2018 (11) TMI 769 - HC - Customs

Duty Drawback - case of petitioner is that Duty Drawback claim provided under Foreign Trade Policy has not been extended to the petitioners in respect of procurement of Wind Electrical Generators (WEG) for generation of electricity and its consumption - principles of natural justice. Held that - From the materials and the pleadings placed on record, what emerges and strikes the Court is that the impugned orders passed by the first and third respondents and as communicated by the fourth respondent appear to be not on the basis of sound legal consideration and appreciation of the relevant factual materials which formed the basis for claim of the petitioners for Duty Drawback - There appears to be some force in the contentions putforth on behalf of the petitioners that the geographical location of the WEGs outside the EOUs, cannot be the reason for denying the Duty Drawback benefit to the petitioners since admittedly the location of Wind Mills is always on the basis of the constant availability of wind resources in all seasons as particularly, in this case, when the petitioners are the only consumers and beneficiaries of the energy generated by the Wind Mills it cannot be gainsaid that the location of Wind Mills outside the territorial jurisdiction can be an adverse factor for denying the benefit of Duty Drawback. When an adverse decision is taken of this nature denying the right of the petitioners to claim Duty Drawback, it is incumbent upon the authority to disclose the basis of such adverse decision and why the case of the petitioners could not be accepted. In the impugned communications, the first respondent appeared to have not taken any effort to address all the issues, but appeared to have taken a decision with closed mind. The matter is remanded back to the first respondent for fresh consideration - petition allowed by way of remand.

Summary

Issues involved:
Claim for Duty Drawback on Wind Electrical Generators (WEGs) located outside Export Oriented Units (EOUs) under Foreign Trade Policy.

Analysis:
1. Location of WEGs and Duty Drawback Claim:
The petitioners, private limited companies manufacturing cotton yarn, sought Duty Drawback claim under the Foreign Trade Policy for procuring Wind Electrical Generators (WEGs) located outside their Export Oriented Units (EOUs). The petitioners argued that the location of WEGs outside EOUs should not be a reason for denial of Duty Drawback since the energy generated was exclusively used by their units. They emphasized that the physical location of Wind Mills does not affect the claim eligibility as the energy generation is integral to their manufacturing activity.

2. Rejection of Duty Drawback Claim:
The first respondent refused to approve the Duty Drawback claim for the petitioners, citing the location of WEGs outside EOUs as the basis. Despite representations and appeals made by the petitioners, the claim was rejected without providing specific reasons or legal provisions justifying the denial. The court noted that the rejection lacked sound legal consideration and appreciation of relevant facts, emphasizing that the location of Wind Mills based on wind availability should not be a deterrent for claiming Duty Drawback.

3. Judicial Precedent and Decision:
The petitioners relied on a Supreme Court decision regarding Modvat/Cenvat credit on capital goods to support their argument that regardless of the location of WEGs, they should be entitled to Duty Drawback as an integral part of their manufacturing activity. The court found merit in this argument and set aside the impugned orders, remanding the matter back to the first respondent for fresh consideration within a specified timeframe. The court directed the first respondent to comprehensively review the claim and consider the exclusive usage of WEGs by the petitioners for their manufacturing activity, in line with the Supreme Court decision cited.

4. Conclusion:
The court concluded that the rejection of the Duty Drawback claim lacked proper legal reasoning and instructed the first respondent to reevaluate the claim, taking into account all relevant factors and the exclusive usage of WEGs by the petitioners. The court highlighted the importance of providing a fair opportunity for the petitioners to present their claim and directed the first respondent to issue final orders within a specified timeline. The court's decision was based on ensuring a thorough and reasoned consideration of the petitioners' claim for Duty Drawback on WEGs located outside their EOUs, emphasizing the need for a just and legally sound determination.