Terminal Excise Duty refund claims for EOU supplies must be reconsidered under the updated Foreign Trade Policy framework.

Refund claims for Terminal Excise Duty on supplies from Domestic Tariff Area units to a 100% Export Oriented Unit had to be reconsidered under the Foreign Trade Policy 2009-2014. The prior rejection relied on a DGFT circular treating ab initio exempt supplies as ineligible, but the later Supreme Court interpretation clarified that deemed export benefits under Chapter 8 may still be available subject to disclaimer and compliance with prescribed formalities. In light of that revised legal position, the rejection communications were quashed and the refund applications restored for fresh decision by the competent authority.

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Issues: Whether the communications rejecting the claim for refund of Terminal Excise Duty were liable to be quashed and the refund applications restored for reconsideration in light of the Supreme Court's exposition of the Foreign Trade Policy.

Analysis: The refund claim arose from supplies of inputs by Domestic Tariff Area units to a 100% Export Oriented Unit and was based on the Foreign Trade Policy 2009-2014, particularly the scheme of deemed exports under paragraph 8.3(c) and the entitlement conditions under paragraph 8.5. The impugned rejection relied on the DGFT policy circular stating that no refund of TED would be available where the supplies were ab initio exempted. However, the later Supreme Court decision clarified the relationship between ab initio exemption for EOU-related supplies and the separate entitlement of an EOU to avail the benefit of the DTA supplier under Chapter 8, subject to disclaimer and compliance with formalities. In view of that change in the governing legal position, the earlier rejection could not be sustained without fresh consideration on the updated legal basis.

Conclusion: The rejection communications were quashed and the refund claims were restored for fresh decision by the competent authority in accordance with the revised legal position.

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