2022 (9) TMI 1353 - HC - Customs

Seeking refund of terminal excise duty (TED) - duty paid on supply of laptops to licence holders of Export Promotion Capital Goods (EPCG) Scheme - benefits for deemed exports - HELD THAT - There are no doubt in mind and Mr.Chandrasekaran, learned Senior Panel for R1 to R5 would fairly accede to the position, that a supplier to a EOU/licence holder under the EPCG scheme, is entitled to refund of terminal excise duty. In the present case, there is no dispute on the position that the petitioner has, in fact, paid the refund at the first instance - the factum of payment of duty by the petitioner stands established. In the case of Sandoz Private Limited 2022 (1) TMI 225 - SUPREME COURT , the Hon'ble Supreme Court has directed credit of the duty paid to the CENVAT Register of that assessee for the reason that, pending litigation, the era of Central Excise had been subsumed into Goods and Service Tax regime with no avenue available for receipt of the amount in cash. The GST Authorities were thus impleaded to ascertain the mechanism presently in vogue. In their counter dated 10.08.2022, the GST Central Excise Authority have merely distanced themselves from the present litigation stating that it is for the DGFT to take a view in regard to the refund - petition allowed.

Summary

Issues Involved:
1. Refund of Terminal Excise Duty (TED) on supply of laptops to EPCG scheme license holders.
2. Legitimacy of Policy Circular No.16 dated 15.03.2013.
3. Rejection of refund claims and subsequent appeals.
4. Legal position on TED refund under Foreign Trade Policy (FTP).
5. Implementation of Supreme Court judgment in Sandoz Private Limited case.

Issue-wise Detailed Analysis:

1. Refund of Terminal Excise Duty (TED) on supply of laptops to EPCG scheme license holders:
The petitioner sought a refund of TED paid on the supply of laptops under the EPCG scheme. The initial claims made in 2013 were rejected multiple times, leading to the filing of writ petitions. These petitions were allowed by the High Court in 2016, directing the respondent to process the refund claims in accordance with the law and relevant case law.

2. Legitimacy of Policy Circular No.16 dated 15.03.2013:
The petitioner challenged Policy Circular No.16, which clarified that no TED refund should be provided in cases where supplies are ab-initio exempted from payment of excise duty. The Court examined the circular and its implications, noting that it aimed to prevent the circumvention of policy by paying excise duty on exempt supplies to claim refunds.

3. Rejection of refund claims and subsequent appeals:
The respondent authorities rejected another batch of refund claims in 2018, and the petitioner's appeals were dismissed by the Director General of Foreign Trade (DGFT) as non-maintainable under Section 15(1) of the Foreign Trade Development and Regulation Act, 1992, on the grounds that the orders were administrative decisions, not adjudicative orders. This rejection was challenged in a subsequent writ petition.

4. Legal position on TED refund under Foreign Trade Policy (FTP):
The Court referred to the Supreme Court judgment in Sandoz Private Limited vs. Union of India, which clarified the entitlement of TED refunds under FTP. The FTP provides for TED refunds to Domestic Tariff Area (DTA) suppliers, subject to conditions such as non-availment of CENVAT credit/rebate by the recipient. The Court emphasized that the FTP's provisions are explicit and not ambiguous regarding the benefits and entitlements of concerned entities.

5. Implementation of Supreme Court judgment in Sandoz Private Limited case:
The Court reiterated the Supreme Court's findings that EOUs are entitled to ab-initio exemption from payment of central excise duty on goods procured from DTA. However, if TED is paid, EOUs can claim the refund benefit available to DTA suppliers, provided they obtain a disclaimer from the supplier and comply with other formalities. The Court directed the respondent to grant credit of the paid duty amount in the petitioner's electronic credit register, following the Supreme Court's approach in the Sandoz case, due to the subsumption of Central Excise into the GST regime.

Conclusion:
The Court concluded that the petitioner is entitled to a TED refund as a supplier to an EOU under the EPCG scheme. The impugned orders were set aside, and the respondent was directed to credit the duty amount in the petitioner's electronic credit register within eight weeks. The writ petitions were allowed without costs.