2015 (2) TMI 173 - HC - Customs

Denial of deemed export benefit - refund/return/pay back the benefit of deemed export - Held that - The Petitioner s case is not referred to at all in the paragraph shown by the Respondents. In fact, what has been stated is that on 9th September 2011 in a meeting of the Policy Interpretation Committee under the Chairmanship of the Director General of Foreign Trade, various issues relating to deemed exports, were considered and as per the deliberation in the said meeting, clarifications were issued. The minutes of the meeting of the Policy Interpretation Committee held on 15th March 2011 are at page 132 of the paper-book and it is submitted that the deliberations were held in a meeting convened by the DGFT of representatives of the Department of the Revenue, Department of Economic Affairs and Ministry of Power. The Regional Authorities were advised that in case any payment has been made which is contrary to the clarification issued in the meeting dated 15th March 2011 that all such cases should be reviewed and recovery be made. The Petitioner cannot rely upon the communication dated 5th December 2000, since it was preceded by Policy Circular No. 32, dated 20th August 1998 issued to all Licensing Authorities. Therefore, the Recovery Notices were issued to the Petitioner for surrender of export deemed benefit availed. Since they failed to respond, the Respondents issued the show cause notices as per the Foreign Trade (Development and Regulation) Act, 1992. The affidavit thus contains a justification as to why show cause notices have been issued. We find in the entire affidavit that the Respondents have not explained as to why they decided to recover the benefits earlier granted and from parties like the Petitioners, why the Petitioners were not entitled to the benefits in terms of the earlier policy and specifically is not explained. All that we find is that the deemed exports were for certain categories. In that regard, what we find is that the interpretation which was placed on the provisions of the Foreign Trade policy and particularly Chapter 8 by the Committee in its meeting dated 15th March 2011 is extensively referred to. The denial of duty drawback for excise duty paid on High Speed Diesel, Steel, Cement has been correctly done as per this interpretation. A bare perusal of clarification shows that the meeting of the Policy Interpretation Committee was held. A Zonal Joint Director and some of the Regional Authorities were invited to obtain response from them and particularly their experience in processing export goods. In paragraph 2 of the minutes which has been stated that these authorities pointed out their inability to settle the deemed export claims due to inadequate budgetary provisions. These difficulties are noted in paragraph 2 further and there is a reference to Public Notice issued on 1st March 2011. In paragraph 3 of the minutes, the issue of claiming deemed export benefits issued by the project authority was discussed. After detailed deliberations, it was decided that if the bill of entry is in the name of Project Authority, the deemed export benefit would not be available. Department having clarified and interpreted its policy for the first time in March 2011, it could not have relied upon such clarification to reopen the concluded cases or review them as attempted. This is a clear case of afterthought. If the Policy was earlier applied and to cases including that of the Petitioner, as pointed out in the petition itself, then, that having not been reopened at any time, reliance on such clarification or interpretation cannot take the case of the Department any further. The Department may have been called upon to interpret the Policy in the light of the several difficulties and particularly the objectionable provision but that should not have been the basis for reopening the case of the present Petitioner or review it merely on the strength of the policy or the interpretation placed thereon. The Petitioner could not have been called upon to refund the amount duly paid and disbursed to them. - decision taken by the Policy Interpretation Committee in its meeting on 15th March 2011 cannot be applied to the Petitioner s case and which has been concluded prior thereto. Rule is made absolute in the above terms with no order as to costs. - Decided in favour of appellants.

Summary

Issues Involved:
1. Maintainability of the Writ Petition.
2. Applicability of the Policy Interpretation Committee's decision dated 15th March 2011.
3. Retrospective application of policy clarifications.
4. Entitlement to deemed export benefits and refund of excise duty.
5. Validity of show cause notices issued to the Petitioner.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The court addressed the preliminary objection regarding the maintainability of the Writ Petition. It was argued by the Respondents that the Petitioner should have pursued alternate remedies available under the Foreign Trade (Development and Regulation) Act, 1992. However, the court noted that the Writ Petition raised significant issues regarding the applicability of a circular and policy interpretation that could not be effectively addressed by the Adjudicating Authority. The court emphasized that the rule against entertaining a writ petition due to the availability of alternate remedies is a matter of caution and prudence, not an absolute bar. Consequently, the court decided to entertain the Writ Petition.

2. Applicability of the Policy Interpretation Committee's Decision Dated 15th March 2011:
The Petitioner contended that the show cause notices were based on the Policy Interpretation Committee's decision dated 15th March 2011, which should not apply retrospectively. The court examined the Policy Interpretation Committee's decision and found that it was indeed the foundation of the show cause notices. The court concluded that the decision of the Policy Interpretation Committee could not be applied to cases that were already concluded and where refunds had been sanctioned and granted prior to the 2011 decision.

3. Retrospective Application of Policy Clarifications:
The Petitioner argued that the 2011 decision could not be applied retrospectively to cases covered by the earlier decision of the Government of India, Ministry of Commerce, Directorate General of Foreign Trade dated 5th December 2000. The court agreed with this argument, stating that the clarification issued in 2011 could not govern cases that had been concluded before its issuance. The court emphasized that the Department could not reopen or review concluded cases based on the 2011 interpretation.

4. Entitlement to Deemed Export Benefits and Refund of Excise Duty:
The Petitioner claimed entitlement to deemed export benefits for various projects and sought a refund of excise duty paid on items like iron, steel, cement, and fuel supplied to these projects. The court reviewed the Foreign Trade Policy and relevant communications, including the Government of India's clarification dated 5th December 2000. The court found that the Petitioner's projects were eligible for deemed export benefits under the applicable policy and that the refunds granted could not be demanded back based on the 2011 interpretation.

5. Validity of Show Cause Notices Issued to the Petitioner:
The court examined the show cause notices issued to the Petitioner, which were based on the Policy Interpretation Committee's decision dated 15th March 2011. The court held that the show cause notices could not be sustained as they were founded on a clarification that could not be applied retrospectively. The court quashed and set aside the show cause notices, declaring that the 2011 decision could not be applied to the Petitioner's case, which had been concluded prior to that date.

Conclusion:
The court allowed the Writ Petitions, quashing the show cause notices and declaring that the Policy Interpretation Committee's decision dated 15th March 2011 could not be applied retrospectively to the Petitioner's case. The court directed the authorities to process pending applications independently and in accordance with the policy prevailing before 15th March 2011. The authorities were expected to take a decision within three months from the date of receipt of the court's order. No order as to costs was made.