TaxTMI 
TaxTMI 
2022 (1) TMI 225
X X X X Extracts X X X X
X X X X Extracts X X X X
.....12.2019^7 passed by the High Court of Karnataka at Bengaluru in Writ Appeal No.286 of 2019 (T­TAR). CIVIL APPEAL NO. 3358 OF 2020 2a. The appellant in Civil Appeal No.3358 of 2020 claims to be hundred per cent Export Oriented Unit^8 engaged in the manufacture of goods falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985 and for that purpose, the appellant has a factory, inter alia, at Plot No.8A/2, 8B/2, 88A/1/1, Kalwe, MIDC, Dighe, Navi Mumbai - 400708. Besides, the appellant has another factory situated at Plot No. L­1, MIDC, Mahad, Raigad, within the Domestic Tariff Area Unit^9. The appellant had applied for refund of Terminal Excise Duty^10 in respect of excisable goods procured from its unit in DTA, as it did in the past and was granted refund from time to time between 2006 and 2012. The instant refund application, however, came to be disallowed, which decision is the subject matter of appeal before this Court. It had been asserted that TED was paid by the DTA Unit from where the goods in question were procured or supplied to the appellant for its EOU during the relevant period. The application for refund dated 20.04.2012 was accompani....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... SEEPZ­SEZ/W.P./TED/SANDOZ/314/2013­14 dated 06.01.2015. 2g. Feeling aggrieved by this decision, the appellant filed fresh Writ Petition No.2927 of 2015 before the Bombay High Court assailing the policy circular dated 15.03.2013 and order dated 06.01.2015 passed by the Development Commissioner. The Bombay High Court negatived the challenge to the stated policy circular as well as the order passed by the Development Commissioner and thus, dismissed the writ petition vide impugned judgment and order dated 01.08.2016. This judgment is subject matter of challenge in Civil Appeal No.3358 of 2020. By the same judgment, the Bombay High Court dismissed the writ petition filed by the appellant in Civil Appeal No.3359 of 2020 involving the selfsame issue. CIVIL APPEAL NO. 3359 OF 2020 3a. Reverting to the factual matrix in Civil Appeal No.3359 of 2020, the appellant claims to be identically placed as in the companion appeal being hundred per cent EOU engaged in manufacturing of goods falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985 and for that purpose, the appellant has a factory at B­15, Phase 1­A, Verna, Salcette, Goa 403772. The ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... This judgment is subject matter of challenge in Civil Appeal No. 3359 of 2020. 4. As the factual matrix in both the writ petitions was similar, the High Court vide common impugned judgment dated 01.08.2016 considered the grounds of challenge to the decision of the Development Commissioner; and eventually opined that in light of paras 6.2(b) and 6.11(c)(ii) of the FTP, no refund of TED could be given by the regional authority of DGFT or the Office of the Development Commissioners because procurement of excisable goods by the appellants-EOUs was ab initio exempted from payment of excise duty. It went on to observe that there was a clear stipulation in the FTP itself in that regard. The High Court noted that the purport of the impugned circular was only to clarify the obvious position. There was no obligation on the EOU to pay duty at the time of procurement of excisable goods. For, FTP plainly predicates that the procurement of excisable goods should be done by EOU without payment of excise duty. As there is reverse obligation on EOU to procure excisable goods without payment of duty, there is no question of claiming refund. Thus, it held that the conclusion reached by the Devel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hy;Company (DTA Unit) had filed refund application before the Joint Director General of Foreign Trade, which was returned to it in light of the impugned circular. The appellant then pursued the refund application on 11.03.2014 to the Deputy Commissioner of Central Excise Department, which came to be rejected on 29.05.2015. Against this decision, the matter was carried in appeal up to the Customs Excise and Service Tax Appellate Tribunal^16 unsuccessfully. After exhausting that remedy and allowing decision of the statutory authorities under the Central Excise Act, 1944^17 as final, the respondent­Company chose to file writ petition before the High Court of Delhi seeking direction against DGFT to consider the refund application regarding TED amount under FTP. It was urged that the primary responsibility to refund TED amount paid by the respondent­Company (DTA Unit) being supplier of excisable goods to EOU, was that of DGFT. The High Court of Delhi vide impugned judgment dated 08.10.2018 allowed the writ petition and issued directions to DGFT to consider the refund application filed by the respondent­Company and if found in order, directed refund of TED amount to the respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt in respect of goods supplied to EOUs during the period from June 2009 to October 2009 in terms of para 8.3 of the FTP. Learned Single Judge of the High Court of Karnataka adverted to the decision of the learned Single Judge of the Calcutta High Court in IFGL Refractories Limited vs. Joint