1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3358 OF 2020
SANDOZ PRIVATE LIMITED ..…APPELLANT
VERSUS
UNION OF INDIA & OTHERS …..RESPONDENT(S)
with
CIVIL APPEAL NO. 3359 OF 2020
CIVIL APPEAL NO. 3360 OF 2020
CIVIL APPEAL NO. 3705 OF 2020
J U D G M E N T
A.M. Khanwilkar, J.
1. From amongst these four appeals, first two appeals1
emanate
from the common judgment and order dated 01.08.20162
passed
by the High Court of Judicature at Bombay3
in Writ Petition
1 Civil Appeal Nos. 3358 and 3359 of 2020
2 2016 (341) ELT 22 (Bom.)
3 for short, “Bombay High Court”
2
No.2927 of 2015 and Writ Petition No.2926 of 2015, whereas, third
appeal4
arises from the judgment and order dated 08.10.20185
passed by the High Court of Delhi at New Delhi in Writ Petition (C)
No.10526 of 2017 and the fourth appeal6
assails the judgment and
order dated 09.12.20197
passed by the High Court of Karnataka at
Bengaluru in Writ 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, 8
8A/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
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”
3
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
not claim benefit of TED refund supported by the disclaimer
certificate given by DTA Unit in that regard. The refund application
was required to be decided within 30 days of receipt of complete
application. As it was not so disposed of, the appellant requested
the Development Commissioner to intervene and do the needful.
The refund claim for the period between July 2012 and September
2012 was around Rs.1,90,47,437/ (Rupees One Crore Ninety Lakh
FortySeven Thousand Four Hundred and ThirtySeven only) and
for the period between October 2012 and December 2012, it was
Rs.1,36,04,814/ (Rupees One Crore ThirtySix Lakh Four
Thousand Eight Hundred and Fourteen only).
4
2b. In the meantime, a circular purported to be a policy circular
bearing No.16 (RE2012/200914) dated 15.03.201311 came to be
issued by the Director General of Foreign Trade12 to clarify that no
refund of TED should be provided by the Office of
DGFT/Development Commissioners, as supplies made by DTA Unit
to EOU are ab initio exempted from payment of excise duty. The
Development Commissioner eventually rejected the refund claim
set forth by the appellant and informed the appellant in that regard
vide letter dated 01.04.2013.
2c. Resultantly, the appellant filed Writ Petition No.9312 of 2013
before the Bombay High Court challenging the legality and validity
of the stated policy circular issued by DGFT and two
communications of the Development Commissioner rejecting the
refund application submitted by the appellant.
2d. In the meantime, a notification bearing No.4(RE2013)/2009
2014 came to be issued by DGFT on 18.04.201313, notifying the
amendments made by the Central Government in Foreign Trade
11 for short, “impugned circular”
12 for short, “DGFT”
13 for short, “said notification”
5
Policy, 2009201414 in exercise of powers conferred by Section 5 of
the Foreign Trade (Development and Regulation) Act, 199215
.
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.
SEEPZSEZ/W.P./TED/SANDOZ/314/201314 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
14 for short, “FTP”
15 for short, “1992 Act”
6
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 the appellant’s
EOU. The appellant’s EOU uses the said goods in the manufacture
of goods cleared for export. The appellant asserted that its DTA
Unit did not claim benefit of TED refund and produced disclaimer
certificate in that regard to enable the appellant’s EOU to claim the
7
refund of TED on the goods procured by it or supplied by its DTA
Unit. The appellant asserts that even in the past it had claimed
refund of TED paid by its DTA Unit on the goods supplied to the
appellant’s EOU and was so granted by the Development
Commissioner. However, on this occasion, a different view had
been taken in respect of subject application dated 08.08.2012
submitted by the appellant for TED refund for the month of
November 2011 being Rs.6,87,89,737/ (Rupees Six Crore EightySeven Lakh EightyNine Thousand Seven Hundred and ThirtySeven only). The claim came to be rejected in light of the policy
(impugned) circular issued by DGFT, without giving any
opportunity to the appellant.
3b. Feeling aggrieved, the appellant filed Writ Petition No.9607 of
2013 before the Bombay High Court challenging the legality and
validity of the policy circular dated 15.03.2013. That petition was
disposed of by directing the competent authority to pass a speaking
order on the refund application submitted by the appellant.
