2020 (3) TMI 1012 - HC - Customs

Refund of Terminal Excise Duty (TED) - Rejection of refund contending that as supplies against ICB are ab initio exempted from payment of excise duty, the same are ineligible for refund - applicability of relevant FTP 2009-14. HELD THAT - By virtue of the notification No. 4 dated 18th April, 2013, a condition was incorporated stipulating that categories of supplies which are exempt ab initio would not be eligible to receive refund of TED. In the present case, the supplies were made during the period from 15th December, 2009 to 10th February, 2011 and thus during the relevant period, there was no such condition in the FTP. It may also be noted that the aforenoted notification is substantive and not clarificatory and therefore cannot be applied retrospectively. Thus, even in this situation, in our view, the petitioner is entitled to refund of TED under para 8.3 (c) of the FTP as the exemption was not availed by the petitioner and it opted to pay the excise duty. It appears that DGFT in view of policy circular No. 11/2015-20 dated 23rd July, 2018, has now identified the issue viz-a-viz the non-refund of excise duty paid by the suppliers. This circular in our view now recognizes the provisions of the FTP in the right perspective, that exemption from TED was not available for certain supplies even though the same were under ICB. There is thus no impediment in granting the refund to the Petitioner - In view of the above discussion, the impugned circular has no application to the case of the petitioner and it is lawfully entitled to refund of TED in terms of para 8.3 (c) read with para 8.4.4. (iv) of the FTP. The impugned orders/letters denying refund of TED are hereby quashed. The respondents are directed to process petitioner s claim for TED refund in respect of the applications enumerated in paragraph 3 of this order and release the amounts which they are entitled to in respect of the supplies made hereunder within a period of eight weeks from today - Petition allowed.

Issues Involved:
1. Rejection of refund claims for Terminal Excise Duty (TED).
2. Applicability of the Foreign Trade Policy (FTP) provisions.
3. Interpretation of policy circulars and notifications.
4. Eligibility for deemed export benefits.
5. Distinction between ab initio exemption and refund eligibility.

Issue-wise Detailed Analysis:

1. Rejection of refund claims for Terminal Excise Duty (TED):
The petitioner, M/s Multitex Filtration Engineers Limited, sought a refund of TED for supplies made to various power projects. The refund claims were rejected by the respondents based on Circular No. 16 dated 15th March 2013, which stated that supplies against International Competitive Bidding (ICB) are ab initio exempted from excise duty and thus ineligible for refund. The petitioner argued that the rejection was based on an erroneous understanding of the law and relied on the judgment in M/s Alstom Transport India Limited v. Union of India.

2. Applicability of the Foreign Trade Policy (FTP) provisions:
The petitioner contended that their case was covered under para 8.3 (c) read with 8.4.4 (iv) of the FTP. The relevant FTP provisions (2009-14) were examined, which state that deemed exports are eligible for benefits such as exemption from TED or refund where supplies are made against ICB. The court noted that the supplies made by the petitioner were not ab initio exempted from excise duty as they did not meet the conditions for customs duty exemption under Entry No. 91 of the Central Excise Notification No. 6/2006-CE.

3. Interpretation of policy circulars and notifications:
The court scrutinized Circular No. 16 dated 15th March 2013 and found the respondents' reasoning for rejecting the refund claims to be flawed. The circular clarified that no refund of TED should be provided where supplies are ab initio exempted from excise duty. However, the court highlighted that the supplies made by the petitioner did not qualify for customs duty exemption and thus were not ab initio exempted from excise duty. Consequently, the circular could not be invoked to deny the refunds.

4. Eligibility for deemed export benefits:
The court examined the eligibility for deemed export benefits under para 8.2 (g) of the FTP, which covers supplies to power projects not entitled to zero customs duty. The court concluded that the supplies made by the petitioner fell under this category and were not exempted from customs duty, making them eligible for TED refund. The court also noted that the policy circular No. 11/2015-20 dated 23rd July 2018 recognized the issue of non-refund of TED for certain supplies under ICB and allowed refunds where exemption was not available.

5. Distinction between ab initio exemption and refund eligibility:
The court emphasized that the assumption that all supplies under ICB are ab initio exempted was erroneous. The petitioner demonstrated that some supplies under ICB are not exempt from excise duty due to the lack of customs duty exemption. The court also referred to the amended para 8.3 (c) of the FTP (effective from 18th April 2013), which stipulated that supplies exempt ab initio would not be eligible for TED refund. However, this amendment was not applicable to the supplies made by the petitioner during 2009-2011.

Conclusion:
The court held that the impugned circular had no application to the petitioner's case and that the petitioner was lawfully entitled to a refund of TED under para 8.3 (c) read with para 8.4.4. (iv) of the FTP. The court directed the respondents to process the petitioner's refund claims and release the amounts within eight weeks. The writ petition was allowed, and the pending application was disposed of accordingly.

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