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TMI Blog2019 (8) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondent to make recovery after unduly long period of time. In Asahi Songwon, the delay was almost seven years. Whereas in the case on hand, it is almost more than eight years. Grant of CST refunds - DTA clearance - HELD THAT:- We may look into paragraph 6.11 of the Foreign Trade Policy 20042009. This policy provides for the refund of the CST suffered on the inputs used for the production of final product cleared into the DTA by an EOU - The reading of the Foreign Trade Policy referred to above as well as the condition in appendix 14-I-I of the Handbook of Procedures 20042-009 as it existed until 16th September 2008 appears to be in conflict with each other. The Foreign Trade Policy, more particularly, para 6.11(c)(i) makes it clear that an EOPU shall be entitled to the reimbursement of the CST goods manufactured in India. If that be so, then, in our opinion, the appendix of the Handbook of Procedures could not have been relied upon. There is merit in the submission of Mr. Iyer that the provisions in the FTP govern the statutory scheme of the policy, and in such circumstances, the appendix or the Handbook of Procedures cannot override the FTP provisions. In case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r may kindly be granted. E. As exparte ad interim relief in terms of prayer (D) above may kindly be granted; and F. Such other and further or incidental reliefs as may be deemed just and proper in the fats and circumstances of the present case may kindly be granted. 2 It appears from the materials on record that the writ applicant is a company having an Export Oriented Unit ('EOU' for short) functioning under a letter of permission granted by the respondent No.3 Development Commissioner, Kandla. The EOU is engaged in the business of manufacture and export of the goods falling under chapter 32 of the Central Excise Tariff. 3 During 2007-09, the EOU had availed the refund of the Central Sales Tax ('CST' for short) suffered on the inputs procured from the Domestic Tariff Area (DTA) unit and used in the production of the finished goods cleared for the exports as well as cleared to other units in the Domestic Tariff Area (DTA) as per the permission granted under the Foreign Trade Policy ('FTP' for short). 4 A show cause notice dated 7th July 2015 came to be issued to the EOU u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sd/- ( Krishan Kumar) Joint Development Commissioner Kandla Special Economic Zone. 5 In response to the above referred show cause notice, the EOU filed its reply dated 19th August 2015 addressed to the Joint Development Commissioner, Kandla Special Economic Zone, Ministry of Commerce and Industries, Kandla, Kutch. In the reply, the EOU invited the attention of the Commissioner to paragraph 6.11 of the Foreign Trade Policy 200409. The attention of the Commissioner was drawn, more particularly, to clause (c). The relevant portion of the reply is as follows: ( C) In addition, EOU / EHTP / STP / BTP units shall be entitled to following:- i) Reimbursement of Central Sales Tax (CST) on goods manufactured in India. Simple interest @ 6% per annum will be payable on delay in refund of CST on supplies made to EOUs in respect of reimbursement / refunds that have become due on or after 01.04.2007 but which have not been settled within 30 days of its final approval for payment by the office of Development Commissioner, SEZ. ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the period before issuance of the said public notice. ( iv) Vide Public Notice No. 81 dated 16.9.2008, the word 'meant for 'export was deleted from 2 of Appendix 14II of HBP Vol. I Which was applicable from the date of issuance of the said public notice. Hence, with the issuance of the said public notice, the reimbursement of CST on supply of goods by EQU into DTA/EOU made available w. e. f. 16.9.2008. ( v) It is true that even though provision contained in para 6.11(c)(i) of the Policy permits for DTA sale of goods but it does not ipso facto implies that reimbursement of CST shall also be available on such goods supplied into DTA Public Notice No. 81 (RE2008) dated 16.09.08 had only prospective effect. ( vi) It is correct to note that the provisions of FTP and HBP are to be read in harmony and CST to be reimbursed as per provisions mentioned in the Appendix 14II of HBP applicable at the time of supply. ( vii) As per the scheme of EOUs, the units which are undertaking to export their entire production of goods and services (except permissible sales in DTA) are considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongwan Colors Ltd and Ors vs. Union of India and Ors reported in 2017 (356) ELT 532 (Guj). 