Pursuant to the remand order, the competent authority gave
personal hearing to the appellant and once again rejected the TED
refund claim vide order dated 12.01.2015 on the ground that the
8
appellant had received supplies of the concerned goods from their
DTA Unit to EOU, which were ab initio exempted from payment of
duty under para 6.11(c)(ii) of Foreign Trade Policy, 20092014.
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
9
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 manner contrary thereto or to the
mandate of Section 5 of the 1992 Act. Further, the impugned
circular was only to place on record the correct perspective of the
dispensation provided in the FTP. The argument that the
impugned circular can have prospective effect only, cannot be
countenanced in law. In that, the circular was only to clarify the
10
purport of paras 6.2(b), 6.11(c)(ii) and 8.3(c) of the FTP; and if these
provisions were read harmoniously and conjointly, leave no
manner of doubt that refund request before DGFT under para
8.3(c) in relation to excisable goods, even though procured by EOU
upon payment of duty, would be inadmissible in law.
5. The Bombay High Court also noted that although in the past
the regional authority had accepted refund request of EOUs, that
cannot bestow any right much less vested right in EOUs so as to
issue mandamus to the concerned statutory authorities to act
contrary to the provisions of the FTP. As a matter of fact, to dispel
the doubt entertained by EOUs if any, the position was restated by
the Government vide notification dated 18.04.2013 issued in
exercise of power conferred under Section 5 of the 1992 Act. In
substance, the Bombay High Court observed that the impugned
circular was only to restate and clarify that the regional authority
of DGFT was not competent to entertain the refund application;
and if EOU or the supplier so desired, were free to pursue refund
claim before the competent excise authorities where amount
towards duty had been deposited or paid.
11
CIVIL APPEAL NO.3360 OF 2020
6a. This appeal by the Union of India assails the judgment and
order dated 08.10.2018 passed by the 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 Rs.46,54,295 (Rupees FortySix Lakh FiftyFour
Thousand Two Hundred and NinetyFive 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 respondentCompany (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
12
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 decision in Kandoi Metal
Powders Manufacturing Company Private Limited vs. Union of
India18 which in turn had adverted to the decision of the Calcutta
High Court in the case of Joint Director General of Foreign
Trade vs. IFGL Refractories Limited19
, to reinforce the view
16 for short, “the CESTAT”
17 for short, “1944 Act”
18 (2014) 302 ELT 209 (Del.)
19 2002 (143) ELT 294 (Cal.)
13
taken by it that the impugned circular invoked by the Department
had prospective effect only. It also noted that Kandoi Metal
Powders Manufacturing Company Private Limited20 was
concerned with the clarification issued by the Policy Interpretation
Committee vide its decision dated 04.12.2012 to the effect that
refund of CENVAT credit provisions were available under the
Central Excise Act and the Rules framed thereunder. The same
should be availed instead of claiming refund. It was held that the
view taken by DGFT that the respondent could avail of the refund
under the provisions of the 1944 Act and the Rules framed
thereunder, was untenable in law. On facts, it noted that since the
supply of excisable goods was prior to 15.03.2013, the question of
invoking circular against the respondentCompany did not arise.
Instead, the High Court held that refund application ought to have
been processed by the DGFT in terms of para 8.3(c) of the FTP, as
it stood prior to 15.03.2013. Accordingly, while allowing the writ
petition, the High Court of Delhi issued direction to the appellant
(DGFT) to consider the respondent’s refund application and to
refund the due amount with interest at the rate of 9 % per annum.
20 supra at Footnote No.18
14
CIVIL APPEAL NO.3705 OF 2020
7. This appeal by Union of India is against the decision dated
09.12.2019 of the Division Bench of the High Court of Karnataka
in Writ Appeal No.286 of 2019 (TTAR). The stated appeal was filed
by the appellantUnion of India by way of intracourt appeal
against the decision dated 20.3.201821 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 (TTAR)] whereby the respondentCompany — 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 Trade22 (later confirmed by
the Division Bench of the same High Court in Joint Director
21 2018 (361) ELT 44 (Kar.)
22 2001 (132) ELT 545 (Cal.)
