Retrospective policy amendment cannot defeat vested terminal excise duty refund rights on deemed export supplies.

Supplies by a Domestic Tariff Area unit to 100% Export Oriented Units were treated as deemed exports under the Foreign Trade Policy 2009-14, and the pre-18.04.2013 regime allowed terminal excise duty refund for such supplies where CENVAT credit or rebate was not availed. The 18.04.2013 amendment was held substantive, not clarificatory, and could not be applied retrospectively, so the supplier retained a vested refund entitlement for pre-amendment clearances. The Policy Interpretation Committee minutes and policy circular could not override the policy or curtail that entitlement, as they were inconsistent with the FTP. The refusals were set aside and refund processing was directed under the unamended policy.

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Issues: (i) Whether supplies made by a Domestic Tariff Area unit to 100% Export Oriented Units during the period prior to 18.04.2013 were entitled to refund of terminal excise duty under the Foreign Trade Policy 2009-14; (ii) Whether the Policy Interpretation Committee minutes and the policy circular could validly deny such refund.

Issue (i): Whether supplies made by a Domestic Tariff Area unit to 100% Export Oriented Units during the period prior to 18.04.2013 were entitled to refund of terminal excise duty under the Foreign Trade Policy 2009-14.

Analysis: Paragraph 8.2(b) of the Foreign Trade Policy 2009-14 treated supplies to EOUs as deemed exports. Paragraph 8.3(c), as it stood prior to 18.04.2013, provided that in cases other than supplies against ICB, refund of terminal excise duty would be given. Paragraph 8.5 made refund available where the recipient did not avail CENVAT credit or rebate. The amendment introduced on 18.04.2013 was held to be substantive, not clarificatory, and could not be applied retrospectively. The Court also held that the petitioner had a vested right to claim refund for supplies made before the amendment.

Conclusion: The petitioner was entitled to refund of terminal excise duty for the relevant pre-amendment supplies.

Issue (ii): Whether the Policy Interpretation Committee minutes and the policy circular could validly deny such refund.

Analysis: Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 empowers the Central Government to formulate and amend the policy, but not retrospectively absent express authority. Section 6 confers limited functions on the DGFT and does not authorise amendment of the policy. A circular or clarification inconsistent with the FTP was therefore beyond power. The CENVAT Rules did not override the express refund entitlement under the FTP, and the policy circular could not curtail that entitlement.

Conclusion: The Policy Interpretation Committee minutes and the policy circular could not validly defeat the refund claim and were liable to be ignored to that extent.

Final Conclusion: The impugned refusals were set aside and the respondents were directed to process the refund claim in accordance with the unamended policy applicable to the relevant period.

Ratio Decidendi: A substantive amendment to the Foreign Trade Policy cannot be applied retrospectively to take away a vested refund entitlement, and a DGFT circular or clarification inconsistent with the policy is ultra vires.

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