9 Mr. Iyer submitted that so far as the second issue with regard to the grant of the CST refund on the DTA clearance is concerned, the authority committed a serious error in placing reliance on the condition in appendix 14 II of the Handbook of Procedures 2004-09 as it existed until 16th September 2008. He would submit that in fact, no such reliance could have been placed by the CRA audit. He submitted that such condition would not override the Foreign Trade Policy, more particularly, the clause 6.I-I which provides for the entitlement for supplies from the DTA. Mr. Iyer invited the attention of this Court to paragraph 6.I-I (c)(i), which provides that the EOU units shall be entitled to the reimbursement of the CST on goods manufactured in India. He submitted that this aspect also has been impliedly taken care of by this Court in the case of Asahi Songwon (supra) . 10 In the last, Mr. Iyer submitted that even otherwise, the issue could not have been reopened after a period of almost eight years. He submitted that the refund was granted by the authority way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall also be available on such goods supplied into DTA. Public Notice No.81 (RE2008) dated 16.09.08 had only prospective effect. Vide Public Notice No.81 dated 16.09.2008, the word meant for export was deleted from para 2 of Appendix 14II of HBP Vol.I which was applicable from the date of issuance of the said public Notice. Hence, with issuance of the said public notice, the reimbursement of CST on supply of goods by EOU into DTA/EOU made available w.e.f. 16.09.2008. Appendix 14II of Hand Book of Procedures clearly states that EOU is entitled to reimbursement of CST paid on only those purchases made from DTA which are used for production of goods actually exported. Para2 of the said appendix before Public Notice No.81(RE2008) dated 16.09.08 clearly states that an EOU is entitled to reimbursement to CST paid on only those purchases made from DTA which are used for production on goods meant for export and/or utilized for exports/services. The supplies in the present case pertains to the period before issuance of the said public notice. EOUs were eligible to get CST refund on raw material, components etc., utilized for their production meant for exportation and ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in Ground 14(A), it is stated that the Order-in-Original No.5/1617 passed by the Development Commissioner, KASEZ, Gandhidham was upheld by the DGFT, Appellate Authority is correct and as per provisions of FTP/HBP of the relevant period. The Order-in-Appeal passed by the DGFT is as per the provisions of FTP/HBP of the relevant period. 10 With respect to the submissions made in Ground 14(B) to (G), it is stated that even though provision contained in Para 6.11(c) (I) of the Policy permits for DTA sale of goods but it does not ipso facto imply that reimbursement of CST shall also be available on such goods supplied into DTA. Public Notice No.81 (RE2008) dated 16.09.08 had only prospective effect. Vide Public Notice No.81 dated 16.09.2008, the word meant for export was deleted from para 2 of Appendix 14II of HBP Vol. I which was applicable from the date of issuance of the said public Notice. Hence, with issuance of the said public notice, the reimbursement of CST on supply of goods by EOU into DTA/EOU made available w.e.f. 16.09.2008. Vide Public Notice No.81 dated 16.09.2008, the word meant for export was deleted from para 2 of Appendix 14 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to at present. 12 With respect to the submissions made in Ground 14(I), it is submitted that CAG review for the period 2007-08 to 2010-11 was done during the period May-June 2012 and demand notices were issued during the period October 2013. The Development Commissioner s office has been in the process of recovery proceedings since October/November 2013 and there are large number of units involved in the audit conducted by the CAG. Since there are large number of units involved, naturally, it will take considerable time/long time to complete recovery proceedings. It may be noted that CAG review was conducted by the Comptroller and Audit Genera1(C AG) which is supreme audit institution of India for the claims belonging to the period 2007 i.e. after five years. They had completed the Audit and was also fully aware of the time factor. CAG has delayed in conducting CAG review for the period 2007-08 to 2010-11. However, main intention of audit was that inadmissible Government revenue would be recovered. It is also noted that noticee firm has given undertaking and declaration in all the claims, as mentioned in the Appendix14II, that in case excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lementation of Foreign Trade Policy? We have noticed that the Director General of Foreign Trade in terms of section 6 of the Act has certain delegated powers which would include powers to frame such procedures. Subsection (3) of section 6 however, excludes the delegation of such powers to those contained under sections 3, 5, 15, 16 and 19 of the Act. In exercise of powers under section 6, the Director General of Foreign Trade could not have framed or altered the Foreign Trade Policy. We may refer to the Division Bench judgment of this Court in case of Alstom India Ltd. v. Union of India reported in 2014 (301) E.L.T. 446 (Guj.), in which it was observed as under : 28. We find that the Respondent