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TMI Blog2022 (1) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... he entitlement of DTA supplier under Chapter 8 upon obtaining a suitable disclaimer from DTA supplier - Upon conjoint reading of the relevant para and its clauses, it leaves no manner of doubt that the intent of the subject FTP was to encourage DTA suppliers by providing refund of TED in terms of para 8.3(c), subject to fulfilment of formalities and stipulations in Chapter 8 of FTP. This was also to generate foreign exchange as a consequence of goods supplied as inputs or otherwise, were finally exported by the EOU. The EOU, on the other hand, could only avail of the entitlement of the DTA supplier if the DTA supplier had not taken rebate or CENVAT credit facility (as per para 8.5) treating it as deemed export. This dispensation was uniformly followed until the issue of policy circular dated 15.3.2013. EOU is entitled only for ab initio exemption from payment of central excise duty in terms of para 6.11(c)(ii) of the FTP; and obliged to import the goods from DTA supplier without payment of duty in terms of para 6.2(b) of the FTP. The arrangement provided in para 6.11(a) is, however, in the nature of benefit given to EOU in the event it had paid the amount towards TED in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R For Respondent(s) Mr. Rupesh Kumar, AOR Mr. T. Sundar Ramanathan, AOR Mrs. Anil Katiyar, AOR Mr. B. Krishna Prasad, AOR J U D G M E N T A.M. Khanwilkar, J. 1. From amongst these four appeals, first two appeals 1 emanate from the common judgment and order dated 01.08.2016 2 passed by the High Court of Judicature at Bombay 3 in Writ Petition No.2927 of 2015 and Writ Petition No.2926 of 2015, whereas, third appeal 4 arises from the judgment and order dated 08.10.2018 5 passed by the High Court of Delhi at New Delhi in Writ Petition (C) No.10526 of 2017 and the fourth appeal 6 assails the judgment and order dated 09.12.2019 7 passed by the High Court of Karnataka at Bengaluru in Writ Appeal No.286 of 2019 (T TAR). CIVIL APPEAL NO. 3358 OF 2020 2a. The appellant in Civil Appeal No.3358 of 2020 claims to be hundred per cent Export Oriented Unit 8 engaged in the manufacture of goods falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985 and for that purpose, the appellant has a factory, inter alia, at Plot No.8A/2, 8B/2, 88A/1/1, Kalwe, MIDC, Dighe, Navi Mumbai 400708. Besides, the appellant has another fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendments made by the Central Government in Foreign Trade Policy, 2009 2014 14 in exercise of powers conferred by Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 15 . 2e. The stated writ petition preferred by the appellant came to be disposed of on 23.09.2014 whilst directing the competent authority to consider the refund claim of the appellant afresh after taking into account all aspects of the matter and give fair opportunity to the appellant. 2f. Pursuant to the remand order, the Development Commissioner granted personal hearing, but eventually rejected the TED refund claim of the appellant vide order bearing No. SEEPZ SEZ/W.P./TED/SANDOZ/314/2013 14 dated 06.01.2015. 2g. Feeling aggrieved by this decision, the appellant filed fresh Writ Petition No.2927 of 2015 before the Bombay High Court assailing the policy circular dated 15.03.2013 and order dated 06.01.2015 passed by the Development Commissioner. The Bombay High Court negatived the challenge to the stated policy circular as well as the order passed by the Development Commissioner and thus, dismissed the writ petition vide impugned judgment and order dated 01.08.2016. This judgment is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Foreign Trade Policy, 2009 2014. Thus, refund was not admissible to the appellant. 3c. This decision was challenged by the appellant before the Bombay High Court by way of fresh Writ Petition No.2926 of 2015 wherein the policy circular dated 15.03.2013 issued by DGFT was also challenged. This writ petition was heard and decided by the Bombay High Court, along with another writ petition (which is subject matter in the companion appeal filed by Sandoz Private Limited) vide common judgment and order dated 01.08.2016, rejecting the assail to the policy circular and order passed by the competent authority referred to above. This judgment is subject matter of challenge in Civil Appeal No. 3359 of 2020. 4. As the factual matrix in both the writ petitions was similar, the High Court vide common impugned judgment dated 01.08.2016 considered the grounds of challenge to the decision of the Development Commissioner; and eventually opined that in light of paras 6.2(b) and 6.11(c)(ii) of the FTP, no refund of TED could be given by the regional authority of DGFT or the Office of the Development Commissioners because procurement of excisable goods by the appellants EOUs was ab initio ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of the High Court of Delhi in Writ Petition (C) No.10526 of 2017. By that writ petition, the respondent claiming to be a supplier of excisable goods to various EOUs, who in turn exported their final product outside India, sought direction against DGFT to grant TED refund in the sum of ₹ 46,54,295 (Rupees Forty Six Lakh Fifty Four Thousand Two Hundred and Ninety Five only), towards deemed exports made to EOUs (Vimal Agro Products Pvt. Ltd. and TATA Coffee Ltd.). These supplies were made between January 2012 and March 2013 and admittedly, before issue of the impugned circular. 