15
General of Foreign Trade23) and of the High Court of Delhi in
Kandoi Metal Powders Manufacturing Company Private
Limited24 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 India25 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 policy circular dated 15.03.2013, by
no standard, was clarificatory in nature. Resultantly, learned
Single Judge allowed the writ petition and was pleased to set aside
the communication dated 31.03.2016 issued by the Deputy
Director of Foreign Trade, disallowing the refund claim of the
23 supra at Footnote No.19
24 supra at Footnote No.18
25 (2017) 346 ELT 12 (Mad.)
16
respondentCompany (DTA Unit). Learned Single Judge while
setting aside that order relegated the respondentCompany before
the competent authority under the FTP to consider the refund
claim of the respondentCompany in accordance with the policy.
The Division Bench whilst dealing with the appeal filed by the
Department, vide impugned judgment noted that the respondentCompany had supplied computer systems to EOU on payment of
TED from June 2009 till October 2009, which in terms of the FTP,
in particular para 8.2(b), was deemed export — entitling the
respondentCompany to claim refund of TED from the regional
authority of DGFT in terms of para 8.3(c) of the FTP. The Division
Bench of the High Court of Karnataka opined that there was no
infirmity in the view taken by the learned Single Judge holding that
the appellant cannot be heard to retain the amount which was not
payable by way of tax being a case of deemed export. As the
amount of Rs.1,04,36,945 (Rupees One Crore Four Lakh ThirtySix
Thousand Nine Hundred and FortyFive only) was wrongly paid by
the respondentCompany, the same needed to be refunded and,
therefore, learned Single Judge was justified in relegating the
17
respondentCompany before the competent authority under the
FTP to consider the refund claim.
8. We have heard Shri Arvind Datar, Shri Jay Savla, learned
senior 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
respondentAssessee (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 —
18
“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 Appeal No.3358 of 2020 — July 2012 and December 2012;
19
Civil Appeal No.3359 of 2020 — November 2011; Civil Appeal
No.3360 of 2020 — January 2012 and March 2013; and Civil
Appeal No.3705 of 2020 — June 2009 and October 2009).
12. At the outset, it needs to be borne in mind that the entities in
all these cases are claiming refund founded on the FTP and not in
reference to the provisions of the 1944 Act or the rules framed
thereunder, in particular, the Central Excise Rules, 200226 and the
CENVAT Credit Rules, 200427
.
13. Had it been a claim for refund of duty under the 1944 Act, the
same would be governed by the regime predicated in Section 11B of
that Act. The expression “duty” has been defined in Rule 2(e) of
the 2002 Rules to mean the duty payable under Section 3 of the
1944 Act. Section 3 of the 1944 Act envisages that there shall be
levied and collected in such manner as may be prescribed a duty of
excise as may be called the Central Value Added Tax (CENVAT) on
all excisable goods (excluding goods produced or manufactured in
special economic zones) which are produced or manufactured in
India as, and at the rates, set forth in the Fourth Schedule. It may
26 for short, “2002 Rules”
27 for short, “2004 Rules”
20
be apposite to refer to Section 5A28 of the 1944 Act. It empowers
the Central Government to grant exemption from duty of excise in
respect of specified excisable goods. The exercise of power to
exempt is a beneficial power — which enables the Central
Government to reduce or waive duty on specified goods on such
conditions as may be prescribed. The exemption notification has
statutory force. However, the manufacturers (including DTA Unit)
of specified goods are free to disregard, the benefit of exemption so
provided when it is laced with fulfilment of preconditions by third
party (EOU). However, subsection (1A) of Section 5A came to be
28 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 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 manufacturer of such excisable
goods shall not pay the duty of excise on such goods.
…..
(emphasis supplied)
21
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
subsection (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 precondition). 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
cent of the global trade by promoting exports. It is thus clear that
the concessions or so to say, benefits and entitlements provided
22
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 for the eligibility criterion. It envisages that units
undertaking to export their entire production of goods and services
(except permissible sales in DTA) may be set up under the EOU
Scheme. Similar provision is made regarding other Parks referred
to therein. It is, however, made clear that trading units are not
covered under these schemes. Para 6.1 (Eligibility) reads thus:
“6.1 Eligibility
Units undertaking to export their entire production of
goods and services (except permissible sales in DTA), may
be set up under the Export Oriented Unit (EOU) Scheme,
Electronics Hardware Technology Park (EHTP) Scheme,
Software Technology Park (STP) Scheme or Bio
23
Technology Park (BTP) Scheme for manufacture of goods,
including repair, remaking, reconditioning, reengineering and rendering of services. Trading units are
not covered under these schemes.”
