2018 (10) TMI 386 - HC - Customs

100% EOU - reimbursement of the Central Sales Tax paid on raw materials and inputs purchased from the units situated in DTA - Duty Drawback - time limitation. Held that - In case of Asahi Songwon Colours Limited 2017 (7) TMI 512 - GUJARAT HIGH COURT , this Court had examined the correctness of imposition of a condition in the Handbook of Procedures for claim of the benefit by an EOU which was granted under the Foreign Trade Policy. The Court was of the opinion that such condition which did not find place in the policy could not have been introduced in the guise of procedure to be followed for making the claim. Claim of recovery of duty drawback - delay in initiating procedure for recoveries - Held that - This issue can also be seen in light of gross delay and latches on the part of the Department and the observations made by this Court in the case of Asahi Songwon Colors Limited. While therefore keeping the question of the Department s stand of non eligibility of duty draw back on oil purchases made from the distributors or dealers of the domestic oil companies and not directly from the depots open, this petition is allowed by setting aside the impugned order.

Summary

Issues:
Challenge to order dated 16th July 2018 by respondent no. 2 regarding reimbursement of Central Sales Tax and duty drawback on oil purchases by a 100% Export Oriented Unit (EOU).

Analysis:
The petitioners, a registered company engaged in manufacturing and export, challenged the respondent's objections to reimbursement of Central Sales Tax and duty drawback on oil purchases. The respondent issued a show cause notice in 2017 seeking recovery of amounts paid many years back. The petitioners argued that the objections were unjustified as the Foreign Trade Policy did not impose restrictions on goods sold in the local market or duty drawback conditions. They also contended that the grievances were time-barred. Reference was made to a previous case, Asahi Songwon Colours Limited v. Union of India, to support their arguments.

The Department opposed the petition, citing conditions in the Handbook of Procedures for claiming reimbursement and duty drawback. They highlighted specific conditions not met by the petitioners, justifying the refund demands. The Department also referred to a Government Circular regarding duty drawback eligibility based on oil procurement sources.

The Court noted that the show cause notice for recovery of Central Sales Tax and duty drawback related to transactions from 2007, issued almost ten years later. Citing the Asahi Songwon Colours Limited case, the Court emphasized that the Foreign Trade Policy did not limit benefits based on procurement sources. It critiqued the introduction of conditions not present in the policy through procedures. The Court also discussed the separation of powers and legislative authority, emphasizing that procedures could not restrict benefits beyond policy provisions.

The Court found the issue of Central Sales Tax reimbursement covered by the Asahi Songwon Colours Limited judgment. Regarding duty drawback on oil purchases, the Court highlighted the Department's delay and lack of explanation for the prolonged action. The Court allowed the petition, setting aside the impugned order, while leaving the duty drawback eligibility question open.

In conclusion, the Court disposed of the petition, emphasizing the importance of adherence to policy provisions and the limitations on procedural restrictions beyond policy mandates.