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TMI Blog2015 (10) TMI 2615X X X X Extracts X X X X X X X X Extracts X X X X ..... pital goods’ would not be entitled for exemption under advance authorisation. Petition dismissed - decided against petitioner. - Writ Petition No. 10561 of 2013 (GM-RES) - - - Dated:- 30-10-2015 - Aravind Kumar, J. Shri Shivadass, Advocate, for the Petitioner. Shri Krishna S. Dixit, Assistant Solicitor General of India, for the Respondent. ORDER Petitioner has sought for quashing of the order dated 18-1-2013 passed by first respondent (Annexure-A1) and communication dated 11-2-2013 (Annexure-A2) issued by third respondent with a prayer for issue of writ of mandamus to respondents 3 and 4 by directing them to issue Export Obligation Discharge Certificate in favour of petitioner and withdrawal of the letter dated 15-3-2015 (Annexure-AF) respectively. Petitioner after having obtained Advance Authorisation from Joint Director General of Foreign Trade, Bangalore (for short Jt. DGFT ) as a main contractor for import of goods, had procured goods worth CIF value of ₹ 68,27,31,904/- without payment of Customs duty against discharge of export obligation of ₹ 72,70,00,000/- by supplying the same to the Hydel Project and claimed to have fulfilled the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch imported goods are used and as such, the activities undertaken by the petitioner amounts to manufacture as defined in Paragraph 9.36 of FTP. He would submit the respondent-authorities having failed to consider the claim of the petitioner in this perspective has resulted in erroneously rejecting the claim of the petitioner and as such, he prays for quashing of the order passed by the appellate authority and seeks for allowing the writ petition. 4. Per contra, Sri Krishna S. Dixit, learned Assistant Solicitor General of India appearing for respondents would support the impugned order and contends that Deemed Export Benefit is available only to goods manufactured in India and supplied to power projects and only such goods manufactured in India by utilization of the imported inputs obtained under the advanced authorisation and such of those goods so manufactured in India which is supplied to the project covered under the policy would only fulfil the provisions of the policy. He would rely upon the Policy Circular No. 50/2009-2014 to support said contention. 4.1 He would contend that capital goods procured by the petitioner are directly shifted to the project site and hence it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so imported by the petitioner and supplied to Non-Mega Power Project are not deemed export under FTP. Being aggrieved by the same, an appeal came to be filed before the appellate authority - first respondent herein in appeal No. 40040/2012 along with an application for stay. A communication dated 7-3-2012 came to be issued by Assistant Commissioner of Customs, Chennai directing the Bankers to remit the proceeds of Bank Guarantee furnished by the petitioner. Hence, petitioner herein filed W.P. No. 37506/2012 seeking for withdrawal of the letter dated 7-3-2012 and for a writ of mandamus to the Banker not to encash the Bank Guarantee during the pendency of appeal proceedings along with other reliefs. Said writ petition came to be disposed of by this Court by order dated 22-1-2013 by reiterating the order dated 9-10-2012 whereunder the appellate authority had been directed to dispose of the appeal filed by the petitioner within three months. Thereafter, the appellate authority adjudicated the appeal on merits and by order dated 18-1-2013 (Annexure-A1) rejected the same by upholding the order dated 28-8-2012. Thereafter, third respondent has issued a communication to the petitioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which again consists of (a) Duty Entitlement Pass Book - DEPB Scheme and, (b) Duty Draw Back Scheme - DBK. Paragraph 4.1.1 of FTP would indicate that goods exported under Advance Authorisation or Duty Free Import Authorisation Scheme or DEPB Scheme may be re-imported in same form or substantially the same form subject to DoR Specified Conditions. Under Clause 4.1.3 Advance Authorisation is issued to allow Duty Free Import of inputs, which are physically incorporated in export product and it can be issued either to a manufacturer, exporter or merchant exporter tied to supporting manufacturer(s) for : (i) Physical exports (including exports to SEZ); and/or (ii) Intermediate supplies; and/or (iii) Supply of goods to the categories mentioned in Paragraph 8.2(b), (c), (d), (e), (f), (g), (i) and (j) of FTP; (iv) Supply of stores on board of foreign going vessel/aircraft subject to condition that there is specific SION in respect of item(s) supplied. 