16. Para 6.2 of the FTP specifies the stipulations for the EOU to
conduct its activities such as export and import of goods. Amongst
others, the clause relevant for considering the present appeals is
para 6.2(b), which reads thus:
“6.2 Export and Import of Goods
(a) …..
(b) An EOU/EHTP/STP/BTP unit may import and/or
procure, from DTA or bonded warehouses in
DTA/international exhibition held in India, without
payment of duty, all types of goods, including capital
goods, required for its activities, provided they are not
prohibited items of import in the ITC (HS). Any
permission required for import under any other law
shall be applicable. Units shall also be permitted to
import goods including capital goods required for
approved activity, free of cost or on loan/lease from
clients. Import of capital goods will be on a selfcertification 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
24
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 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.
25
Simple interest @ 6% per annum will be
payable on delay in refund of CST, if the
case is not settled within 30 days of
receipt of complete application (as in
paragraph 9.10.1 of HBP v1).
(ii) Exemption from payment of
Central Excise Duty on goods procured
from DTA on goods manufactured in
India.
(iii) 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.
Reimbursement of additional duty of
excise levied on fuel under the Finance
Acts would also be admissible.
(iv) CENVAT Credit on service tax paid.”
(emphasis supplied)
The opening part of clause (a) concerns the supplier as it refers to
supplies from DTA Unit to EOU to be regarded as deemed exports.
Further, as a consequence of deemed exports, DTA supplier
becomes eligible for entitlements specified under Chapter 8 of the
FTP. To put it differently, in the same Chapter 6, the entitlement of
DTA supplier under Chapter 8 of FTP has also been adverted to.
This provision also deals with the manner of availing the
entitlements specified under Chapter 8 of FTP — either by the DTA
Unit itself or the EOU, the recipient of the goods and services. For,
in terms of this stipulation even the EOU can set up a refund claim
in respect of stated transaction, in lieu of the entitlement of DTA
26
Unit after obtaining suitable disclaimer from DTA supplier. In
other words, clause 6.11 [clause (a) thereof in particular] deals with
entitlement of DTA supplier, which can be availed by the DTA
supplier itself or by the EOU to whom the goods were supplied by it
upon giving suitable 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
27
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”29 and “entitlement”30. “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 initio
29 In Black’s Law Dictionary (11th Edition): benefit, n. (14c) 1. The advantage or privilege
something gives; the helpful or useful effect something has . 2.
Profit or gain; esp., the consideration that moves to the promise . — Also termed legal benefit; legal value.
30 In Black’s Law Dictionary (11th Edition): entitlement. (19c) An absolute right to a (usu.
monetary) benefit, such as social security, granted immediately upon meeting a legal
requirement.
28
exemption qua EOU. The provision in the form of para 6.11(a)
merely enables EOU to set up a claim “in respect of” entitlements
of DTA supplier under Chapter 8 of FTP. There is no separate
entitlement for EOU under Chapter 8 of FTP. To put it differently,
although the heading of para 6.11 is “Entitlement for supplies from
the DTA” and clause (a) thereof envisages that EOU shall on
production of a suitable disclaimer from DTA supplier be eligible
for obtaining entitlements specified in Chapter 8 of FTP, it does not
follow that it is the entitlement of EOU. It is, however, only a case
of benefit transferred to EOU concerning the entitlement of DTA
supplier under Chapter 8 of FTP.
20. That brings us to Chapter 8 of FTP. The heading of Chapter 8
is “Deemed Exports”. The original para 8.1 specified that deemed
exports refer to those transactions in which goods supplied do not
leave country and payment for such supplies is received either in
Indian rupees or in free foreign exchange. By way of amendment,
it further provided that the supply of specified goods (noted in para
8.2) shall be regarded as deemed exports provided goods are
manufactured in India. The original para 8.1 reads thus:
29
“8.1. Deemed Exports
“Deemed Exports” refer to those transactions in which
goods supplied do not leave country, and payment for
such supplies is received either in Indian rupees or in free
foreign exchange.”
