EOUs entitled to CST reimbursement on inter-state purchases despite procedural restrictions

The court held that Export Oriented Units (EOUs) are eligible for reimbursement of Central Sales Tax (CST) on inter-state purchases from another EOU, despite procedural norms restricting such claims. The court emphasized that substantive rights under the Foreign Trade Policy (FTP) should not be hindered by procedural restrictions. The impugned communications were set aside, and the Development Commissioner was directed to grant the refund claims for CST on purchases made by the petitioner from another EOU. The writ petitions were allowed, and the connected miscellaneous petition was closed.

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Issues Involved:
1. Eligibility of an Export Oriented Unit (EOU) for reimbursement of Central Sales Tax (CST) on inter-state purchases from another EOU.
2. Interpretation of Foreign Trade Policy (FTP) provisions and Handbook of Procedures (HBP) regarding CST reimbursement.
3. Validity of procedural norms conflicting with substantive rights under the FTP.

Issue-wise Detailed Analysis:

1. Eligibility of an EOU for Reimbursement of CST on Inter-State Purchases from Another EOU:
The core issue in both writ petitions was whether inter-state purchases made by an EOU from another EOU qualify for CST reimbursement under the extant provisions of the law. The petitioner, a 100% EOU, argued that they were entitled to CST reimbursement for purchases made from another EOU, citing past instances where such claims were sanctioned. However, the respondents contended that the Handbook of Procedures Vol-I allowed CST reimbursement only for supplies from Domestic Tariff Area (DTA) units, not from EOUs.

2. Interpretation of FTP Provisions and HBP Regarding CST Reimbursement:
The petitioner relied on paragraph 6.11 of the FTP, which provides for certain entitlements for EOUs, including CST reimbursement on goods manufactured in India. The petitioner argued that the substantive right under the policy allows for CST reimbursement irrespective of the seller's category (DTA or EOU). The respondents, however, maintained that the Handbook of Procedures and Appendix 14.I-I only provided for CST reimbursement on purchases from DTA units, not from EOUs.

3. Validity of Procedural Norms Conflicting with Substantive Rights Under the FTP:
The court held that procedural norms (Appendix 14.I-I) should not restrict the substantive rights provided in the policy. It emphasized that the Handbook and Appendix are procedural instruments meant to operationalize the substantive rights in the FTP, not to prevent them. The court noted that the substantive provision in paragraph 6.11 of the FTP remained unchanged in the new FTP (2015-2020), which continued to allow CST reimbursement for goods manufactured in India without specifying the seller's category. Therefore, the procedural norms conflicting with this substantive right were held to be invalid.

Judgment:
The court set aside the impugned communications dated 28.04.2014 and 11.04.2014, issued by the Development Commissioner, Madras Export Processing Zone, Chennai, and the Secretary, Ministry of Commerce and Industry, respectively. It directed the Development Commissioner to grant the refund claims for CST on purchases made by the petitioner from another EOU, M/s Orchid Chemicals & Pharmaceuticals Limited. The writ petitions were allowed, and the connected miscellaneous petition was closed.

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