Director General of Foreign Trade 2001 (132) ELT 545 (Cal.) (later confirmed by the Division Bench of the same High Court in Joint Director General of Foreign Trade) and of the High Court of Delhi in Kandoi Metal Powders Manufacturing Company Private Limited 2014) 302 ELT 209 (Del.) wherein it had been held that once the supply of goods fall within the category of deemed exports, the unit would be entitled to refund of TED. Learned Single Judge also adverted to the decision of the Madras High Court in Lenovo (India) Pvt. Ltd. vs. Union of India (2017) 346 ELT 12 (Mad.) and to the decision of the Bombay High Court in case of Sandoz Private Limited which is impugned in the cognate appeals referred to above. Learned Single Judge, however, noted that the decision of the Bombay High Court has been distinguished by the Madras High Court, but then went on to observe that it did not agree with the view....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ort by the DTA Unit to EOU within the meaning of the applicable FTP. On the other hand, the appeals against the decision of the High Court of Delhi and the High Court of Karnataka pertain to the refund claim set up by the DTA Unit - "suppliers" of goods to concerned EOU, also in reference to selfsame Foreign Trade Policy (FTP). 10. The moot question is: whether the entities herein are entitled to refund of amount purportedly towards TED in respect of specified goods procured or supplied, as the case may be, being deemed exports and from which authority, either under applicable Foreign Trade Policy (FTP) or the 1944 Act? Further, whether Circular No.16 (RE­2012/2009­14) dated 15.03.2013 is merely clarificatory regarding TED refund and exemption and the efficacy thereof? 11. The claim for refund of TED amount of the concerned entities being the recipient or the supplier of specified goods, as the case may be, needs to be understood and analysed in two broad silos and in the context of nature of transaction and the applicability of the provisions of the concerned laws, namely, FTP propounded under the 1992 Act and the 1944 Act. We will dilate on this aspect at appropriat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stipulation will be attracted if the excise duty is exempted ab initio (without any pre­condition). Be that as it may, the governing FTP regime ought to prevail being a special dispensation under the 1992 Act. 14. The authorities propounding the FTP were obviously conscious of the purport of the provisions of the 1944 Act and the rules framed thereunder. Despite that, the subject policy had been propounded with the sole objective of promoting exports and earning foreign exchange. At the relevant time, the goal set forth by the policy makers was to achieve the target of at least one per cent of the global trade by promoting exports. It is thus clear that the concessions or so to say, benefits and entitlements provided under the FTP cannot be constricted by the provisions of the taxing statute of 1944 and the rules framed thereunder. To put it tersely, the dispensation provided under the 1992 Act and the FTP must operate independently and is thus mutually exclusive in this regard. Taking any other view would be counter­productive and whittle down the intent behind formulation of a liberal FTP for promoting exports. 15. Under the subject FTP, Chapter 6 deals with EOUs, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dition and to be used or utilised for export production. This twin condition must be complied by the specified entities without any exception for deriving benefit or availing of entitlements under FTP. Chapter 6 of the FTP postulates that supply of goods from DTA Units to EOU must be regarded as deemed exports, as is evident from para 6.11 of the FTP. The same reads thus: ­ "6.11 Entitlement for supplies from the DTA (a) Supplies from DTA to EOU/EHTP/STP/BTP units will be regarded as "deemed exports" and DTA supplier shall be eligible for relevant entitlements under chapter 8 of FTP, besides discharge of export obligation, if any, on the supplier. Notwithstanding the above, EOU/EHTP/STP/ BTP units shall, on production of a suitable disclaimer from DTA supplier, be eligible for obtaining entitlements specified in chapter 8 of FTP. For claiming deemed export duty drawback, they shall get brand rates fixed by DC wherever All Industry Rates of Drawback are not available. (b) Suppliers of precious and semi­precious stones, synthetic stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment Authorisations at rates and for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in India; exemption from payment of Central Excise Duty on goods produced from DTA on goods manufactured in India; reimbursement of duty paid on fuel procured from domestic oil companies/depots of domestic oil public sector undertakings as per drawback rate notified by DGFT from time to time; and lastly, CENVAT Credit on service tax paid. As regards the Central Excise Duty, para 6.11(c)(ii) postulates exemption from payment of Central Excise Duty on goods procured by the EOU from DTA on goods manufactured in India. This is in consonance with the stipulation in para 6.2(b), which predicates that the EOU may import goods from DTA without payment of duty. 18. From the scheme of Chapter 6 of FTP, it is thus clear that the EOU can import goods from DTA supplier, which transaction de jure is treated as deemed export; and it can do so without payment of duty, as it has been exempted vide para 6.11(c)(ii) of the FTP. On its own, the EOU is not eligible for any other entitlement. 