2021 (7) TMI 865 - HC - Customs

100% EOU - sale in DTA at concessional rate of duty - benefit of N/N. 2/95 - benefit of physical export applicable to deemed export or not - HELD THAT - With reference to the Exim Policy, as well as circulars issued by the Ministry of Commerce and Ministry of Finance and the business transactions, as well as the nature of benefits claimed, involves an adjudication of technical points. Such technical points with reference to the business transactions cannot be adjudicated in a writ proceedings under Article 226 of the Constitution of India. It requires examination of certain records as well as the policy decisions, which all are prevailing during the relevant point of time, more specifically, for the purpose of extending the benefits. Thus, it would be preferable, such issues are decided by the 5th respondent, Commissioner of Central Excise and the 4th respondent, Tribunal, which all are the expert bodies in the field. The power of judicial review under Article 226 of the Constitution of India, need not be extended for the purpose of adjudication of such technical issues, more specifically, when the appeal is pending before the CESTAT and the appeal against the show cause notice is also pending before the 5th respondent, Commissioner of Central Excise. All the facts and circumstances with reference to the records are to be adjudicated and the application of the principles also must be decided by affording opportunity to the parties. This being the factum established, the respondents 4 and 5 are directed to proceed with the proceedings which all are pending before them, after hearing parties and by affording opportunity to the petitioner and take a decision and pass orders, as expeditiously as possible. Petition disposed off.

Summary

Issues:
1. Quashing of appellate order regarding deemed exports and DTA entitlement.
2. Interpretation of Exim Policy 1997-2002 and Notification No.2/95.
3. Application of principles from Virlon Textile Mills case.
4. Adjudication of technical issues by CESTAT and Commissioner of Central Excise.

Analysis:
1. The petitioner sought to quash the impugned appellate order to consider deemed exports for DTA entitlement. The petitioner, an EOU manufacturing cotton yarn, relied on Exim Policy 1997-2002 allowing DTA sales up to 50% of FOB value subject to conditions. The circular highlighted discrepancies in DTA entitlement against deemed exports, leading to revenue loss and issuance of show cause notices.

2. The petitioner argued that the issue was previously decided by CESTAT and referred to the Virlon Textile Mills case, emphasizing the equivalence of DTA sales against foreign exchange to physical exports. The judgment clarified that DTA sales against foreign exchange fell under the proviso to Section 3(1) of the 1944 Act, entitling EOUs to benefits under Notification No.2/95-CE without limitations imposed by para 9.9(b) of the Exim Policy.

3. Citing the Ginni International case and subsequent judgments following Virlon's principles, the petitioner contended that consistency in applying the Supreme Court's ruling should guide the current case. The senior standing counsel argued for technical adjudication by CESTAT and the Commissioner of Central Excise, emphasizing the need for factual examination before applying legal principles.

4. The court acknowledged the settled principles from Virlon's case but deferred technical adjudication to the expert bodies, CESTAT and Commissioner of Central Excise. The court directed the respondents to consider the petitioner's claims in light of Virlon's principles, ensuring due process and opportunity for submissions. The judgment emphasized the need for a detailed examination of records and policy decisions by the expert bodies, rather than through writ proceedings.

In conclusion, the court disposed of the writ petition, directing the expert bodies to proceed with the pending proceedings, consider the petitioner's submissions, and pass orders expeditiously while adhering to the principles laid down by the Supreme Court in Virlon's case.