Electricity deemed export eligible under FTP for supplying to 100% EOU. Court grants benefits to petitioner.

The court held that electricity qualifies as a "consumable" under para 9.15 of the Foreign Trade Policy (FTP) and is eligible for deemed export benefits. The petitioner, supplying electricity to its 100% Export Oriented Unit (EOU), was found entitled to such benefits. The court quashed previous orders and allowed the writ petition, declaring the petitioner's right to deemed export benefits for supplying electricity from its Domestic Tariff Area (DTA) unit to the EOU.

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Issues Involved:
1. Whether electricity is a "consumable" item under para 9.15 of the Foreign Trade Policy (FTP).
2. Whether the petitioner is entitled to deemed export benefits for the supply of electricity to its 100% Export Oriented Unit (EOU).

Detailed Analysis:

Issue 1: Whether electricity is a "consumable" item under para 9.15 of the Foreign Trade Policy (FTP).

Facts and Arguments:
The petitioner, a company incorporated under the Companies Act, 1956, claimed deemed export benefits for the electricity consumed by its 100% EOU engaged in the production of zinc. The Board of Approval for Export Oriented Unit Scheme rejected the claim, stating that electricity is not a "consumable" item and thus not eligible for exemption under para 6.5.1 of the Hand Book Procedure (HBP) 2009-14. The petitioner argued that electricity is an integral "consumable" in the zinc manufacturing process, as defined under para 9.15 of FTP, which states that a "consumable" is any item required for a manufacturing process but does not necessarily form part of the end product and is substantially consumed during the process.

Court's Appreciation:
The court meticulously examined the zinc manufacturing process, which involves electro-winning, melting and casting, leaching and purification, and roasting. It was observed that electricity is essential for the electrolysis process, which is critical for zinc production. The court noted that electricity, although intangible, is a measurable and quantifiable good that is substantially consumed in the manufacturing process. Therefore, electricity qualifies as a "consumable" under para 9.15 of FTP.

Issue 2: Whether the petitioner is entitled to deemed export benefits for the supply of electricity to its 100% Export Oriented Unit (EOU).

Facts and Arguments:
The petitioner contended that as a 100% EOU, it should be entitled to deemed export benefits for the electricity supplied from its Domestic Tariff Area (DTA) unit. The respondents argued that electrical energy, being intangible, cannot be classified as a "consumable" under para 6.6.1 of HBP-I, which lists eligible goods for deemed export benefits.

Court's Appreciation:
The court analyzed the relevant provisions of the FTP and HBP-I. Para 6.6.1 of HBP-I includes raw materials, components, consumables, intermediates, spares, and packing materials as eligible for deemed export benefits. The court emphasized that these terms have a broad connotation and can include various goods, including electricity, which fits the definition of "consumable" under para 9.15 of FTP. The court rejected the argument that the intangibility of electricity disqualifies it from being a "consumable." It was also noted that the exclusion of electricity in para 6.6.1 and the inclusion of electricity-generating equipment indicate that electricity, as a consumable, has a distinct identity.

Conclusion:
The court concluded that electricity is a "consumable" as per para 9.15 of FTP and therefore falls under the goods permitted to be imported/procured from DTA under para 6.6.1 of HBP-I. The petitioner's claim for deemed export benefits was found to be valid.

Judgment:
The petition for writ was allowed. The orders dated 6.7.2012 and 14.9.2012 were quashed. It was declared that the petitioner is entitled to deemed export benefits for its DTA unit supplying electricity to its 100% EOU. No order as to costs.

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