2018 (1) TMI 1064 - HC - Customs

Court grants petition for Terminal Excise Duty refund, emphasizing entitlement & non-retroactive amendments

The court allowed the petition, setting aside the impugned orders and the Policy Circular dated 15.03.2013, directing the respondents to process the ... Refund of Terminal Excise Duty (TED) - supplies made by the petitioner to 100% Export Oriented Units (EOU) - According to the petitioner, it is entitled to refund of TED on the supplies made to 100% EoUs as in terms of paragraph 8.2 (b) of the Foreign Trade Policy 2009-14 (FTP), the supply of goods to EOUs would qualify as ‘deemed exports’ and thus in terms of paragraph 8.3(c) read with paragraph 8.5 of the FTP, the same were eligible for refund of TED. Held that: - In view of the settled position of law, the Central Government could also not make any substantive changes in the FTP, which had the effect of taking away any vested right. In the present case, the FTP expressly provided for the refund of TED in certain cases. It is not disputed that the goods supplied by the petitioner to the EOUs constituted 'deemed exports' and thus, the petitioner had a vested right to claim refund of excise duty in respect of goods supplied during the period prior to 18.04.2013 in terms of the then applicable FTP. Powers of DGFT - Held that: - This Court is also not persuaded to accept the policy circular issued by the DGFT (Policy Circular No. 16 (RE-2012/2009-14) dated 15.03.2013) seeking to clarify that no refund of TED should be provided in cases where the supplies of goods are ab initio exempted from payment of excise duty, is binding. The same is clearly beyond the powers of the DGFT - the DGFT is appointed for the purposes of the Act and is responsible for carrying out the export-import policy that may be formulated by the Central Government. The role of the DGFT is limited to advising the Central Government in formulation of the export import policy and to exercise certain other powers of the Central Government, which are exercisable under the Act. However, that does not include the power to either frame or amend the FTP. The impugned orders/communications - orders dated 05.06.2013, 23.01.2014 and 28.08.2014 - rejecting the petitioner’s claim for refund of TED in respect of the goods supplied between January, 2012 and 17.04.2013 on the ground that the said goods were exempted from excise duty, are set aside - petition allowed. Issues Involved:1. Rejection of the petitioner’s claim for refund of Terminal Excise Duty (TED).2. Interpretation and applicability of the Foreign Trade Policy (FTP) provisions.3. Validity of the Policy Circular dated 15.03.2013 issued by DGFT.4. Retrospective application of amendments to FTP.5. Jurisdiction and authority of DGFT in issuing policy circulars.Detailed Analysis:1. Rejection of the petitioner’s claim for refund of Terminal Excise Duty (TED):The petitioner challenged the orders dated 05.06.2013, 23.01.2014, and 28.08.2014, which rejected their claim for refund of TED for supplies made to 100% Export Oriented Units (EOUs) from January 2012 to April 2013. The petitioner argued that under paragraphs 8.2(b), 8.3(c), and 8.5 of the FTP 2009-14, supplies to EOUs qualify as 'deemed exports' and are eligible for TED refund. The respondents contended that the supplies were exempt from excise duty and that the petitioner’s method of utilizing Cenvat Credit to pay excise duty and then seeking a refund circumvented the Cenvat Credit Rules and FTP.2. Interpretation and applicability of the Foreign Trade Policy (FTP) provisions:The court examined paragraphs 8.2, 8.3, and 8.5 of the FTP before and after the amendment on 18.04.2013. Initially, paragraph 8.3(c) provided for TED exemption for supplies against International Competitive Bidding (ICB) and refunds in other cases. The amendment introduced a condition that refunds would only be given if exemption was not available, which the court found to be substantive, not clarificatory. The court held that the petitioner had a vested right to claim TED refund for supplies made before 18.04.2013 under the unamended FTP.3. Validity of the Policy Circular dated 15.03.2013 issued by DGFT:The court found that the Policy Circular dated 15.03.2013, which clarified that no TED refund should be provided for goods exempt from excise duty, was beyond DGFT’s powers. Section 6 of the Foreign Trade (Development & Regulation) Act, 1992, limits DGFT’s role to advising the Central Government and carrying out the FTP, not amending it. The court emphasized that any circular inconsistent with the FTP is invalid.4. Retrospective application of amendments to FTP:The court reiterated that delegated or subordinate legislation, such as amendments to the FTP, cannot be retrospective unless expressly provided by the statute. Section 5 of the Act does not authorize retrospective changes. Therefore, the substantive amendment to paragraph 8.3(c) of the FTP could not affect the petitioner’s vested rights for the period before 18.04.2013.5. Jurisdiction and authority of DGFT in issuing policy circulars:The court clarified that DGFT’s authority does not extend to amending the FTP. Any clarification or circular issued by DGFT must align with the existing FTP. The court cited previous judgments, including M/s Atul Commodities Pvt. Ltd. and Ors. v. Commissioner of Customs and Narendra Udeshi v. Union of India, to support this position.Conclusion:The court allowed the petition, setting aside the impugned orders and the Policy Circular dated 15.03.2013, directing the respondents to process the petitioner’s TED refund claim. The court underscored that the petitioner’s entitlement to TED refund under the FTP before the amendment was clear and unambiguous, and any subsequent amendments could not retrospectively affect this right. The pending application was also disposed of.