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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 ..... Appeal No.286 of 2019 (TTAR). CIVIL APPEAL NO. 3358 OF 2020 2a. The appellant in Civil Appeal No.3358 of 2020 claims to be hundred per cent Export Oriented Unit8 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 factory situated at Plot No. L1, MIDC, Mahad, Raigad, within the Domestic Tariff Area Unit9. The appellant had applied for refund of Terminal Excise Duty10 in respect of excisable goods procured from its unit in DTA, as it did in the past and was granted refund from time to time between 2006 and 2012. The instant refund application, however, came to be disallowed, which decision is the subject matter of appeal before this Court. It had been asserted that TED was paid by the DTA Unit from where the goods in question were procured or supplied to the appellant for its EOU during the relevant period. The application for refund dated 20.04.2012 was accompanied by a declaration given by the appellant that the appellant's DTA Unit did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subject matter of challenge in Civil Appeal No.3358 of 2020. By the same judgment, the Bombay High Court dismissed the writ petition filed by the appellant in Civil Appeal No.3359 of 2020 involving the selfsame issue. CIVIL APPEAL NO. 3359 OF 2020 3a. Reverting to the factual matrix in Civil Appeal No.3359 of 2020, the appellant claims to be identically placed as in the companion appeal being hundred per cent EOU engaged in manufacturing 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 at B15, Phase 1A, Verna, Salcette, Goa 403772. The appellant's DTA Unit has been supplying goods on payment of CENVAT duty under claim for rebate to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atrix 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 exempted from payment of excise duty. It went on to observe that there was a clear stipulation in the FTP itself in that regard. The High Court noted that the purport of the impugned circular was only to clarify the obvious position. There was no obligation on the EOU to pay duty at the time of procurement of excisable goods. For, FTP plainly predicates that the procurement of excisable goods should be done by EOU without payment of excise duty. As there is reverse obligation on EOU to procure excisable goods without payment of duty, there is no question of claiming refund. Thus, it held that the conclusion reached by the Development Commissioner was in conformity with the dispensation provided in the FTP and is not in any manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Tribunal16 unsuccessfully. After exhausting that remedy and allowing decision of the statutory authorities under the Central Excise Act, 194417 as final, the respondentCompany chose to file writ petition before the High Court of Delhi seeking direction against DGFT to consider the refund application regarding TED amount under FTP. It was urged that the primary responsibility to refund TED amount paid by the respondentCompany (DTA Unit) being supplier of excisable goods to EOU, was that of DGFT. The High Court of Delhi vide impugned judgment dated 08.10.2018 allowed the writ petition and issued directions to DGFT to consider the refund application filed by the respondentCompany and if found in order, directed refund of TED amount to the respondent with interest at the rate of 9 % per annum. The High Court of Delhi essentially relied upon its earlier dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 209 (Del.) wherein it had been held that once the supply of goods fall within the category of deemed exports, the unit would be entitled to refund of TED. Learned Single Judge also adverted to the decision of the Madras High Court in Lenovo (India) Pvt. Ltd. vs. Union of India (2017) 346 ELT 12 (Mad.) and to the decision of the Bombay High Court in case of Sandoz Private Limited which is impugned in the cognate appeals referred to above. Learned Single Judge, however, noted that the decision of the Bombay High Court has been distinguished by the Madras High Court, but then went on to observe that it did not agree with the view taken by the Bombay High Court in view of the amendment to the FTP. Instead, learned Single Judge opined that the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 applicable Foreign Trade Policy (FTP) or the 1944 Act? Further, whether Circular No.16 (RE2012/200914) dated 15.03.2013 is merely clarificatory regarding TED refund and exemption and the efficacy thereof? 11. The claim for refund of TED amount of the concerned entities being the recipient or the supplier of specified goods, as the case may be, needs to be understood and analysed in two broad silos and in the context of nature of transaction and the applicability of the provisions of the concerned laws, namely, FTP propounded under the 1992 Act and the 1944 Act. We will dilate on this aspect at appropriate place. Be it noted that the refund claim in the respective appeals varies between June 2009 and March 2013 (i.e., Civil Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning 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 cent of the global trade by promoting exports. It is thus clear that the concessions or so to say, benefits and entitlements provided under the FTP cannot be constricted by the provisions of the taxing statute of 1944 and the rules framed thereunder. To put it tersely, the dispensation provided under the 1992 Act and the FTP must operate independently and is thus mutually exclusive in this regard. Taking any other view would be counterproductive and whittle down the intent behind formulation of a liberal FTP for promoting exports. 