2018 (10) TMI 711 - HC - Customs

Court directs refund of Terminal Excise Duty for deemed exports, quashes orders, instructs processing within 8 weeks

The court ruled in favor of the petitioner, directing authorities to process the refund claims for Terminal Excise Duty (TED) for deemed exports in ... Refund of Terminal Excise Duty - deemed exports - FTP - DGFT has rejected the petitioner’s claim on the ground that the benefit of refund is available to it under the provisions of Central Excise Act and Rules - Held that:- The refund of TED claim in this case pertains to export and transaction prior to 15.03.2013. The crucial clarificatory circular was issued on that day. Two applications made in respect of sales to the EOUs (Vimal Agro Products Pvt. Ltd. and TATA Coffee Ltd.) covered various periods prior to 15.03.2013. This aspect is of significance and appears to have completely lost sight off. The DGFT – as well as Central Excise Authorities have not principally denied that the supplies were made to EOUs (Vimal Agro Products Pvt. Ltd. and TATA Coffee Ltd.). In these circumstances, the question is what constitutes the entitlement of such unit that supplied the goods to Export Oriented Units. In the event, there is no dispute – as it appears to be having regard to the pleadings – that the supplies were made to EOU/EHTP/STP/BTP (categorically spelt out in 8.2). Benefit of deemed export under para 8.3 i.e. advance authorization [clause (a)], deemed export drawback [clause (b)] or exemption from TED – in case of supplies made against International Competitive Bidding (ICB) or in other case of refund of TED. Clause (c) accrues to the concerned party i.e. supplier to EOU/STP. In this case, the petitioner’s primary claim is that it is the supplier to such EOUs and that such supplies were made before 15.03.2013. This clear aspect has been completely overlooked and lost sight off by the respondent DGFT, which appears to initially reject the claim on the ground that the benefit the petitioners seeks entitlement of, was inadmissible because Central Excise benefit could be claimed. The petitioner’s claim has to succeed - petition allowed. Issues Involved:1. Entitlement to refund of Terminal Excise Duty (TED) for deemed exports.2. Applicability of policy circulars and amendments to the Foreign Trade Policy (FTP) 2009-14.3. Jurisdiction and responsibility of authorities (DGFT vs. Central Excise) for processing refund claims.4. Interpretation of provisions under FTP 2009-14 regarding deemed exports and TED refunds.Detailed Analysis:1. Entitlement to Refund of Terminal Excise Duty (TED) for Deemed Exports:The petitioner sought a direction for the refund of Terminal Excise Duty (TED) amounting to Rs. 46,54,295/- for deemed exports made to Vimal Agro Products Pvt. Ltd. and TATA Coffee Ltd. The petitioner manufactures tin containers supplied to Export Oriented Units (EOUs), which further exported the final products using these containers. The supplies were treated as deemed exports under the Foreign Trade Policy (FTP) 2009-14. The petitioner contended that TED refund claims were previously entertained and sanctioned by the Director General of Foreign Trade (DGFT) as the containers were ultimately used for export. However, a circular issued on 15.03.2013 stated that no refund of TED would be provided by DGFT for supplies to 100% EOUs, as these were exempted from excise duty.2. Applicability of Policy Circulars and Amendments to the FTP 2009-14:The petitioner argued that the application for TED refund was filed for the period before the issuance of the circular on 15.03.2013. The DGFT's circular and subsequent notification on 18.04.2013 amended para 8.3(c) of the FTP, stating that TED refunds would be given only if exemptions were not available. The petitioner relied on a previous judgment (Kandoi Metal Powders Mfg. Co. Pvt. Ltd. vs. Union Of India) which held that supplies to EOUs were deemed exports eligible for TED refunds under para 8.5 of the FTP, provided the recipient did not avail CENVAT credit/rebate.3. Jurisdiction and Responsibility of Authorities (DGFT vs. Central Excise) for Processing Refund Claims:The petitioner initially filed the refund claim with the Joint DGFT, which was returned. Subsequently, the petitioner approached the Central Excise Department, which issued a show cause notice and ultimately rejected the refund claim. The petitioner’s appeal to the Dy. Commissioner and the CESTAT was also unsuccessful. The DGFT argued that the Central Excise Authorities were the appropriate agency to approach for the refund, as per the clarification provided in the policy circular.4. Interpretation of Provisions under FTP 2009-14 Regarding Deemed Exports and TED Refunds:The court examined the provisions of the FTP 2009-14, particularly paras 8.2, 8.3, and 8.5, which outlined the eligibility for TED refunds for deemed exports. The court found that the supplies made to EOUs were indeed deemed exports and eligible for TED refunds as per the existing policy before the issuance of the clarificatory circular on 15.03.2013. The court noted that the DGFT and Central Excise Authorities failed to recognize that the petitioner’s claims pertained to periods before the circular’s issuance, thus entitling the petitioner to the refund under the unamended provisions of the FTP.Conclusion:The court quashed the impugned orders and directed the respondents to process the petitioner’s refund claims in accordance with the 2009 policy. The refund applications were to be processed within eight weeks, with interest payable for the past three years at 9% per annum. The writ petition was allowed in these terms.