Terminal excise duty refund depends on the policy in force when supplies were made; later policy cannot defeat accrued entitlement.

Terminal excise duty refund under the deemed export scheme must be assessed by reference to the Foreign Trade Policy and notifications in force when the supplies were made, so a later policy cannot retrospectively defeat an accrued entitlement. The Delhi HC further stated that the refund bar for goods exempt ab initio applies only where the supplies were unconditionally exempt at the relevant time. Because the customs exemption did not extend to the Chennai Metro Rail Project supplies, the goods were not exempt ab initio and the exclusion did not apply. The denial of refund was therefore unsustainable, and the claim had to be processed for the relevant period.

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Issues: (i) Whether the petitioner's supplies made during 26.02.2014 to 30.08.2014 were governed by the Foreign Trade Policy 2009-2014 or by the later Foreign Trade Policy 2015-2020 for the purpose of terminal excise duty refund; (ii) Whether the supplies were exempt ab initio from terminal excise duty so as to bar refund under the policy.

Issue (i): Whether the petitioner's supplies made during 26.02.2014 to 30.08.2014 were governed by the Foreign Trade Policy 2009-2014 or by the later Foreign Trade Policy 2015-2020 for the purpose of terminal excise duty refund.

Analysis: The relevant supplies were made before the new policy came into force. The deemed export claim had been made for that earlier period, and the entitlement had to be tested with reference to the policy and notifications in force when the supplies were made. A later policy could not be used to defeat benefits that had accrued under the earlier regime.

Conclusion: The supplies were governed by the Foreign Trade Policy 2009-2014, and the petitioner was entitled to have its claim examined under that policy.

Issue (ii): Whether the supplies were exempt ab initio from terminal excise duty so as to bar refund under the policy.

Analysis: The excise exemption for supplies under international competitive bidding was conditional upon corresponding customs duty exemption. The customs notification did not extend such exemption to supplies made to the Chennai Metro Rail Project, and the goods therefore were not unconditionally exempt. Since the bar on refund applied only to goods exempt ab initio, the petitioner's supplies did not fall within that exclusion.

Conclusion: The petitioner's supplies were not exempt ab initio, and the bar against refund did not apply.

Final Conclusion: The orders denying terminal excise duty refund were unsustainable, and the petitioner's refund claim was required to be processed and released for the relevant period.

Ratio Decidendi: A terminal excise duty refund cannot be denied under the deemed export scheme unless the supplies were unconditionally exempt from duty at the relevant time; a later policy cannot retrospectively displace an accrued benefit under the earlier policy governing the supplies.

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