[Para 8.1, after amendment, in 20122013 reads thus:
“8.1. Deemed Exports
Deemed Exports” refer to those transactions in which
goods supplied do not leave country, and payment for
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 20122013 reads thus:
“8.2. Categories of Supply
Following categories of supply of goods by main/subcontractors shall be regarded as “Deemed Exports”:
30
(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 be available for
supplies made by an Advance Authorisation
holder to a manufacturer holding another
Advance Authorization if such manufacturer, in
turn, supplies the product(s) to an ultimate
exporter.”
31
And original para 8.4 of the FTP providing benefits to the suppliers,
as applicable at the relevant time, reads thus:
“8.4 Benefits to the Supplier
8.4.1 (i) In respect of supplies made against
Advance Authorisation / DFIA in terms of
paragraph 8.2(a) of FTP, supplier shall be
entitled to Advance Authorisation / DFIA for
intermediate supplies.
(ii) If supplies are made against Advance
Release Order (ARO) or Back to Back Letter of
Credit issued against Advance Authorisation /
DFIA in terms of paragraphs 4.1.11 and 4.1.12
of FTP, suppliers shall be entitled to benefits
listed in paragraphs 8.3(b) and (c) of FTP,
whichever is applicable.
8.4.2 In respect of supply of goods to EOU /
EHTP / STP / BTP in terms of paragraph
8.2(b) of FTP, supplier shall be entitled to
benefits listed in paragraphs 8.3(a), (b) and (c)
of FTP, whichever is applicable.
8.4.3 In respect of supplies made under paragraph
8.2(c) of FTP, supplier shall be entitled to the
benefits listed in paragraphs 8.3(a), (b) and (c) of
the Policy, whichever is applicable.
8.4.4 (i) In respect of supplies made under paragraphs
8.2(d), (f) and (g) of FTP, supplier shall be
entitled to benefits listed in paragraphs 8.3(a),
(b) and (c), whichever is applicable.
(ii) In respect of supplies mentioned in
paragraph 8.2(d), supplies to projects funded 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,
32
import of which is allowed by DoR at zero
customs duty, subject to fulfillment of
conditions specified under Notification No.
21/2002Customs dated 1.3.2002, as amended
from time to time.
(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. 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
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 shall also be
33
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 88 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. Further,
supply of goods required for the expansion of
existing mega power project as specified in
Sl. no 400A of DoR Notification 21/2002
Customs dated 1.3.2002, as amended shall
also be eligible for deemed export benefits as
mentioned in paragraph 8.3 (a), (b) and (c) of
FTP, whichever is applicable.”]
(amendments highlighted)
(v) Supplies under paragraph 8.2(g) of FTP to
new refineries being set up during Ninth Plan
period and spilled over to Tenth Plan period,
shall be entitled for deemed export benefits in
respect of goods mentioned in list 17 specified in
S.No. 228 of Notification No. 21/2002Customs
dated 1.3.2002, as amended from time to time.
Supplier shall be eligible for benefits listed in
paragraphs 8.3(a) and (b) of FTP, whichever is
applicable.
8.4.5 In respect of supplies made under paragraph
8.2(e) of FTP, supplier shall be eligible for
benefits listed in paragraph 8.3(a) and (b) of FTP,
whichever is applicable. 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,
34
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. 21/2002
Customs 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.
35
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 FTP. Para 8.3(c), inter alia, envisages that exemption from
TED is available for supplies made against International
Competitive Bidding31 and also to Advance Authorisation Holder to
a manufacturer holding another advance authorisation if such
manufacturer supplies the products to an ultimate exporter. In
other cases, (would include other DTA suppliers of goods to EOU),
however, refund of TED will be given. Further, the expression
“will” is to be construed as a mandate to give refund to such DTA
suppliers, being its entitlement under FTP. This does not whittle
down the ab initio exemption of payment of duty given to EOU in
respect of supply from DTA.