15. Under the subject FTP, Chapter 6 deals with EOUs, Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and BioTechnology Parks (BTPs). Para 6.1 provides f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements 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 any, on the supplier. Notwithstanding the above, EOU/EHTP/STP/ BTP units shall, on production of a suitable disclaimer from DTA supplier, be eligible for obtaining entitlements specified in chapter 8 of FTP. For claiming deemed export duty drawback, they shall get brand rates fixed by DC wherever All Industry Rates of Drawback 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 v1. (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% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awback 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 scheme of Chapter 6 of FTP, it is thus clear that the EOU can import goods from DTA supplier, which transaction de jure is treated as deemed export; and it can do so without payment of duty, as it has been exempted vide para 6.11(c)(ii) of the FTP. On its own, the EOU is not eligible for any other entitlement. 19. Needless to observe that there is marked distinction between the expression "benefit"19 and "entitlement"20. "Benefit", by its very nature, is an advantage, help or aid, while "entitlement" is right to have something. Under Chapter 6, the EOU is entitled to import specified goods from DTA without payment of duty, subject to fulfilling other requirements including of actual user condition and to be utilised for export production, being a case of ab in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 exports. To put it differently, the supply of goods by DTA Unit to EOU with actual user condition and utilised for export production, are regarded as deemed exports. To such transactions, certain benefits have been extended, as provided in para 8.3 of the FTP applicable at the relevant time, which reads thus: "8.3 Benefits for Deemed Exports 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 mentioned in paragraph 8.3(a), (b) and (c) of FTP, whichever is applicable, if such mega power project complies with the threshold generation capacity specified therein, in Customs Notification. [Para 8.4.4(iv), after amendment, in 20102011 reads thus: "(iv) Supply of Capital goods and spares upto 10% 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. 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. Benefit of deemed exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 competitive bidding (and not ICB) has been followed. (emphasis supplied) Though couched as benefits, these are essentially entitlements, to be availed by DTA supplier in terms of para 8.4.2. As noted earlier, in terms of para 6.11(a), the EOU can also avail of those entitlements of DTA as specified in Chapter 8 of FTP, as had been earmarked for DTA supplier. That does not mean that EOU is eligible for those entitlements, on its own accord as, amongst other, it is obliged to obtain disclaimer from DTA supplier as a precondition. 21. As aforementioned, para 8.2 lists the categories of supply of goods which are regarded as deemed exports including supply of goods to EOU [para 8.2 (b)]. The specified transactions are provided certain benefits mentioned in para 8.3, subject to terms and conditions in the handbook procedures, volume I, published under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply 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 deemed export drawback in terms of para 8.3 (b) of FTP of Central Excise duty paid on inputs/components, provided CENVAT credit /rebate has not been availed of such duty paid by supplier of goods. A declaration to this effect, in Annexure III of ANF 8, from supplier of goods, shall be submitted by applicant. Such supplies shall however be eligible for deemed export drawback on customs duty paid on inputs/components. (amendments highlighted) 8.5.1 Simple interest @ 6% per annum will be payable on delay in refund of duty drawback and terminal excise duty under deemed export scheme, if the case is not settled within 30 days of receipt of complete application (as in paragraph 9.10.1 of HBP v1)." 24. Similarly, benefit under para 8.3(b) of FTP regarding deemed export drawback can be availed, provided CENVAT credit/rebate has not been availed by DTA supplier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ministry of Commerce and Industry Directorate General of Foreign Trade Udyog Bhawan, New Delhi Policy Circular No. 16 (RE2012/200914) Dated: 15th March, 2013 To, All Regional Authorities All Development Commissioners, SEZ. Subject: Clarification regarding TED Refund where TED exemption is available. It has come to the notice of this Directorate that some RAs of DGFT and the Officers of Development Commissioners of SEZ are providing refund of TED even in those cases where supplies of goods, under deemed exports, is abinitio exempted. 2. There are three categories of supplies where supply of goods, under deemed exports, are abinitio exempted from payment of excise duties. These are as follows: (i) Supply of goods under Invalidation letter issued against Advance Authorisation [Para 8.3(c) of FTP]; (ii) Supply of goods under ICB [Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 mind the procedure underlying the refund of CENVAT credit/rebate of excise duty obligations. If CENVAT credit utilised by DTA supplier or EOU, as the case may be, cannot be encashed, there is no question of refunding the amount in cash. In that case, the commensurate amount must be reversed to the CENVAT credit account of the concerned entity instead of paying cash. 30. If, the claim for refund by DTA supplier under the scheme of FTP is allowed, it can be in cash if TED had been paid in cash. Else, it can be in the form of reversal of commensurate CENVAT credit amount to the concerned account of DTA supplier. 