6b. The respondent Company (DTA Unit) had filed refund application before the Joint Director General of Foreign Trade, which was returned to it in light of the impugned circular. The appellant then pursued the refund application on 11.03.2014 to the Deputy Commissioner of Central Excise Department, which came to be rejected on 29.05.2015. Against this decision, the matter was carried in appeal up to the Customs Excise and Service Tax Appellate Tribunal 16 unsuccessfully. After exhausting that remedy and allowing decision of the statutory authorities under the Central Excise Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench of the High Court of Karnataka in Writ Appeal No.286 of 2019 (T TAR). The stated appeal was filed by the appellant Union of India by way of intra court appeal against the decision dated 20.3.2018 2018 (361) ELT 44 (Kar.) of the learned Single Judge of the same High Court in Acer India Pvt. Ltd. vs. Union of India [Writ Petition No.64539 of 2016 (T TAR)] whereby the respondent-Company - claiming to be engaged in the business of manufacture and sale of computer systems and supply of goods to hundred per cent EOUs on payment of TED, had sought a declaration that it was eligible for refund of TED amount in respect of goods supplied to EOUs during the period from June 2009 to October 2009 in terms of para 8.3 of the FTP. Learned Single Judge of the High Court of Karnataka adverted to the decision of the learned Single Judge of the Calcutta High Court in IFGL Refractories Limited vs. Joint Director General of Foreign Trade 2001 (132) ELT 545 (Cal.) (later confirmed by the Division Bench of the same High Court in Joint Director General of Foreign Trade ) and of the High Court of Delhi in Kandoi Metal Powders Manufacturing Company Private Limited 2014) 302 ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enior counsel and Shri Prakash Shah, learned counsel appearing for the appellants in the appeals by the Assessee, Shri Balbir Singh, learned Additional Solicitor General of India for the Department; and Shri G. Shivadass, learned senior counsel for the respondent Assessee (writ petitioner), in the appeals by the Department. CONSIDERATION 9. From the factual matrix delineated above in the respective appeals, it is obvious that Civil Appeal Nos.3358 and 3359 of 2020 pertain to EOUs, who had procured goods from its unit in Domestic Tariff Area (DTA), which transactions were in the nature of deemed export by the DTA Unit to EOU within the meaning of the applicable FTP. On the other hand, the appeals against the decision of the High Court of Delhi and the High Court of Karnataka pertain to the refund claim set up by the DTA Unit - suppliers of goods to concerned EOU, also in reference to selfsame Foreign Trade Policy (FTP). 10. The moot question is: whether the entities herein are entitled to refund of amount purportedly towards TED in respect of specified goods procured or supplied, as the case may be, being deemed exports and from which authority, either under appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of exemption so provided when it is laced with fulfilment of pre conditions by third party (EOU). However, sub section (1A) of Section 5A came to be inserted by way of an amendment w.e.f. 13.05.2005. It was for removal of doubts. It declared that where an exemption under sub section (1) in respect of any excisable good from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods . This stipulation ordains that the excise duty is not payable on the specified goods. However, this stipulation will be attracted if the excise duty is exempted ab initio (without any pre condition). Be that as it may, the governing FTP regime ought to prevail being a special dispensation under the 1992 Act. 14. The authorities propounding the FTP were obviously conscious of the purport of the provisions of the 1944 Act and the rules framed thereunder. Despite that, the subject policy had been propounded with the sole objective of promoting exports and earning foreign exchange. At the relevant time, the goal set forth by the policy makers was to achieve the target of at least one per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. Import of capital goods will be on a self-certification basis. Goods imported by a unit shall be with actual user condition and shall be utilized for export production. .. (emphasis supplied) From the opening part of this provision itself, it is amply clear that it governs specified entities/units, who are engaged in import and/or procurement of goods from DTA or bonded warehouses etc., and that they must do