22. Notably, para 8.3(c) of FTP does not provide inbuilt eligibility
“category” unlike specified in subparas (a) and (b) for ICB and
Advance Authorisation Holder. The expression “in other cases” in
31 for short, “ICB”
36
subpara (c) needs to be understood in proper perspective.
Concededly, paras 8.4.1 to 8.4.7 provide for benefits to the supplier
of goods to EOU as being deemed export. It is essentially an
entitlement of DTA supplier — as listed in para 8.3(a), (b) and (c) of
FTP, as may be applicable. It is seen that para 8.4.2 was
substituted by the revised FTP of 2012, wherein a table was
inserted32. As per that table, benefits available under para 8.2 to
32 Para 8.4, after amendment, in 20122013 reads thus:
"8.4 Benefits to the Supplier
Following table shows the benefits available to different categories of supplies
as mentioned in Para 8.2 above. In respect of such supplies supplier shall be entitled
to the benefits listed in paragraphs 8.3 (a), (b) & (c) of the Policy, whichever is
applicable.
32
Relevant subpara of 8.2
32 Benefit available as given in Para 8.3,
32
(a)
32 Yes
(for
intermediate
supplies)
32 Yes
(against
ARO or Back to
Back letter of
credit)
32 Yes
(Against
8.4.1 This paragraph is deleted because the contents of this paragraph
reflected in table given in paragraph 8.4 above.
37
specified categories of supplies including supply to EOU in para
8.2(b) had been extended benefits under para 8.3, as applicable.
23. The eligibility for refund of TED/drawback in terms of para
8.3(c) of FTP is made dependent on the nonavailment 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
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.”
38
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 20122013 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 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 and subject to complying
other formalities. Para 8.4.2 as originally stood, is indicative of
39
option given only to supplier (DTA) in connection with supply of
goods to EOU, as specified in para 8.3 (a), (b) and (c) of FTP. That
has remained intact despite the amendment of 2012, until March
2013. Be it noted that the purport of para 8.5 states that supply of
goods will be eligible for TED refund only if CENVAT credit/rebate
has not been availed on such goods. These stipulations
demonstrate that the scheme of FTP is explicit and not ambiguous
nor silent in respect of benefits and entitlements of the concerned
entities. It needs no elaboration. Thus, an argument having
potential of defeating the intent of the applicable FTP, in any
manner, ought to be negated.
25. Going by the scheme of FTP applicable at the relevant period,
it is crystal clear that EOUs were entitled to ab initio exemption
from payment of Central Excise duty on goods procured from DTA
on goods manufactured in India, as the import of such goods was
to be made without payment of duty. No more and no less. That,
however, did not preclude the EOU from availing of the entitlement
of DTA supplier under Chapter 8 upon obtaining a suitable
disclaimer from DTA supplier, as provided in para 6.11(a). That
40
availment by EOU had been linked to entitlement of DTA supplier,
as specified in Chapter 8. The DTA supplier could (entitled to) take
refund of TED in respect of goods supplied by it to EOU being
exempted from TED, in light of para 8.3(c). 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
41
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 8.3(c) of FTP];
and
(iii) Supply of goods to EOUs [Para 6.11(c)(ii) of FTP]
42
3. Prudent financial management and adherence to
discipline of budget would be compromised if refund is
provided, in cases, where exemption is mandated. In fact,
in such cases the relevant taxes should not have been
collected to begin with. And if, there has been an
error/oversight committed, then the agency
collecting the tax would refund it, rather than seeking
reimbursement from another agency. Accordingly, it is
clarified that in respect of supplies, as stated at Para 2
above, no refund of TED should be provided by RAs of
DGFT/Office of Development Commissioners, because
such supplies are abinitio exempted from payment of
excise duty.
4. This issue with the approval of DGFT.
(Jay Karan Singh)
Joint Director of Foreign Trade
…..”
(emphasis supplied)
43
33 Section 5, as it existed before amendment in 2010:
5. Export and import policy. — The Central Government 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.
44
27. As regards the claim for refund of TED by EOU, therefore,
need to be governed by the dispensation provided in para 6.11(a)
read with entitlement of DTA supplier under Chapter 8 of FTP.
However, it may have to be processed by the authorities under the
FTP keeping in mind the principle underlying the refund of
CENVAT credit granted under Rule 5 of the 2004 Rules and in the
manner provided therefor, though not covered by Rule 5. That is
because in law it is a case of deemed export by virtue of applicable
FTP.
