Foreign trade policy clarification upheld: deemed export supplies exempt at inception cannot support terminal excise duty refund claims.

The Foreign Trade Policy was construed as already exempting supplies from a domestic tariff area unit to a 100% export oriented unit from duty at inception, so those supplies could not generate a claim for refund of terminal excise duty. The Director General of Foreign Trade circular was treated as a clarificatory instrument within the implementation and interpretation role under the Foreign Trade (Development and Regulation) Act, 1992, because it did not introduce a new restriction or amend the policy retrospectively. On that reading, past refunds or earlier individual orders did not alter the correct policy position, and the refund claims were not admissible.

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Issues: (i) Whether the policy circular issued by the Director General of Foreign Trade merely clarified the existing foreign trade policy or introduced a substantive amendment affecting pending refund claims; (ii) Whether supplies made by a domestic tariff area unit to a 100% export oriented unit were eligible for refund of terminal excise duty under the foreign trade policy.

Issue (i): Whether the policy circular issued by the Director General of Foreign Trade merely clarified the existing foreign trade policy or introduced a substantive amendment affecting pending refund claims.

Analysis: The statutory scheme under the Foreign Trade (Development and Regulation) Act, 1992 vests the power to formulate and amend the foreign trade policy in the Central Government, while the Director General is responsible for implementation and interpretation. The circular was read with the policy provisions governing export-oriented units and deemed exports. On that construction, the circular did not create a new condition or an independent restriction; it explained the already existing position that supplies covered by the relevant policy clauses were ab initio exempt from excise duty and therefore not entitled to refund of terminal excise duty.

Conclusion: The circular was held to be clarificatory and valid.

Issue (ii): Whether supplies made by a domestic tariff area unit to a 100% export oriented unit were eligible for refund of terminal excise duty under the foreign trade policy.

Analysis: The policy provisions dealing with export-oriented units, deemed exports, and terminal excise duty were construed together. Although supplies from domestic tariff area to export-oriented units are treated as deemed exports and may qualify for chapter 8 benefits where the recipient furnishes the required disclaimer, the relevant clauses also indicated that such supplies were permitted without payment of duty and were therefore exempt at inception. On a harmonious reading of the policy paragraphs, refund of terminal excise duty was not available where the supplies were already exempt ab initio. Past refunds or earlier individual orders did not override the correct construction of the policy.

Conclusion: The claim for refund of terminal excise duty was held not admissible.

Final Conclusion: The policy circular was upheld as a clarification of the existing foreign trade policy, and the refund claims for terminal excise duty by the export-oriented units were rejected.

Ratio Decidendi: Where the governing foreign trade policy already exempts a category of supplies from duty at inception, an administrative circular clarifying that no refund of terminal excise duty is payable does not amount to a retrospective amendment and refund cannot be claimed for such exempt supplies.

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