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2019 (2) TMI 1316 - HC - CustomsDenial of export duty drawback to the petitioner - petitioner is a power generation company which has implemented various non-mega power projects - It is the case on behalf of the petitioner that in respect of the supply of the above plant to the power project, the petitioner applied to the Respondent No. 3 for claiming the deemed export drawback in respect of the custom duties paid on the imported equipments and spare parts as per the provisions of Chapter 8 of the Foreign Trade Policy - Territorial jurisdiction of this Court. Territorial Jurisdiction - It is the specific case on behalf of the respondents that as no cause of action much less part of cause of action has arisen within the territorial jurisdiction of the High Court of Gujarat, the Gujarat High Court shall not have any territorial jurisdiction to decide the dispute with respect to deemed drawback between the parties - Held that - It cannot be said that no part cause of action has arisen within the territorial jurisdiction of the Gujarat High Court. Considering the nature of controversy and the reliefs sought it can be said that part cause of action can be said to have arisen at New Delhi however, at the same time when the goods in question, on which the duty drawback is claimed, were used in the project in Gujarat, it can be said that part cause of action has also arisen in Gujarat and therefore, it cannot be said that this Court has no territorial jurisdiction. Under the circumstances, preliminary objection/s raised on behalf of the Union of India that this Court has no territorial jurisdiction is hereby overruled. Rejection of the claim of the petitioner of deemed export drawback on the goods imported by the petitioner, for supply of off-shore equipments and spare parts to the petitioner, supplied by one Alstom , which came to be used by the petitioner to set up a power project - Held that - While considering the benefits of deemed export duty drawback the conditions to be satisfied are that the goods supplied are manufactured in India; supply of goods are to the power projects and that the benefits of deemed export shall be available under Paragraphs (d), (e), (f), (g) of Chapter 8.2, only if the supply is made under procedure of ICB i.e. International Competitive Bidding - In the present case the goods supplied by Alstom and imported by the petitioner was under the procedure of ICB. It is also not in dispute that the said goods imported are used in power projects. However, one essential condition that such imported goods on which the custom duty is paid and which are used in the power project shall be manufactured in India, is not satisfied. Manufacture is defined under Chapter 9.36 of the FTP and it means to make, produce, fabricate, assemble, process or bring it to existence by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling, reconditioning.etc. In the present case the goods which are imported by the petitioner and supplied by Alstom on which the custom duty is paid and for which the deemed export drawback is claimed, cannot be said to be manufactured in India even as per the definition of manufacture contained in clause/Chapter 9.36. Nothing is on record that any of the activities contained in Chapter/Clause 9.36 had been carried out in India before the same is used in the power project. It appears that the goods which are imported are directly used in the power project. The power project itself cannot be said to be the goods. The underlying intent and idea to classify certain transactions to be deemed export is to give them a status of export so as to make eligible or a manufacture of such goods including contractor or subcontractor to get benefit of duty draw back and thereby compete with persons who would supply imported goods. The idea seems to be to give the benefit to the local manufacturers and when the locally manufactured goods are supplied, then they are deemed to be export and thereby idea is to provide level playing field to permit such manufacturer/supplier to drawback duty supplied by him on any inputs of such goods which are ultimately supplied to non-mega power project - considering the object and reasons of the FTDR as well as underlying intent and idea to grant the benefit of deemed export drawback and one of the essential conditions is that the goods imported and supplied to the non-Mega power project must be/shall be manufactured in India and in the present case the goods imported for which the benefit of deemed export drawback is claimed, cannot be said to be manufactured in India , the claim of the petitioner of deemed export drawback is rightly rejected. It is also required to be noted at this stage that in the present case the supplier is Alstom and the petitioner has imported the goods. Therefore, considering Clause/Chapter 8.4.4(i) in respect of the supplies made under Paragraphs 8.2(g) of FTP, i.e. supply of goods to power projects, the supplier shall be entitled to the benefits listed in Para 8.3(b) namely deemed export drawback. Therefore also, the petitioner not being the supplier shall not be entitled to the benefit of the deemed export drawback under Para 8.3(b) as claimed by the petitioner. The impugned decision of the Respondent No. 3 rejecting the claim of the petitioner of deemed export drawback and the impugned minutes of meeting of the Policy Interpretation Committee being PIC No. 10/AM-11, dated 15-3-2011 are absolutely in consonance with the Foreign Trade Policy (2009-2014) and the petitioner has been rightly denied the benefit of deemed export duty drawback - petition dismissed - decided against petitioner.