so without payment of duty. Besides, the specified entities are obliged to utilise the goods imported with actual user condition and to be used or utilised for export production. This twin condition must be complied by the specified entities without any exception for deriving benefit or availing of entitlements under FTP. Chapter 6 of the FTP postulates that supply of goods from DTA Units to EOU must be regarded as deemed exports, as is evident from para 6.11 of the FTP. The same reads thus: 6.11 Entitlement for supplies from the DTA (a) Supplies from DTA to EOU/EHTP/STP/BTP units will be regarded as deemed exports and DTA supplier shall be eligible for relevant entitlements under chapter 8 of FTP, besides discharge of export obligation, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able disclaimer in that regard. The entitlements of the DTA supplier have been delineated in Chapter 8 of FTP, to which we will advert to a little later. Clause (a) of Chapter 6.11 also provides that DTA supplier and EOU may claim deemed export duty drawback as well, as per the rates fixed by DC wherever All Industry Rates of Drawback are not available. 17. Clause (c) of para 6.11 is a provision which spells out the entitlement of EOU. It includes reimbursement of Central Sales Tax (CST) on goods manufactured in India; exemption from payment of Central Excise Duty on goods produced from DTA on goods manufactured in India; reimbursement of duty paid on fuel procured from domestic oil companies/depots of domestic oil public sector undertakings as per drawback rate notified by DGFT from time to time; and lastly, CENVAT Credit on service tax paid. As regards the Central Excise Duty, para 6.11(c)(ii) postulates exemption from payment of Central Excise Duty on goods procured by the EOU from DTA on goods manufactured in India. This is in consonance with the stipulation in para 6.2(b), which predicates that the EOU may import goods from DTA without payment of duty. 18. From the schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such supplies is received either in Indian rupees or in free foreign exchange. Supply of goods as mentioned in Paragraph 8.2 below shall be regarded as Deemed Exports provided goods are manufactured in India. ] (amendment highlighted) Para 8.2 of Chapter 8 specifies the categories of supplies which can be regarded as deemed exports. Clause (b) thereof is applicable to the present appeals. Relevant extract of original para 8.2 is as under: 8.2. Categories of Supply Following categories of supply of goods by main/subcontractors shall be regarded as Deemed Exports under FTP, provided goods are manufactured in India: (a) xxx xxx xxx (b) Supply of goods to EOU/STP/EHTP/BTP; .. [Para 8.2, after amendment, in 2012 2013 reads thus: 8.2. Categories of Supply Following categories of supply of goods by main/subcontractors shall be regarded as Deemed Exports : (c) xxx xxx xxx (d) Supply of goods to EOU/STP/EHTP/BTP; .. ] In other words, only the specified categories of supplies are regarded as deemed exports. In that, import of goods, as specified in para 8.2(b) from DTA supplier to the EOU is regarded as deemed e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by such Agencies alone, as may be notified by DEA, MoF, shall be eligible for deemed export benefits. A list of such Agencies / Funds is given in Appendix 13 of HBP v1. (iii) Benefits of deemed exports under para 8.2(f) of FTP shall be applicable in respect of items, import of which is allowed by DoR at zero customs duty, subject to fulfillment of conditions specified under Notification No. 21/2002 Customs dated 1.3.2002, as amended from time to time. (iv) Supply of Capital goods and spares upto10% of FOR value of capital goods to power projects in terms of paragraph 8.2(g), shall be entitled for deemed export benefits provided the ICB procedures have been followed at Independent Power Producer (IPP) / Engineering and Procurement Contract (EPC) stage. Benefit of deemed exports shall also be available for renovation/modernization of power plants. Supplier shall be eligible for benefits listed in paragraph 8.3(a) and (b) of FTP, whichever is applicable. However, supply of goods required for setting up of any mega power project as specified in S.No. 400 of DoR Notification No. 21/2002 Customs dated 1.3.2002, as amended, shall be eligible for deemed export benefits as mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. Benefit of deemed exports shall be available in respect of supplies of capital goods and spares to Fertilizer Plants which are set up or expanded / revamped / retrofitted / modernized during Ninth Plan period. Benefit of deemed exports shall also be available on supplies made to Fertilizers Plants, which have started in the 8th / 9th Plan periods and spilled over to 10th Plan period. 8.4.6 Supplies of goods to projects funded by UN Agencies covered under para 8.2(i) of FTP are eligible for benefits listed in paragraph 8.3(a) and (b) of FTP, whichever is applicable. 