2016 (8) TMI 710 - HC - Customs

Court clarifies policy on excise duty exemptions for supplies to EOUs, rejects refund claims

The court held that the policy circular dated 15th March 2013 was clarificatory and did not introduce new conditions. It interpreted the FTP provisions ... Deemed export - Supply of intermediate goods by the DTA unit to 100% EOU unit - claiming refund of the TED paid by the petitioners' DTA unit on the goods supplied to the petitioners EOU. - Payment of duty on exempted goods by the DTA unit - Held that:- When there is an exemption, then, this refund claim was rightly disallowed. We do not think that any individual decision and in the case of a distinct assessee would, therefore, be of assistance to the present petitioners. Though in the past such claims have been granted does not mean that the practice or the past orders should govern the issue necessarily. When the petitioners themselves were aware of a policy circular and sought to urge that it would not be governing the controversy and for the period for which refund is claimed, then, it is clear that they were required to overcome the said stipulations and the circular itself. That having found rightly to be clarifying the obvious position, we have no hesitation in concluding that the refund applications were properly and correctly disallowed. - Decided against the assessee. Issues Involved:1. Eligibility for refund of Terminal Excise Duty (TED) under the Foreign Trade Policy (FTP).2. Interpretation and application of policy circular dated 15th March 2013 issued by the Director General of Foreign Trade (DGFT).3. Retrospective effect of policy circulars and their impact on refund claims.4. Jurisdiction and powers of the DGFT in interpreting and implementing the FTP.Detailed Analysis:1. Eligibility for Refund of Terminal Excise Duty (TED):The petitioner, a 100% Export Oriented Unit (EOU), claimed refunds of TED paid on goods supplied by their Domestic Tariff Area (DTA) unit for export purposes. The FTP 2004-2009 and 2009-2014, particularly paragraphs 8.1, 8.2, 8.3, and 8.5, were relied upon to argue that such supplies qualify as deemed exports and are eligible for TED refund, provided the recipient EOU does not avail Cenvat credit. The petitioner’s DTA unit issued disclaimer certificates to enable the EOU to claim TED refunds.2. Interpretation and Application of Policy Circular Dated 15th March 2013:The refund applications for TED were rejected based on a policy circular dated 15th March 2013, which clarified that no TED refund should be provided for supplies to EOUs as these are ab-initio exempt from excise duty. The respondents argued that this circular did not amend but merely clarified existing provisions of the FTP, specifically para 6.2(b) and 6.11(c)(ii), which state that such supplies are exempt from excise duty from inception.3. Retrospective Effect of Policy Circulars:The petitioners contended that the policy circular could not be applied retrospectively to their refund claims filed before its issuance. They argued that the circular introduced new conditions and should not affect claims for periods predating its issuance. The court examined whether the circular was merely clarificatory or if it substantively amended the FTP provisions.4. Jurisdiction and Powers of the DGFT:The court reviewed the statutory scheme under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), which empowers the Central Government to formulate and amend the FTP. The DGFT is responsible for advising the government and implementing the policy but does not have the authority to amend it. The court found that the DGFT’s circular was within its jurisdiction to interpret and clarify the FTP.Judgment:The court concluded that the policy circular dated 15th March 2013 was clarificatory and did not introduce new conditions. It harmoniously interpreted para 6.2(b) and 6.11(c)(ii) of the FTP, which already exempted supplies to EOUs from excise duty. Therefore, no refund of TED was admissible as the supplies were ab-initio exempt from duty. The court held that the refund applications were correctly disallowed and dismissed the writ petitions, discharging the rule without costs.The court also noted that past practices of granting refunds do not bind the authorities if they are contrary to the clarified policy. The judgment emphasized that the DGFT's power to interpret the FTP does not contravene the FTDR Act, and the circular's retrospective application was justified as it clarified existing policy provisions.