MOOWR 19 provisions, which are the conditions prescribed by the CBIC under Section 65 of the Customs Act 1962.</p>
<p>CBIC also stated that permissions granted to the solar power projects must be immediately reviewed and follow-up action taken. No more permissions in such cases should be granted under Section 65 of the Customs Act,1962.</p>
<p>Indian solar developers <a href="https://mercomindia.com/solar-module-imports-jump-210-yoy-first-quarter/" target="_blank" rel="noopener">procured</a> 9.7 GW of solar modules in the first quarter of 2022 and stockpiled them ahead of BCD on solar cells and modules. Imports surged by 210% year-over-year compared to 3.13 GW imported in Q1 2021.</p>
<p>The stockpiling was to save on module costs, which increased by 40% once BCD kicked in. The exponential increase in imports of cells and modules was mainly from China. In March alone, the top 20 Indian solar developers imported 4.2 GW of solar modules.</p>
<p>For an in-depth look at the data, analysis, and charts, subscribe to our quarterly market report – <a href="https://mercomindia.com/product/q2-2019-india-solar-market-update/" target="_blank" rel="noopener">Mercom India Solar Update</a><em>.</em> Detailed solar import and export data by component types, suppliers, manufacturers, and developers are available in Mercom’s <a href="https://mercomindia.com/product/india-solar-export-import-tracker/" target="_blank" rel="noopener">India Solar Export-Import Tracker</a>.</p>


CBIC Revokes Customs Duty Deferment on Imported Solar Modules in Warehouses

<p>In a move that could significantly influence the pace of EV adoption in the country, the government has reduced the applicable customs duty on parts and components of electric vehicles.</p>
<p>The government has lowered the customs duty on import of EV components to 10-15 percent. So far, EV components imported for assembly in India attracted import duty of 15-30 percent. However, with this move, the assembled parts and components will now attract a duty of 15 percent and above up to 60 percent.</p>
<p>The Central Board of Indirect Taxes and Customs (<a href="http://www.cbic.gov.in/index" target="_blank" rel="noopener">CBIC</a>) has created a separate category for EV components.</p>
<p>According to the CBIC, <em>“Electrically operated vehicles, if imported as a knocked down kit containing all the necessary components (parts or subassemblies) for assembling a complete vehicle with disassembled battery pack, motor, motor controller, charger, power control unit, energy monitor contractor, brake system, electric compressor not mounted on chassis will attract a duty of 10 percent.” On the other hand, “Electrically operated vehicles, if imported as a knocked down kit containing all the necessary components, parts or subassemblies, for assembling a complete vehicle with pre-assembled battery pack, motor, motor controller, charger, power control unit, energy monitor contractor, brake system, electric compressor not mounted on a chassis or a body assembly, will attract a duty of 15 percent.”</em></p>
<p>Other combinations will attract a duty of 25 percent, according to the notification. Battery pack for use in the manufacture of EVs or hybrid vehicles will attract a duty of 5 percent.</p>
<p>According to the CBIC, EVs and its components with cost, insurance, and freight value more than $40,000 will attract 100 percent duty, while those with value less than $40,000 will attract 60 percent duty.</p>
<p>This is one of the many positive developments that have recently occurred in India’s EV sector. To propel the growth of EVs in India, the government <a href="https://mercomindia.com/gst-li-ion-batteries-reduced-from-28-to-18-percent/" target="_blank" rel="noopener">previously</a> slashed applicable rate of the Goods and Services Tax (GST) on lithium ion batteries. The government is also <a href="https://mercomindia.com/govt-mulls-subsidies-ev-charging-infrastructure/" target="_blank" rel="noopener">planning</a> to subsidize EV charging infrastructure.</p>
<p>Many states have <a href="https://mercomindia.com/states-poised-lead-ev-revolution/" target="_blank" rel="noopener">geared up</a> for the uptake of EVs as a means of mainstream mobility and others have initiated plans to develop EV manufacturing hubs. India is a price-sensitive country and for EVs to appeal to a larger consumer base, the cost needs to go down by a lot. States have their own policies, the reduction in taxation will be complimentary.</p>
<p><a href="https://mercomindia.com/uttarakhand-driving-investments-ev-manufacturing/" target="_blank" rel="noopener">Recently</a> state cabinet of Uttarakhand approved a policy to promote the adoption of electric vehicles in the state, while also incentivizing those who want to foray into EV manufacturing. The Delhi government released its draft <a href="https://mercomindia.com/delhi-draft-ev-policy-2018/" target="_blank" rel="noopener">Delhi Electric Vehicle Policy</a> to improve Delhi’s air quality by bringing down the emissions from transport sector.</p>
<p><a href="https://mercomindia.com/ev-adoption-lags-most-states/" target="_blank" rel="noopener">Previously</a>, Mercom reported that EV sales so far has been inconsistent under the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME) program. While some states have made <a href="https://mercomindia.com/states-poised-lead-ev-revolution/" target="_blank" rel="noopener">good progress</a>, many states are well-behind in EV adoption.</p>
<p>The reduction in component cost due to reduction in customs duty will make the adoption of EVs faster in cost-conscious India.</p>
<p>Image credit: Mahindra</p>