No.2, namely, DGFT, through Para 8.3.6 of the HOP has incorporated by reference the provisions of Duty Drawback Rules mutatis mutandis to the FTP and HOP. We find substance in the contention of Mr Ghosh that the HOP is nothing but an administrative guideline as would appear from a combined reading of Para 2.4 of the FTP and Section 6 of the FTDR Act. We have already pointed out that Section 3 of the FTDR Act grants power to the Respondent No.1 to make provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferment of such power to the Respondent No.2 to adopt the duty drawback rules without any power to legislate either expressly or otherwise would amount to permitting the levy or collection of tax without authority of law in violation of Article 265 of the Constitution of India. 20 Our attention was also drawn to the decision of learned Single Judge of Madras High Court in case of Hospira Health Care India Pvt. Ltd v. Development Commissioner, MEPZ Special Economic Zone Heous and ors. reported in (2016) 4 MLJ 179, in which similar issue had come up for consideration and it was held that the demand for refund of the reimbursement benefits were in conflict with para. 6.11 of the Foreign Trade Policy. 21 Even otherwise, the Hand Book of Procedures and in particular Appendix14II contained therein nowhere aims to lay down any policy but prescribes the procedure to be followed for reimbursement of CST. It is undoubtedly true that para.2 of this Appendix restricts the CST reimbursement on purchases made by an EOU from a DTA unit. However, this restriction in our opinion would run counter to the terms of FTP itself and ultra vires the powers of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iately arise is whether such benefits could have been recognized through a procedure framed for claiming such a benefit? This further development would effectively prevent the respondents from contending that the original Foreign Trade Policy 20042009 did not envisage CST reimbursement by an EOU upon procurement of goods manufactured in another EOU. 15 Thus, this Court ruled that the Foreign Trade Policy 20042009 did not limit the benefit of CST reimbursement to an EOU on the purchases made only from a DTA unit. Prima facie , it appears that this decision has been overlooked by the appellate authority. The decision of this Court in Asahi Songwon (supra) is dated 6th July 2017. When the show cause notice was issued, the orderinoriginal was passed, this judgement was not pronounced. When the appeal was being heard, this judgement was already pronounced. As observed by us, prima facie, it appears that the appellate authority has overlooked the position of law, as explained by this Court. We also take notice of the fact that the contention of Mr. Iyer with regard to the delay and recovery after a period of almost eight years is also taken care of by this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awback are not available. ( b) Suppliers of precious and semiprecious stones, synthetic stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment authorisations at rates and for items mentioned in HBP vl. ( c) In addition, EOU/EHTP/STP/BTP units shall be entitled to the following: ( i) Reimbursement of Central Sales Tax (CST) on goods manufactured in India. Simple interest @, 6% per annum will be payable on delay in refund of CST on supplies made to EOUs in respect of reimbursement/refunds that have become due on or after 01.04.2007 but which have not been settled within 30 days of its final approval for payment by the Office of Development Commissioner, SEZ. ( ii) Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India ( iii) Deleted ( iv) Reimbursement of Duty paid on fuels procured from domestic oil companies as per Drawback rate notified by the DGFT from time to time. ( V) Cenvat Credit on service tax paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) The goods for which the claim has been made are meant for utilization / production of goods/services of the EOU/EHTP/STP unit and will be utilized only in our factory and we shall not divert or dispose off the material procured without obtaining prior permission of the concerned Development Commissioner. 19 The reading of the Foreign Trade Policy referred to above as well as the condition in appendix 14-I-I of the Handbook of Procedures 20042-009 as it existed until 16th September 2008 appears to be in conflict with each other. The Foreign Trade Policy, more particularly, para 6.11(c)(i) makes it clear that an EOPU shall be entitled to the reimbursement of the CST goods manufactured in India. If that be so, then, in our opinion, the appendix of the Handbook of Procedures could not have been relied upon. This aspect also to a certain extent, has been taken care of by this Court in the case of Asahi Songwon (supra) . 20 At the cost of repetition, we once again reproduce the observations made in para 18 of Asahi Songwon (supra) . The same reads as under: A minute scrutiny of these provisions contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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