11. The petitioner in the instant case is claiming the benefit of deemed export by contending that Paragraph 8.2 of Chapter 8 is to be understood in terms of definition of manufacture occurring in Paragraph 9.36 of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of goods to nuclear power projects through competitive bidding as opposed to ICB. Benefits of deemed exports shall be available under paragraphs (d), (e), (f) and (g) only if the supply is made under procedure of ICB. However, in regard to mega power projects, the requirement of ICB would not be mandatory, if the requisite quantum of power has been tied up through tariff based competitive bidding or if the project has been awarded through tariff based competitive bidding. Benefits for Deemed Exports 8.3 Deemed exports shall be eligible for any/all of following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to terms and conditions as in HBP v1 :- (a) Advance Authorisation/Advance Authorisation for annual requirement/DFIA. (b) Deemed Export Drawback. (c) Exemption from terminal excise duty where supplies are made against ICB. In other cases, refund of terminal excise duty will be given. Exemption from TED shall also be available for supplies made by an Advance Authorisation holder to a manufacturer holding another Advance Authorisation if such manufacturer, in turn, supplies the product(s) to an ultimate expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.1 and 8.2 of Chapter 8 would clearly indicate that in order that transaction is qualified as Deemed Export, they must necessarily fulfil the following criteria or conditions namely, (i) Deemed Exports are those transactions in which goods supplied do not leave the country; (ii) Goods are necessarily to be manufactured in India in respect of categories envisaged in clauses (a) to (j) of Paragraph 8.2 of Chapter 8 of FTP; (iii) Goods are supplied by main/sub-contractor. The words used in clause (g) of Paragraph 8.2 are supply of goods to power projects and refineries... . These words have to be read in conjunction with the words provided goods are manufactured in India found in Clause 8.2 of Chapter 8. 14. Petitioner is attempting to justify its claim for obtaining EODC on the ground that after direct import of procurements, it has undertaken the activity of assembly of various parts, fabrication, re-conditioning, erection, installation, etc., and as such its claim would fall within the word manufacture as specifically defined in Paragraph 9.36 of Chapter 9 of FTP. 15. At this juncture itself, it would be appropriate to notice that a Circular bearing No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eemed export benefits will not be admissible. 17. Deemed Export Policy is basically for import substitution and in the event of the Project Authority is importing the same, then consequently, no import substitution takes place. It is because of this precise reason the appellate authority has rightly observed that, import of capital goods by non-mega power projects is subjected to 5% of Basic Customs Duty if supplied as such to the project site and 5% duty to be paid get exempted by taking Advance Authorisation, then, it defeats the very purpose of imposition of 5% Basic Customs duty which observation and conclusion is just and proper and in consonance with the extant FTP. 18. Now turning my attention back to the core issue, namely, the contention of the petitioner that activity undertaken by it is in terms of the contract entered into with the project authority when examined in the background of the definition of the word manufacture as defined under Paragraph 9.36, this Court is of the considered view that same will have to be read along with Clause 8.2 of FTP. 19. There cannot be any dispute to the fact that the Hydel power plant which is being installed and commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be available for supply of capital goods if the categories of supply of goods by main/sub-contractors as mentioned in Paras 8.2(a) to 8.2(g), provided goods are manufactured in India . In the case on hand, capital goods like Turbine, Generators, etc., have been imported and as such, they have been installed in the power project. If the petitioner had undertaken manufacture of such goods procured namely, Turbines and Generators by importing inputs required for manufacture of these goods. Since export policy having been brought for import substitution and if the project authorities were to import the same, then said project authority cannot be heard to contend that imports substitution has taken place. From facts on hand, it is explicitly clear that the goods imported under advance authorisation licence have been supplied as such to the project and they have not been manufactured in India and as such, these goods as capital goods would not be entitled for exemption under advance authorisation. For the reasons indicated hereinabove, this Court is of the considered view that there is no merit in the contentions raised by learned Advocate appearing for petitioner and as such, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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