8.4.7 In respect of supplies made to Nuclear Power Projects under para 8.2(j) of FTP, the supplier would be eligible for benefits given in para 8.3(a), (b) and (c) of FTP, whichever is applicable. Supply of only those goods required for setting up any Nuclear Power Project specified in list 43 at S.No. 401 of Notification No. 21/2002Customs dated 1.3.2002, as amended from time to time, having a capacity of 440MW or more as certified by an officer not below rank of Joint Secretary to Government of India in Department of Atomic Energy, shall be entitled for deemed export benefits in cases where procedure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made dependent on the non availment of CENVAT credit/rebate on such goods by the recipient thereof, as is envisaged in original para 8.5. The same reads thus: 8.5 Eligibility for refund of terminal excise duty/drawback Supply of goods will be eligible for refund of terminal excise duty in terms of para 8.3(c) of FTP, provided recipient of goods does not avail CENVAT credit / rebate on such goods. Similarly, supplies will be eligible for deemed export drawback in terms of para 8.3(b) of FTP on Central Excise paid on inputs/components, provided CENVAT credit facility/rebate has not been availed by applicant. Such supplies will however be eligible for deemed export drawback on customs duty paid on inputs/components. [Para 8.5, after amendment, in 2012 2013 reads thus: 8.5 Eligibility for refund of terminal excise duty/drawback Supply of goods will be eligible for refund of terminal excise duty in terms of Para 8.3(c) of FTP, provided recipient of goods does not avail CENVAT credit/rebate on such goods. A declaration to this effect, in Annexure II of ANF 8, from recipient of goods, shall be submitted by applicant. Similarly, supplies will be eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The eligibility for refund of TED, however, has been circumscribed by formalities and requirements to be adhered to, including as noted in para 8.5. In that, recipient of goods (EOU) does not avail CENVAT credit or rebate. Similarly, DTA supplier would be eligible for deemed export drawback in terms of para 8.3(b) of FTP on Central Excise paid on inputs/components, provided CENVAT credit facility/rebate has not been availed. 26. Upon conjoint reading of the relevant para and its clauses, it leaves no manner of doubt that the intent of the subject FTP was to encourage DTA suppliers by providing refund of TED in terms of para 8.3(c), subject to fulfilment of formalities and stipulations in Chapter 8 of FTP. This was also to generate foreign exchange as a consequence of goods supplied as inputs or otherwise, were finally exported by the EOU. The EOU, on the other hand, could only avail of the entitlement of the DTA supplier if the DTA supplier had not taken rebate or CENVAT credit facility (as per para 8.5) treating it as deemed export. This dispensation was uniformly followed until the issue of policy circular dated 15.3.2013. That circular reads thus: Government of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the authorities under the FTP by reckoning the entitlement of DTA supplier specified in Chapter 8 of the FTP concerning the goods supplied to it, being a case of deemed exports. The EOU on its own, however, is not entitled for refund of TED, as the mandate to EOU is to procure or import goods from DTA supplier, without payment of duty in view of the express ab initio exemption provided in terms of para 6.2(b) read with para 6.11(c)(ii). However, despite such express obligation on the EOU, if the EOU has had imported goods from DTA supplier by paying TED, it can only claim the benefit of refund provided to DTA supplier under para 8.4.2 read with paras 8.3(c) and 8.5 subject to obtaining disclaimer from DTA supplier in that regard and complying with other formalities and requirements. 29. We thus agree with the conclusion reached by the Bombay High Court that the EOU is not entitled to claim refund of TED on its own. However, we add a caveat that EOU may avail of the entitlements of DTA supplier specified in Chapter 8 of FTP on condition that it will not pass on that benefit back to DTA supplier later on. In any case, the refund claim needs to be processed by keeping in min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther noted that merely because such refund was not permissible to the DTA supplier under the 1944 Act and the rules framed thereunder, that would not deprive the DTA supplier to avail of the entitlements and benefits under the FTP. It held that it is open to the assessee to take advantage of any law, particularly which is more beneficial. Accordingly, learned Single Judge issued directions to pay the refundable amount along with interest at the rate of 12 % per annum. The appeal filed by the Department against the said decision was rejected by the Division Bench of the Calcutta High Court in Joint Director General of Foreign Trade. The Division Bench, however, directed the DGFT to refund TED amount as it was the concerned Authority under the FTP, subject to assessee completing necessary formalities as provided for in the FTP. This decision was then affirmed by this Court consequent to dismissal of special leave petition being S.L.P. (C) No.5368 of 2002, on 7.10.2002. 