28. If the refund claim is by the EOU, the same needs to be
processed 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
34 To be published in the Gazette of India Extraordinary
Part II, Section 3, SubSection (II)
Government of India
45
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
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 of the Foreign Trade
(Development & Regulation) Act, 1992, as amended, read with paragraph 1.3 of the Foreign
Trade Policy, 20092014, the Central Government hereby makes the following amendments in
Foreign Trade Policy, 20092014.
2. The existing paragraphs 8.3 (c) and 8.4 in the FTP are substituted by amended
paragraphs 8.3(c) and 8.4 as given below:
(i) Existing Paragraph 8.3 (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 exporter.”
Amended Paragraph 8.3 (c)
“Refund of terminal excise duty will be given if exemption is not available.
Exemption from TED is available to the following categories of supplies:
(i) Supplies against ICB;
(ii) Supplies of intermediate goods, against invalidation letter,
made by an Advance Authorisation holder to another Advance
Authorisation holder; and
(iii) Supplies of goods by DTA unit to EOU / EHTP / STP / BTP unit
Thus such categories of supply which are exempt ab initio will not be eligible to
receive refund of TED”.
(ii) Existing Paragraph 8.4
“Following table shows the benefits available to different categories of supplies
as mentioned in Para 8.2 above. In respect of such supplies supplier shall be entitled
to the benefits listed in paragraphs 8.3 (a), (b) & (c) of the Policy, whichever is
applicable.
Relevant
46
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 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.
subpara of 8.2
47
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 that the EOU did not avail CENVAT credit or rebate
in relation to the goods supplied to EOU. Similarly, if the DTA
supplier has utilised the CENVAT credit, commensurate amount
needs to be reversed to its CENVAT credit account, in which case,
there is no question of refunding the amount in cash to the DTA
supplier.
32. We shall now revert to the judicial pronouncements dealing
with the subject FTP. Except the decision of the Bombay High
Court commended to us, which is under challenge in the first two
appeals pertaining to refund claim by EOU, all other reported
decisions are in respect of DTA supplier of specified
goods/services.
33. The earliest decision is that of the learned Single Judge of the
Calcutta High Court in IFGL Refractories Limited35
. The High
35 supra at Footnote No.22
48
Court noted that the Export and Import Policy for the relevant
years was adopted amongst other to promote export of Indian
products to foreign countries aiming at to earn foreign exchange
and to increase global market. The scheme was propounded to
encourage indigenous supplier by providing certain benefits and
entitlements, either by way of exemption from payment of excise
duty or to get refund of excise duty, if already paid. The object of
the scheme was to provide exporters dutyfree input for production
of export materials and for that reason, it exempted supplier from
payment of any excise duty and, if paid, to provide for refund of
TED. The High Court further 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
49
Bench of the Calcutta High Court in Joint Director General of
Foreign Trade36
. 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
Industries37
. 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
36 supra at Footnote No.19
37 2012 (276) ELT 9 (Guj.)
50
on its earlier decision in Commissioner of Central Excise vs.
Shilpa Copper Wire Industries38, 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 of Delhi in Kandoi
Metal Powders Manufacturing Company Private Limited39
.
Even, this was a case of supplier manufacturing goods supplied to
EOU in reference to the applicable FTP. The High Court not only
relied on the decision of the Division Bench of the Calcutta High
Court in Joint Director General of Foreign Trade40
, but
38 2011 (269) ELT 17 (Guj.)
39 supra at Footnote No.18
40 supra at Footnote No.19
51
independently opined that DGFT having formulated the FTP, the
claim of the assessee was governed by the entitlements specified
therein in paras 8.2, 8.3, 8.4 and 8.5 as applicable at the relevant
time. Accordingly, the High Court allowed the writ petition and
relegated the writ petitioner before the Authority concerned for
deciding the refund claim of the petitioner. This judgment has
been followed in subsequent decisions, not only by the coordinate
Benches of the High Court of Delhi, but also by other High Courts.
