2019 (11) TMI 557 - HC - Central Excise

Court upholds petitioner's exemption from terminal excise duty under Foreign Trade Policy

The court acknowledged the petitioner's entitlement to deemed export status and exemption from terminal excise duty under the Foreign Trade Policy, ... Deemed export - exemption from terminal excise duty - International Competitive Bidding - Foreign Trade Policy clause 8.2(d)(i) - Foreign Trade Policy clause 8.3 - Central Excise Rule 19 - Notification No. 43/2001-C.E. (N.T.) - compliance with Central Excise exemption notificationDeemed export - Foreign Trade Policy clause 8.2(d)(i) - International Competitive Bidding - Entitlement of the petitioner to be treated as a deemed exporter for supplies made under an International Competitive Bidding financed by a multilateral agency notified by the Department of Economic Affairs. - HELD THAT: - The Court accepted the petitioner's primary foundation for deemed export status under clause 8.2(d)(i) of the Foreign Trade Policy, noting that supplies made to projects financed by notified multilateral agencies under International Competitive Bidding fall within clause 8.2(d)(i) (and could alternatively fall under clause 8.2(f)). Once the petitioner traces its deemed export status to clause 8.2(d)(i), that categorisation determines entitlement to benefits conferred on deemed exports under the Foreign Trade Policy, subject to other policy provisions. [Paras 4]The petitioner is entitled to the benefit of deemed export status in respect of the supplies made under the International Competitive Bidding project.Exemption from terminal excise duty - Foreign Trade Policy clause 8.3 - Central Excise Rule 19 - Notification No. 43/2001-C.E. (N.T.) - compliance with Central Excise exemption notification - Whether entitlement to exemption from terminal excise duty for such deemed exports is dependent on compliance with Notification No. 12/2012-C.E. or governed by the Foreign Trade Policy read with Rule 19 and Notification No. 43/2001-C.E. (N.T.). - HELD THAT: - The Court held that where deemed export status is traced to clause 8.2(d)(i), entitlement to exemption from terminal excise duty is determined by clause 8.2(d)(i) and clause 8.3 of the Foreign Trade Policy read with Rule 19 of the Central Excise Rules and Notification No. 43/2001-C.E. (N.T.). Compliance with Notification No. 12/2012-C.E. is a further condition relevant to deemed export claims under clause 8.2(f) but is not contemplated as a prerequisite when the claim is based on clause 8.2(d)(i). Accordingly, the respondents' refusal to grant terminal excise duty exemption solely on the ground of non-compliance with Notification No. 12/2012-C.E. was unsustainable. [Paras 4]Entitlement to exemption from terminal excise duty must be recognised in accordance with the Foreign Trade Policy provisions read with Rule 19 and Notification No. 43/2001-C.E. (N.T.); the denial in Ext.P8 based on non-compliance with Notification No. 12/2012-C.E. is not legally sustainable.Quashing of administrative communication - Relief to be granted: quashing of the impugned communication and return of security furnished during pendency of proceedings. - HELD THAT: - The Court quashed Ext.P8 insofar as it denied exemption from terminal excise duty, declared the petitioner entitled to that exemption for the two transformers, and directed that the bank guarantee furnished to secure clearance during the writ petition be returned to the petitioner within three weeks of receipt of the judgment. [Paras 4, 5]Ext.P8 is quashed to the extent of denying terminal excise duty exemption; the petitioner is declared entitled to the exemption and the respondents are directed to return the bank guarantee within three weeks.Final Conclusion: Writ petition allowed: Ext.P8 quashed insofar as it denied exemption from terminal excise duty; petitioner entitled to deemed export benefits and terminal excise duty exemption for the supplies under the International Competitive Bidding project; respondents directed to return the bank guarantee within three weeks. Issues:1. Entitlement to benefit of deemed exports under Foreign Trade Policy.2. Compliance with Central Excise Exemption Notification No. 12/2012-C.E.3. Interpretation of Rule 19 of the Central Excise Rules, 2002.Analysis:Entitlement to Benefit of Deemed Exports:The petitioner, a Government Company engaged in manufacturing electric transformers, entered into a contract for a project financed by a multilateral agency. The petitioner contended that it was entitled to the benefit of deemed exports under the Foreign Trade Policy, Chapter 8. The 5th respondent confirmed the petitioner's entitlement to deemed export status and exemption from terminal excise duty for supplies made against International Competitive Bidding. The court agreed that the petitioner's entitlement should be acknowledged based on the provisions of the Foreign Trade Policy, specifically clause 8.2(d)(i) and 8.3(c), irrespective of compliance with Central Excise Exemption Notification No. 12/2012-C.E.Compliance with Central Excise Exemption Notification:While the respondents argued that the petitioner did not meet the conditions of the Central Excise Exemption Notification No. 12/2012-C.E., the court emphasized that compliance with this notification was not necessary for the petitioner to claim the benefit of exemption from terminal excise duty. The court clarified that the entitlement for such benefits should be determined by the provisions under the Foreign Trade Policy and Rule 19 of the Central Excise Rules, 2002, rather than the specific terms of the mentioned notification.Interpretation of Rule 19 of the Central Excise Rules, 2002:The court highlighted Rule 19 of the Central Excise Rules, 2002, which allows for export without payment of duty subject to specified conditions. It noted that once the petitioner complied with the requirements of the notification issued in terms of Rule 19, their entitlement to exemption from terminal excise duty should be recognized in accordance with the provisions of the Foreign Trade Policy. The court, therefore, quashed the communication denying the benefit of exemption and declared the petitioner's entitlement to exemption from terminal excise duty for the supplied transformers.Conclusion:The court allowed the writ petition, quashed the impugned communication, and declared the petitioner's entitlement to exemption from terminal excise duty. Additionally, it directed the respondents to return the bank guarantee furnished by the petitioner during the pendency of the petition.