31. As regards the refund claim of DTA supplier, as noted earlier, it needs to be processed by the authorities under the FTP keeping in mind the purport of stipulations spelt out in Chapter 8 of subject FTP, such as the goods imported or supplied to EOU shall be with actual user condition and shall be utilised for export production and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the question whether DTA supplier of goods to EOU is entitled for refund of the CENVAT credit despite Rule 5 of the 2004 Rules, dealing with refund of CENVAT credit. The Authorities had held that not being a case of export of goods out of India, the assessee was not entitled for refund of CENVAT credit amount utilised in respect of subject goods supplied to EOU. The High Court relying on its earlier decision in Commissioner of Central Excise vs. Shilpa Copper Wire Industries 2011 (269) ELT 17 (Guj.), negatived that stand of the Department. Instead, the High Court held that the claim for refund was in reference to the applicable FTP and not on the basis of the provisions of the 1944 Act and the rules framed thereunder. The entitlement of DTA supplier was specified in the applicable FTP being deemed exports which in law are regarded as physical exports for the purpose of entitling refund of unutilised CENVAT credit. 35. Then came the decision of the High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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, we affirm these decisions and hold that the DTA supplier of goods to EOU would be entitled for refund of TED on the basis of applicable para 6.11(a) read with paras 8.3(c), 8.4.2 and 8.5 of the FTP under consideration. The modality of refund, however, ought to be in the form of reversal of commensurate amount in the CENVAT credit account of the DTA supplier, if the DTA supplier had utilized CENVAT credit account in respect of goods supplied to EOU; and if it had paid the amount in cash, the DTA supplier would be entitled for refund of cash with simple interest at the rate of 6% per annum as provided in para 8.5.1 of the applicable FTP on delay in refund of duty drawback and TED under deemed exports scheme. 40. Reverting to the case of EOU considered by the Bombay High Court in the impugned judgment, we hold that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 coupled with the obligation to import the same without payment of duty under para 6.2(b). 43. Besides, if the DTA supplier as well as EOU had utilized its CENVAT credit for importing goods in question, the refund would be in the form of reversal of commensurate amount of CENVAT credit to the account of the concerned entity. However, if TED has been paid in cash by the EOU, the EOU may get refund of that amount from Authority implementing the applicable FTP in cash with simple interest at the rate of 6% per annum for the delayed refund of duty (para 8.5.1) on condition that it would not pass on that benefit to the DTA supplier owing to such refund/rebate. 44. As regards DTA supplier of goods to EOU, it is entitled to receive the refund of TED in terms of para 8.3(c) read with paras 8.4.2 and 8.5 of the applicable FTP subject to complying necessary formalities and stipulations provided therein, being a case of deemed exports. Even, in the case of DTA supplier of goods to EOU, if TED has been paid by utilizing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon: Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured- (i) in a free trade zone or a special economic zone and brought to any other place in India; or (ii) by a hundred per cent. exportoriented undertaking and brought to any other place in India. Explanation. -In this proviso, "free trade zone", "special economic zone" and "hundred per cent. exportoriented undertaking" shall have the same meanings as in Explanation 2 to subsection (1) of Section 3. (1A) For the removal of doubts, it is hereby declared that where an exemption under subsection (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment may, from time to time formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in the like manner, amend that policy. Section 5, as substituted by Act 25 of 2010 w.e.f. 27.8.2010: 5. Foreign Trade Policy. - The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, amend that policy: Provided that the Central Government may direct that, in respect of the Special Economic Zones, the foreign trade policy shall apply to the goods, services and technology with such exceptions, modifications and adaptations, as may be specified by it by notification in the Official Gazette. 23. To be published in the Gazette of India Extraordinary Part II, Section 3, SubSection (II) Government of India Ministry of Commerce and Industry Department of Commerce Udyog Bhawan Notification No. 4 (RE2013)/20092014 Dated: the 18th April, 2013 Subject: Amendments in Paragraph 8.3(c) and Paragraph 8.4 of FTP pertaining to deemed exports scheme - Regarding. S.O (E): In exercise of the powers conferred by Section 5 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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