2017 (7) TMI 786 - HC - Customs

EOU entitled to CST reimbursement for purchases under FTP; 2015 amendments apply retrospectively.

The court held that the respondent company, an Export Oriented Unit (EOU), was entitled to reimbursement of Central Sales Tax (CST) for purchases made ... 100% EOU - Reimbursement of CST paid in respect of the purchases made from an EOU - denial on the ground that the reimbursement of CST vis-a-vis purchases made by an EOU was restricted to the supplies received from an unit located in a Domestic Tariff Area - Held that: - A plain reading of clause (a) and (c) of paragraph 6.11 of 2009 FTP shows that an EOU is entitled to various benefits. In so far as clause (a) to paragraph 6.1 is concerned, the supplies received from DTA by the EOU are regarded as 'deemed exports' and, accordingly, the supplier is eligible for relevant entitlements under Chapter 8 of the FTP. Besides this, even an EOU on production of a suitable disclaimer from a DTA supplier would be eligible for obtaining entitlements specified in chapter 8 of FTP. It has been specifically stated in clause (a) that for claiming deemed export duty draw back, they shall be given brand rates fixed by the Development Commissioner, wherever All Industry Rates of Drawback are not available - in so far as the other entitlements are concerned, these are set out in clause (c) of paragraph 6.11 of the 2009 FTP. Sub-clause (i) speaks about reimbursement of CST; sub-clause (ii) speaks about exemption from Central Excise Duty on goods procured from DTA on goods manufactured in India. Sub-clause (iii) provides for reimbursement of duty paid on fuel procured from domestic oil companies/depots of domestic oil Public Sector Undertakings, as per drawback rate, notified by DGFT from time to time. It also provides for reimbursement of additional duty of excise levied on fuel under the Finance Act, and lastly, clause (iv) provides for cenvat credit on service tax paid. In chapter 6, there are provisions for other entitlements, such as, those given in paragraph 6.12. A holistic reading of the Scheme of Chapter 6 is, indicative of the fact that, there are several entitlements available to an EOU unit, none of which seems to suggest that it is either prohibited from purchasing goods from a DTA unit or from making a domestic sale, subject to it fulfilling the threshold NFE, fixed qua the concerned unit. Both in law and on facts, it cannot be contended by the appellants that goods manufactured by EOU units are not goods manufactured in India and, thus, do not fulfill the conditionality for reimbursement of CST, as contained in sub-clause (i) of clause (c) of paragraph 6.11 of the 2009 FTP. Aplain reading of the provisions of paragraph 6.11 (c)(i), would have us hold that notwithstanding the fact that the respondent company/Writ Petitioner made purchases from an EOU as against DTA unit, it would be entitled to seek reimbursement of CST. Appeal dismissed - decided against Revenue. Issues Involved:1. Entitlement for reimbursement of Central Sales Tax (CST) for purchases made by an Export Oriented Unit (EOU) from another EOU under the 2009 Foreign Trade Policy (FTP).2. Interpretation of the provisions of the 2009 FTP and Appendix 14-I-I.3. Powers and role of the Director General of Foreign Trade (DGFT) in amending the FTP.4. Retrospective application of amendments made in the 2015 FTP.Detailed Analysis:1. Entitlement for Reimbursement of CST:The primary issue was whether an EOU is entitled to reimbursement of CST for purchases made from another EOU under the 2009 FTP. The respondent company, an EOU, sought reimbursement for CST paid on purchases from another EOU, which was initially granted for some periods but later denied.2. Interpretation of the 2009 FTP and Appendix 14-I-I:The appellants argued that the reimbursement of CST was restricted to purchases made from Domestic Tariff Area (DTA) units, based on the provisions of paragraph 6.11 and Appendix 14-I-I of the 2009 FTP. The respondent countered that the FTP did not restrict CST reimbursement to DTA purchases and that Appendix 14-I-I could not override the substantive rights provided by the FTP.The court observed that:- Paragraph 6.11(c)(i) of the 2009 FTP entitles EOUs to reimbursement of CST on goods manufactured in India without specifying the source of purchase.- The heading or marginal notes to paragraph 6.11 cannot override the clear provisions of the FTP.- The entire scheme of Chapter 6 of the FTP supports that EOUs can make purchases from DTA units and claim CST reimbursement.3. Powers and Role of the DGFT:The respondent argued that the DGFT, as an implementing authority, could not amend the FTP, a power vested only in the Central Government under Section 5 of the FTDR Act. The court agreed, noting:- The FTP is formulated by the Central Government, and any amendments can only be made by the Central Government.- The DGFT's role is to implement the FTP, not to alter its substantive provisions through procedural appendices like Appendix 14-I-I.4. Retrospective Application of Amendments in the 2015 FTP:The appellants contended that the 2015 FTP, which explicitly allowed CST reimbursement for purchases from EOUs, should be applied prospectively. The court held:- The 2015 FTP's Appendix 6H clarified the existing position rather than changing it, indicating that CST reimbursement was always intended for purchases from EOUs.- The amendment was clarificatory and thus should be applied retrospectively to support the respondent's claims under the 2009 FTP.Conclusion:The court concluded that the respondent company was entitled to reimbursement of CST for purchases made from another EOU under the 2009 FTP. The provisions of Appendix 14-I-I could not override the substantive rights provided by the FTP. The amendments in the 2015 FTP were clarificatory and supported the respondent's entitlement to CST reimbursement. The appeals were dismissed, and the judgment of the single judge was upheld.