High Court Nullifies Demands for CST Reimbursement, Rules in Favor of Export Oriented Unit

The Calcutta High Court declared nullity of notices dated March 15, 2014, April 17, 2014, and October 20, 2014, and rejected a demand for payment of Rs. 42,81,604/- from the respondents. The court held that an Export Oriented Unit (EOU) was entitled to reimbursement of Central Sales Tax (CST) for purchases from Special Economic Zone (SEZ) Units under the Foreign Trade Policy (FTP) 2009-2014, despite authorities' contentions. The court emphasized the lack of prohibition on such reimbursements in the FTP and quashed the notices, ruling in favor of the petitioners without costs.

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Issues:
1. Declaration of nullity of notices dated March 15, 2014, April 17, 2014, and October 20, 2014.
2. Demand for payment of Rs. 42,81,604/- from the respondents.

Analysis:
1. The petitioners, an Export Oriented Unit (EOU), sought a declaration that the notices and demanded reimbursement of CST. The authorities rejected the claim for refund since the first quarter of 2011-2012, alleging purchases from a SEZ Unit were not eligible for CST reimbursement. The petitioners argued that the authorities' contention was flawed, citing the absence of a clear definition of DTA in the FTP and pointing out the inclusion of supplies from SEZ Units for CST reimbursement in the subsequent FTP. Reference was made to a judgment by the Madras High Court favoring a similar petitioner's claim, establishing entitlement to reimbursement.

2. The respondents contended that under the FTP, an EOU could claim CST reimbursement only for goods manufactured in India and procured from DTA Units, excluding SEZ Units. They relied on specific clauses from the FTP, Handbook of Procedure, and relevant legal provisions to support their argument. The respondents claimed the first petitioner had been overpaid previously and should refund the excess amount. However, the court found no valid reason to deny CST reimbursement for purchases from SEZ by an EOU under the FTP 2009-2014, as the policy did not prohibit such reimbursements. The court also noted that an Office Memorandum used to deny reimbursement had been challenged and quashed by the Madras High Court in a previous case.

3. The court examined the contents of the show-cause cum demand notices issued to the petitioners, highlighting the grounds for denial of CST reimbursement based on specific clauses of the FTP 2009-2014. It emphasized the lack of a clear definition of DTA in the FTP and the subsequent policy changes that allowed for full reimbursement of CST paid on purchases from SEZ by EOUs. The court concluded that the demands for reimbursement were unfounded, as the grounds for denial did not hold under the existing policy framework. Consequently, the court quashed the impugned notices and disposed of the case without costs.

This detailed analysis of the judgment from the Calcutta High Court provides a comprehensive overview of the legal issues, arguments presented by both parties, and the court's reasoning leading to the final decision.

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