2017 (8) TMI 432 - HC - Customs

Karnataka High Court Quashes Circulars Denying CST Reimbursement

M/s. Wipro GE Healthcare Private Limited Versus Union of India, Development Commissioner Cochin Special Economic Zone (CSEZ), The Director, Software Technology Parks of India, Department of Electronics and Information Technology, Director General of Foreign Trade, Deputy Director General of Foreign Trade

The Karnataka High Court allowed the petitions, quashing Circulars denying CST reimbursement under the FTP 2009-2014. The court directed processing and ... Reimbursement of Central Sales Tax (CST) - purchases of Medical Equipments from other suppliers in the course of inter-state Trade and Commerce - denial of benefit on the ground that the goods purchased from EOU - Held that: - there is no justifiable reason for the Respondent-Authority to deny such benefit of CST reimbursement to the petitioner -Company merely because the goods in question are purchased from a Unit situated in EOUs/SEZs/EHTP/STPI specified Zones or areas and deny the said benefit merely because the Units are located in EOU/SEZ area. Irrespective of the location of the Manufacturing Units selling such products to the petitioner - Company in the course of inter-state Trade and charging CST, the goods continue to be the 'Goods manufactured in India' which is the requirement in the said Foreign Trade Policy for entitling the petitioner -Company to claim such reimbursement of CST paid under the Central Sales Tax Act, 1956. Moreover, the specific amendment in the said Foreign Trade Policy for the year 2015-2020 removed the said anomaly and discrimination as to the source of Units from which the petitioner may purchase such goods in the course of inter-state trade and commerce and the said amendment can be treated only as a clarificatory one and can be applied to the previous period also - petition allowed - decided in favor of petitioner. Issues Involved:1. Reimbursement of Central Sales Tax (CST) under the Foreign Trade Policy (FTP) 2009-2014.2. Distinction in reimbursement eligibility based on the source of purchase (Domestic Tariff Area (DTA) vs. Export Oriented Units (EOUs)/Special Economic Zones (SEZs)).3. Validity of the impugned Circulars and communications denying CST reimbursement.4. Interpretation of FTP provisions and their applicability to the petitioner's claims.5. Authority responsible for processing and disbursing CST reimbursement claims.Issue-wise Detailed Analysis:1. Reimbursement of Central Sales Tax (CST) under the Foreign Trade Policy (FTP) 2009-2014:The petitioner, a company engaged in purchasing medical equipment, sought reimbursement of CST paid on inter-state purchases under the FTP 2009-2014. The FTP allowed CST reimbursement for goods purchased from DTA units but denied it for goods purchased from EOUs/SEZs. The petitioner challenged this denial, arguing that the FTP provisions entitled them to reimbursement regardless of the source of purchase.2. Distinction in reimbursement eligibility based on the source of purchase (DTA vs. EOUs/SEZs):The petitioner argued that the distinction made between DTA and EOUs/SEZs for CST reimbursement was unjust and discriminatory. The Madras High Court, in a similar case, held that 'a holistic reading of the Scheme of Chapter 6' of the FTP indicated no restriction on purchasing goods from EOUs/SEZs for CST reimbursement. The court emphasized that the FTP aimed to promote exports and should be interpreted liberally to encourage economic activity.3. Validity of the impugned Circulars and communications denying CST reimbursement:The petitioner challenged several Circulars and communications that denied CST reimbursement for goods purchased from EOUs/SEZs. The Allahabad High Court, in a related case, declared such Circulars 'illegal and in conflict with the provisions of the FTP.' The court held that the FTP did not restrict CST reimbursement to purchases from DTA units and that any procedural documents (like Appendices) that imposed such restrictions were ultra vires.4. Interpretation of FTP provisions and their applicability to the petitioner's claims:The courts examined the FTP provisions, particularly paragraph 6.11(c)(i), which stated that CST reimbursement was available on 'goods manufactured in India.' The Madras High Court clarified that this provision applied to goods purchased from any unit, including EOUs/SEZs, as long as the goods were manufactured in India. The Gujarat High Court concurred, stating that the FTP did not limit CST reimbursement to DTA purchases and that any procedural restrictions were beyond the FTP's scope.5. Authority responsible for processing and disbursing CST reimbursement claims:The Allahabad High Court addressed the issue of which authority was responsible for CST reimbursement. It held that the designated officer of the Software Technology Parks of India (STPI) was responsible for receiving and disbursing CST reimbursement claims. The court rejected the argument that higher authorities were responsible for processing claims, emphasizing that STPI should ensure the claims were processed and funds procured for reimbursement.Conclusion:The Karnataka High Court, agreeing with the judgments of the Madras, Allahabad, and Gujarat High Courts, allowed the petitions. The court quashed the impugned Circulars and communications denying CST reimbursement and directed the respondents to process and reimburse the petitioner's CST claims for the period covered by the FTP 2009-2014. The court emphasized that the goods purchased from EOUs/SEZs were 'goods manufactured in India' and thus eligible for CST reimbursement under the FTP. The court also noted that the amendment in the FTP 2015-2020, which removed the distinction between DTA and EOUs/SEZs, could be applied retrospectively as a clarificatory measure. The respondents were directed to process the refund claims expeditiously within three months.