Court declares Circular No. STPN/CST/2015 illegal, rules in favor of CST reimbursement claims

The court declared Circular No. STPN/CST/2015 as illegal, ruling in favor of the petitioner's entitlement to reimbursement of Central Sales Tax (CST) for goods purchased from Export Oriented Units (EOUs) or Special Economic Zone (SEZ) units. The court held that the circular was inconsistent with the statutory provisions of the Foreign Trade Policy (FTP) and directed the respondent to process the petitioner's CST reimbursement claim according to the FTP provisions. The court allowed the writ petitions in favor of the petitioner.

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Issues Involved:
1. Validity of Circular No. STPN/CST/2015 dated 14.01.2015.
2. Entitlement of the petitioner for reimbursement of Central Sales Tax (CST) on goods purchased from Export Oriented Units (EOUs) or Special Economic Zone (SEZ) units.
3. Authority responsible for the reimbursement of CST to the petitioner.

Issue-wise Detailed Analysis:

1. Validity of Circular No. STPN/CST/2015 dated 14.01.2015:
The petitioner challenged the circular dated 14.01.2015 issued by the Director, Software Technology Parks of India (STPI), which stated that reimbursement of CST is not permissible for goods procured from EOUs, SEZs, and other similar units. The court held that the Foreign Trade Policy (FTP) under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, is a statutory instrument and cannot be overridden by a subordinate authority's circular. The FTP, specifically paragraph 6.11(c)(i), does not stipulate the source of procurement for CST reimbursement, making the circular inconsistent with the FTP. Therefore, the circular was deemed invalid and in conflict with the statutory provisions of the FTP.

2. Entitlement of the petitioner for reimbursement of CST:
The petitioner, an EOU, sought reimbursement of CST paid on goods purchased from other EOUs or SEZ units as per paragraph 6.11(c)(i) of the FTP. The court observed that paragraph 6.11(c)(i) clearly entitles EOUs to CST reimbursement on goods manufactured in India, irrespective of the source of procurement. The court emphasized that the clause is independent and not dependent on other clauses (a) and (b) of paragraph 6.11, which pertain to deemed exports and export duty drawbacks. The court concluded that the petitioner is entitled to CST reimbursement as it fulfills the conditions of manufacturing goods in India and being an EOU.

3. Authority responsible for the reimbursement of CST:
The Handbook of Procedures under the FTP specifies that claims for CST reimbursement should be presented to the designated officer of the STP, who is also responsible for disbursing the claimed amount. The court rejected the argument that the Ministry of Commerce and Industry or another higher authority must process the claims before the STPI can make payments. The court clarified that the designated officer of the STPI is responsible for receiving applications, processing claims, and making payments. If necessary, the STPI must ensure the claims are processed and funds procured for settlement.

Conclusion:
The court declared Circular No. STPN/CST/2015 dated 14.01.2015 as illegal and issued a writ of mandamus directing the respondent to process the reimbursement claim of CST for the petitioner in respect of goods purchased from non-DTA units and make the payment in accordance with paragraph 6.11(c)(i) of the FTP. The writ petitions were allowed.

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