Court sets aside order, quashes circular, deems restriction beyond powers. Emphasizes impermissibility of delayed recovery actions.

The court allowed the petition, setting aside the challenged order and quashing the circular. It declared the circular incorrect and the restriction in Appendix 14II as beyond the Foreign Trade Policy powers. The court emphasized the impermissibility of delayed recovery actions, concluding in favor of the petitioner.

---

---

Issues Involved:
1. Challenge to Appendix 14II of Hand Book Procedures of Foreign Trade Policy 2004-2009.
2. Challenge to circular dated 11.4.2014 as ultra vires the Foreign Trade Policy 2004-2009.
3. Challenge to order dated 22.8.2016 by Development Commissioner, KASEZ.
4. Legality of CST reimbursement on purchases made by an EOU from another EOU.
5. Validity of recovery actions after a long delay.

Issue-wise Detailed Analysis:

1. Challenge to Appendix 14II of Hand Book Procedures of Foreign Trade Policy 2004-2009:
The petitioner contended that the limitation of CST reimbursement to purchases made from Domestic Tariff Area (DTA) units, as specified in Appendix 14II, was ultra vires the Foreign Trade Policy 2004-2009. The Court observed that the Foreign Trade Policy itself did not restrict CST reimbursement to purchases from DTA units. Para 6.11(c)(i) of the policy stated that EOUs are entitled to reimbursement of CST on goods manufactured in India, without specifying any restriction to DTA units. The Court concluded that the restriction in Appendix 14II was beyond the powers of the Director General of Foreign Trade and contrary to the policy.

2. Challenge to circular dated 11.4.2014 as ultra vires the Foreign Trade Policy 2004-2009:
The circular dated 11.4.2014 issued by the Ministry of Commerce and Industry clarified that CST reimbursement was not available for goods supplied from one EOU to another. The Court held that this circular did not lay down the correct legal position because it imposed a restriction not found in the Foreign Trade Policy 2004-2009. The circular was therefore quashed.

3. Challenge to order dated 22.8.2016 by Development Commissioner, KASEZ:
The Development Commissioner, KASEZ, demanded a refund of CST reimbursement and imposed a penalty for delayed return of the amount. The Court set aside this order, noting that the Foreign Trade Policy did not restrict CST reimbursement to purchases from DTA units. The Court found that the order was based on an incorrect interpretation of the policy and the ultra vires circular.

4. Legality of CST reimbursement on purchases made by an EOU from another EOU:
The Court analyzed the relevant provisions of the Foreign Trade Policy and concluded that the policy did not restrict CST reimbursement to purchases from DTA units. The expression "goods manufactured in India" in para 6.11(c)(i) included goods manufactured in EOUs. The Court referred to subsequent policies (2015-2020) which explicitly allowed CST reimbursement for purchases from EOUs, confirming that the original policy intended to cover such transactions. The Court held that the procedure in Appendix 14II, which restricted reimbursement to DTA purchases, was ultra vires the policy.

5. Validity of recovery actions after a long delay:
The Court noted that the claims for CST reimbursement were made and granted between 2006 and 2008, and the demand for recovery was issued in 2015. The Court found that there was no misrepresentation or misstatement by the petitioner that justified such a delayed recovery. The Court held that it was impermissible for the respondents to recover the amount after an undue delay of more than seven years without any explanation.

Conclusion:
The petition was allowed, setting aside the impugned order dated 22.8.2016 and quashing the circular dated 11.4.2014. The Court declared that the circular did not lay down the correct legal position and that the restriction in Appendix 14II was ultra vires the Foreign Trade Policy 2004-2009. The Court also highlighted the impermissibility of delayed recovery actions.

---