Issues Involved:
1. Territorial Jurisdiction 2. Entitlement to Deemed Export Drawback under Chapter 8 of the FTP 3. Interpretation and Application of the Foreign Trade Policy (FTP) 4. Principle of Promissory Estoppel and Legitimate Expectation 5. Review and Administrative Decisions under Section 16 of the FTDR 6. Retrospective Application of Policy Interpretation Committee (PIC) Minutes Issue-wise Detailed Analysis: 1. Territorial Jurisdiction: The respondents raised a preliminary objection regarding the territorial jurisdiction of the Gujarat High Court, arguing that no part of the cause of action arose within its jurisdiction. They contended that all relevant actions and decisions occurred in New Delhi, including the filing of applications, PIC meetings, and the issuance of rejection letters. The petitioner countered by highlighting that significant activities related to the project, such as the registered office location, the site of the power project, and the procurement process, occurred in Gujarat. The court concluded that part of the cause of action did arise in Gujarat, thus overruling the preliminary objection and affirming its jurisdiction. 2. Entitlement to Deemed Export Drawback under Chapter 8 of the FTP: The petitioner claimed entitlement to deemed export drawback under Chapter 8 of the FTP, arguing that the goods were supplied under International Competitive Bidding (ICB) and used in a power project, thereby satisfying the condition of being "manufactured in India" due to the fabrication and assembly process at the project site. The respondents contended that the goods were not manufactured in India and thus did not qualify for the benefit. The court examined the definitions and provisions of Chapter 8 and Chapter 9.36 of the FTP, concluding that the goods must be manufactured in India to qualify for the benefit. Since the imported goods were not manufactured in India, the petitioner's claim was rightly rejected. 3. Interpretation and Application of the Foreign Trade Policy (FTP): The petitioner argued that the PIC's interpretation of the FTP, which denied deemed export benefits if the bill of entry was in the name of the project authority, amounted to an unlawful addition of a new condition. The court held that the PIC's interpretation was within its authority and consistent with the FTP's provisions. The court noted that the PIC's decision was based on the intent and objectives of the FTP, which aimed to promote local manufacturing and provide a level playing field for domestic manufacturers. The court found the PIC's interpretation to be valid and in line with the policy's objectives. 4. Principle of Promissory Estoppel and Legitimate Expectation: The petitioner claimed that the respondents were estopped from denying the deemed export drawback benefit based on past practices and the principle of legitimate expectation. The court rejected this argument, noting that there was no specific promise or representation made by the government to the petitioner. The court emphasized that there can be no estoppel against statutory provisions and that the FTP's clear terms must be followed. The court found no basis for applying the principles of promissory estoppel or legitimate expectation in this case. 5. Review and Administrative Decisions under Section 16 of the FTDR: The petitioner argued that the respondents' decision to reject the deemed export drawback claim amounted to an unlawful review of an earlier decision, violating Section 16 of the FTDR. The court disagreed, stating that the decision was an administrative one based on the PIC's interpretation of the FTP and did not constitute a review of a quasi-judicial decision. The court held that the respondents acted within their authority in interpreting and applying the FTP. 6. Retrospective Application of Policy Interpretation Committee (PIC) Minutes: The petitioner contended that the PIC's decision should apply prospectively and not affect past transactions. The court rejected this argument, stating that the PIC's decision was an interpretation of the existing FTP and not a new policy. As such, it applied to all relevant transactions from the inception of the FTP. The court found no merit in the argument for prospective application. Conclusion: The court dismissed the petition, upholding the respondents' decision to reject the deemed export drawback claim. The court found that the PIC's interpretation of the FTP was valid and consistent with the policy's objectives, and that the petitioner did not meet the conditions for the benefit. The court also overruled the preliminary objection on territorial jurisdiction, affirming its authority to hear the case.
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