34. The next decision is of the High Court of Gujarat in the case of Commissioner of Central Excise and Customs vs. NBM Industries 2012 (276) ELT 9 (Guj.). The Division Bench of the High Court considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemical Limited vs. Additional Director General of Foreign Trade, New Delhi Anr. W.P. No.23194 of 2009, decided on 16.9.2019. 37. As aforesaid, the decision in Kandoi Metal Powders Manufacturing Company Private Limited 2015 (317) ELT 40 (Mad.) has been subsequently followed by the High Court of Delhi in Union of India vs. Alstom India Limited 2015 (325) ELT 72 (Del.), Commissioner of Central Excise, Delhi II vs. Welspring Universal 2018 (359) ELT 635 (Del.), Deepak Enterprises vs. Union of India 2018 (360) ELT 905 (Del.), Alstom Transport India Ltd. vs. Union of India 2018 (363) ELT 69 (Del.), Motherson Sumi Electric Wires vs. Union of India 2018 (364) ELT 91 (Del.), Multitex Filtration Engineers Limited vs. Union of India 2020 (373) ELT 68 (Del.) and Hindustan Tin Works Limited vs. Union of India 2020 (373) ELT 217 (Del.). 38. The view taken by the Calcutta High Court and followed by the High Court of Delhi commended even to the High Court of Karnataka in Acer India Pvt. Ltd. 39. The view taken in these decisions at the instance of the DTA supplier of specified goods to EOU is in consonance with the view taken by us in this judgment. To that extent, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed thereunder, with the avowed purpose of promoting export and earning foreign exchange, it is the obligation of Authority responsible to implement the subject FTP, to deal with refund claim of the concerned entities. For, it is not a case of refund under the 1944 Act or 2002 Rules or 2004 Rules as such, but under the applicable FTP. 42. In conclusion, we hold that the EOU entities, who had procured and imported specified goods from DTA supplier, are entitled to do so without payment of duty [as in para 6.2(b)] having been ab initio exempted from such liability under para 6.11(c)(ii) of the FTP, being deemed exports. Besides this, there is no other entitlement of EOU under the applicable FTP. Indeed, under para 6.11(a) of the FTP, EOU is additionally eligible merely to avail of entitlements of DTA supplier as specified in Chapter 8 of the FTP upon production of a suitable disclaimer from the DTA supplier and subject to compliance of necessary formalities and stipulations. It would not be a case of entitlement of EOU, but only a benefit passed on to EOU for having paid such amount to the DTA supplier, which was otherwise ab initio exempted in terms of para 6.11(c)(ii) of the FTP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above, the appeals filed by the assessee (EOU) against the decision of the Bombay High Court partly succeed in the above terms; and the appeals filed by the Department against the decision of the High Court of Delhi and High Court of Karnataka are also partly allowed in the aforementioned terms. There shall be no order as to costs. Pending application(s), if any, are disposed of accordingly. ------------------- Notes: 1. Civil Appeal Nos. 3358 and 3359 of 2020 2. 2016 (341) ELT 22 (Bom.) 3. for short, Bombay High Court 4. Civil Appeal No.3360 of 2020 5. 2020 (373) ELT 217 (Del.) 6. Civil Appeal No.3705 of 2020 7. 2020 (371) ELT 658 (Kar.) 8. for short, EOU 9. for short, DTA Unit 10. for short, TED 11. for short, impugned circular 12. for short, DGFT 13. for short, said notification 14. for short, FTP 15. for short, 1992 Act 16. for short, the CESTAT 17. for short, 1944 Act 18. 5A. Power to grant exemption from duty of excise.- (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph reflected in table given in paragraph 8.4 above. 8.4.2 This paragraph is deleted because the contents of this paragraph reflected in table given in paragraph 8.4 above. 8.4.3 This paragraph is deleted because the contents of this paragraph reflected in table given in paragraph 8.4 above. 8.4.4 (i) This paragraph is deleted because the contents of this paragraph reflected in table given in paragraph 8.4 above. (ii) This paragraph is deleted because the contents of this paragraph reflected in paragraphs 8.2(d) and 8.4 above. (iii) This paragraph is deleted because the contents of this paragraph reflected in paragraph 8.2 (f) above. (iv) This paragraph is deleted because the contents of this paragraph reflected in paragraphs 8.2 and 8.4 above. (v) Deleted 8.4.5 Deleted. 8.4.6 This paragraph is deleted because the contents of this paragraph reflected in table given in paragraph 8.4 above. 8.4.7 This paragraph is deleted because the contents of this paragraph reflected in paragraphs 8.2 and 8.4 above. 22. Section 5, as it existed before amendment in 2010: 5. Export and import policy. - The Central Government may, from ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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