36. The Madras High Court in the case of Raja Crowns and
Cans Pvt. Limited vs. Union of India41 dealt with similar claim of
the DTA supplier of goods to EOU and whilst following the
decisions of the High Court of Delhi and Calcutta High Court
referred to above, opined that the assessee was entitled to maintain
an application for refund of TED. The High Court, accordingly,
directed the Authorities concerned to consider the refund
application of the writ petitioner. Later on, the Madras High Court
41 2015 (317) ELT 40 (Mad.)
52
took the same view in Lenovo (India) Pvt. Ltd.42 and Manali
Petrochemical Limited vs. Additional Director General of
Foreign Trade, New Delhi & Anr.43
.
37. As aforesaid, the decision in Kandoi Metal Powders
Manufacturing Company Private Limited44 has been
subsequently followed by the High Court of Delhi in Union of
India vs. Alstom India Limited45
, Commissioner of Central
Excise, Delhi II vs. Welspring Universal46, Deepak Enterprises
vs. Union of India47, Alstom Transport India Ltd. vs. Union of
42 supra at Footnote No.25
43 W.P. No.23194 of 2009, decided on 16.9.2019
44 supra at Footnote No.18
45 2015 (325) ELT 72 (Del.)
46 2018 (359) ELT 635 (Del.)
47 2018 (360) ELT 905 (Del.)
53
India48, Motherson Sumi Electric Wires vs. Union of India49
,
Multitex Filtration Engineers Limited vs. Union of India50 and
Hindustan Tin Works Limited vs. Union of India51
.
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.52
.
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)
48 2018 (363) ELT 69 (Del.)
49 2018 (364) ELT 91 (Del.)
50 2020 (373) ELT 68 (Del.)
51 2020 (373) ELT 217 (Del.)
52 supra at Footnote No.21
54
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 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 relation to goods procured by it to DTA
supplier. In that case, EOU will be eligible only for obtaining
entitlements of DTA supplier as specified in Chapter 8 of the FTP
55
upon obtaining a suitable disclaimer from DTA supplier.
Accordingly, in addition to ab initio exemption, the EOU is
additionally eligible to receive entitlements of DTA supplier as
specified in Chapter 8 of the FTP subject to complying with
necessary requirements and formalities. In other words, EOU is
not entitled for refund of TED on its own accord, but can avail of
the entitlements of DTA supplier on complying essential procedure.
As mentioned earlier, the interest on the refundable amount, if
paid in cash ought to be refunded with simple interest at the rate
of 6% per annum as provided in para 8.5.1 of the applicable FTP,
even in the case of application for refund by EOU.
41. The next question is: the refund claim should be set up before
which Authority? As noted earlier, since the entitlement of
exemption and refund of TED flows from the provisions of 1992 Act
and FTP framed thereunder by the Central Government, which is
an independent dispensation than the one provided in the 1944
Act and the rules framed 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
56
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 coupled with the obligation to import the
same without payment of duty under para 6.2(b).
57
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 CENVAT credit, the refund
would be in the form of reversal of commensurate amount in its
CENVAT credit account. And if the amount towards TED has been
paid in cash by the DTA supplier to the Authorities under the 1944
Act, the refund of TED amount would be made by the Authority
58
implementing the applicable FTP in cash with simple interest at the
rate of 6% per annum for the delay in refund of TED as per para
8.5.1.
45. In both cases, as aforesaid, responsibility of refund of TED in
reference to applicable FTP would be that of the Authority
responsible to implement the FTP under the 1992 Act, which has
had consciously accorded such entitlements/benefits for promoting
export and earning foreign exchange. Further, the fact that the
concerned entity had unsuccessfully applied for refund to the
Authorities under the 1944 Act and the rules made thereunder,
that would not denude it of its entitlement to get refund of TED
under the FTP, as may be applicable being mutually exclusive
remedies. It is so because it is well settled that the assessee is free
to take benefit of more beneficial regime.
46. Learned counsel for the parties had referred to other
decisions, which in our opinion need not be dealt with as the same
are not directly dealing with the issue(s) answered in these cases,
in particular dispensation provided under the applicable FTP.
59
47. 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.
..……………………………J.
(A.M. Khanwilkar)
………………………………J.
(Dinesh Maheshwari)
………………………………J.
(Krishna Murari)
New Delhi;
January 4, 2022.
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