To Boost Indigenous Manufacturing, Government Reduces Customs Duty on EV Components

<p>The Ministry of Finance has issued a new memorandum clarifying that only goods specifically classified under tariff item 8541 40 11 (solar cells whether or not assembled in modules or panels) will be subject to the safeguard duty.</p>
<p>Recent confusion arose as the <a href="http://www.cbic.gov.in/resources/htdocs-cbec/customs/cs-act/notifications/notfns-2018/cs-sg2018/cssg01-2018.pdf;jsessionid=D2C0EE198678C1273AD26AF2280F4437" target="_blank" rel="noopener">earlier notification</a> No. 1/2018-Customs (SG), issued on July 30, 2018 said that &#8220;solar cells whether or not assembled in modules or panels”  falling under heading 8541 or tariff item 8541 40 11 of the first schedule to the Customs Tariff Act, 1975 will attract the safeguard duty.</p>
<p>There are many items, other than solar cells and modules, that are classified under heading 8541 in the customs tariff act, such as: diodes, transistors and similar semiconductor devices, photosensitive semiconductor devices, including photovoltaic cells, whether or not assembled in modules or made up into panels, light emitting diodes (led), and mounted piezoelectric crystals.</p>
<p>After the imposition of the safeguard duty, the port systems were detecting any bill of entry filed under heading 8541 and sending it to the accessing officer to check the levy of the safeguard duty on that item. This was creating confusion, as other commodities were also sent for evaluation.</p>
<p>Therefore, the department of revenue, under the Ministry of Finance, circulated a memorandum clarifying that since the goods are specifically classified under tariff item 8541 40 11, only this tariff item should be subject to system intervention and sent for safeguard evaluation.</p>
<p>Currently, all these goods are being accessed provisionally following the instruction of Madras High Court.</p>
<p><a href="https://mercomindia.com/madras-court-customs-solar-modules-safeguard/" target="_blank" rel="noopener">Mercom reported earlier that</a> the Madras High Court had instructed customs officials at the Chennai port to provisionally release a module shipment without paying the safeguard duty. The court had asked customs authorities to make a provisional assessment of the safeguard duty payable in the event of upholding the notification and company to furnish a bond.</p>
<p><a href="https://mercomindia.com/safeguard-duty-25-percent-solar/" target="_blank" rel="noopener">Recently</a>, the Ministry of Finance had announced the levy of a 25 percent safeguard duty based on the final <a href="https://mercomindia.com/25-percent-dgtr-safeguard-duty-recommendation/" target="_blank" rel="noopener">recommendations</a> proposed by the <a href="http://www.dgtr.gov.in/" target="_blank" rel="noopener">DGTR</a>. The decision, which caught the industry off guard, was then challenged by solar developers filing a petition at Orissa High Court.</p>
<p><a href="https://mercomindia.com/orissa-court-solar-safeguard-duty-hearing/" target="_blank" rel="noopener">In the latest development</a>, the Orissa High Court fixed September 19, 2018 as the next date of hearing for the case. This means the safeguard duty imposition will be on hold until that date.</p>


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