2022 (9) TMI 1353 - HC - Customs

Court orders refund of Terminal Excise Duty for Export Oriented Unit supplier

M/s. Lenovo India Pvt Ltd Rep. by Mr. R.C. Pillai Tax Director and Head of Taxation Versus Union of India, The Director General of Foreign Trade, The Zonal Additional Director General of Foreign Trade and Appellate Authority, The Joint Director of Foreign Trade, The Zonal Additional Director General of Foreign Trade, The Commissioner of GST and Central Excise, Goods and Service Tax Network (GSTN)

M/s. Lenovo India Pvt Ltd Rep. by Mr. R.C. Pillai Tax Director and Head of Taxation Versus Union of India, The Director General of Foreign Trade, The ... Issues Involved:1. Refund of Terminal Excise Duty (TED) on supply of laptops to EPCG scheme license holders.2. Legitimacy of Policy Circular No.16 dated 15.03.2013.3. Rejection of refund claims and subsequent appeals.4. Legal position on TED refund under Foreign Trade Policy (FTP).5. Implementation of Supreme Court judgment in Sandoz Private Limited case.Issue-wise Detailed Analysis:1. Refund of Terminal Excise Duty (TED) on supply of laptops to EPCG scheme license holders:The petitioner sought a refund of TED paid on the supply of laptops under the EPCG scheme. The initial claims made in 2013 were rejected multiple times, leading to the filing of writ petitions. These petitions were allowed by the High Court in 2016, directing the respondent to process the refund claims in accordance with the law and relevant case law.2. Legitimacy of Policy Circular No.16 dated 15.03.2013:The petitioner challenged Policy Circular No.16, which clarified that no TED refund should be provided in cases where supplies are ab-initio exempted from payment of excise duty. The Court examined the circular and its implications, noting that it aimed to prevent the circumvention of policy by paying excise duty on exempt supplies to claim refunds.3. Rejection of refund claims and subsequent appeals:The respondent authorities rejected another batch of refund claims in 2018, and the petitioner's appeals were dismissed by the Director General of Foreign Trade (DGFT) as non-maintainable under Section 15(1) of the Foreign Trade Development and Regulation Act, 1992, on the grounds that the orders were administrative decisions, not adjudicative orders. This rejection was challenged in a subsequent writ petition.4. Legal position on TED refund under Foreign Trade Policy (FTP):The Court referred to the Supreme Court judgment in Sandoz Private Limited vs. Union of India, which clarified the entitlement of TED refunds under FTP. The FTP provides for TED refunds to Domestic Tariff Area (DTA) suppliers, subject to conditions such as non-availment of CENVAT credit/rebate by the recipient. The Court emphasized that the FTP's provisions are explicit and not ambiguous regarding the benefits and entitlements of concerned entities.5. Implementation of Supreme Court judgment in Sandoz Private Limited case:The Court reiterated the Supreme Court's findings that EOUs are entitled to ab-initio exemption from payment of central excise duty on goods procured from DTA. However, if TED is paid, EOUs can claim the refund benefit available to DTA suppliers, provided they obtain a disclaimer from the supplier and comply with other formalities. The Court directed the respondent to grant credit of the paid duty amount in the petitioner's electronic credit register, following the Supreme Court's approach in the Sandoz case, due to the subsumption of Central Excise into the GST regime.Conclusion:The Court concluded that the petitioner is entitled to a TED refund as a supplier to an EOU under the EPCG scheme. The impugned orders were set aside, and the respondent was directed to credit the duty amount in the petitioner's electronic credit register within eight weeks. The writ petitions were allowed without costs.