19. Needless to observe that there is marked distinction between the expression "benefit"^19 and "entitlement"^20. "Benefit", by its very nature, is an advantage, help or aid, while "entitlement" is right to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Following categories of supply of goods by main/subcontractors shall be regarded as "Deemed Exports" under FTP, provided goods are manufactured in India: (a) xxx xxx xxx (b) Supply of goods to EOU/STP/EHTP/BTP; ....." [Para 8.2, after amendment, in 2012­2013 reads thus: "8.2. Categories of Supply Following categories of supply of goods by main/subcontractors shall be regarded as "Deemed Exports": (c) xxx xxx xxx (d) Supply of goods to EOU/STP/EHTP/BTP;....."] In other words, only the specified categories of supplies are regarded as deemed exports. In that, import of goods, as specified in para 8.2(b) from DTA supplier to the EOU is regarded as deemed exports. To put it differently, the supply of goods by DTA Unit to EOU with actual user condition and utilised for export production, are regarded as deemed exports. To such transactions, certain benefits have been extended, as provided in para 8.3 of the FTP applicable at the relevant time, which reads thus: "8.3 Benefits for Deemed Exports Deemed exports shall be eligible for any/all of following benefits in respect of manufacture an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....002­Customs dated 1.3.2002, as amended from time to time. (iv) Supply of Capital goods and spares upto10% of FOR value of capital goods to power projects in terms of paragraph 8.2(g), shall be entitled for deemed export benefits provided the ICB procedures have been followed at Independent Power Producer (IPP) / Engineering and Procurement Contract (EPC) stage. Benefit of deemed exports shall also be available for renovation/modernization of power plants. Supplier shall be eligible for benefits listed in paragraph 8.3(a) and (b) of FTP, whichever is applicable. However, supply of goods required for setting up of any mega power project as specified in S.No. 400 of DoR Notification No. 21/2002­ Customs dated 1.3.2002, as amended, shall be eligible for deemed export benefits as mentioned in paragraph 8.3(a), (b) and (c) of FTP, whichever is applicable, if such mega power project complies with the threshold generation capacity specified therein, in Customs Notification. [Para 8.4.4(iv), after amendment, in 2010­2011 reads thus: ­ "(iv) Supply of Capital goods and spares upto 10% of FOR value of capital goods to power projects in terms of parag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lled over to 10th Plan period. 8.4.6 Supplies of goods to projects funded by UN Agencies covered under para 8.2(i) of FTP are eligible for benefits listed in paragraph 8.3(a) and (b) of FTP, whichever is applicable. 8.4.7 In respect of supplies made to Nuclear Power Projects under para 8.2(j) of FTP, the supplier would be eligible for benefits given in para 8.3(a), (b) and (c) of FTP, whichever is applicable. Supply of only those goods required for setting up any Nuclear Power Project specified in list 43 at S.No. 401 of Notification No. 21/2002Customs dated 1.3.2002, as amended from time to time, having a capacity of 440MW or more as certified by an officer not below rank of Joint Secretary to Government of India in Department of Atomic Energy, shall be entitled for deemed export benefits in cases where procedure of competitive bidding (and not ICB) has been followed. (emphasis supplied) Though couched as benefits, these are essentially entitlements, to be availed by DTA supplier in terms of para 8.4.2. As noted earlier, in terms of para 6.11(a), the EOU can also avail of those entitlements of DTA as specified in Chapter 8 of FTP, as had been earmarked for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ided recipient of goods does not avail CENVAT credit / rebate on such goods. Similarly, supplies will be eligible for deemed export drawback in terms of para 8.3(b) of FTP on Central Excise paid on inputs/components, provided CENVAT credit facility/rebate has not been availed by applicant. Such supplies will however be eligible for deemed export drawback on customs duty paid on inputs/components. [Para 8.5, after amendment, in 2012­2013 reads thus:­ "8.5 Eligibility for refund of terminal excise duty/drawback Supply of goods will be eligible for refund of terminal excise duty in terms of Para 8.3(c) of FTP, provided recipient of goods does not avail CENVAT credit/rebate on such goods. A declaration to this effect, in Annexure II of ANF 8, from recipient of goods, shall be submitted by applicant. Similarly, supplies will be eligible for deemed export drawback in terms of para 8.3 (b) of FTP of Central Excise duty paid on inputs/components, provided CENVAT credit /rebate has not been availed of such duty paid by supplier of goods. A declaration to this effect, in Annexure III of ANF 8, from supplier of goods, shall be submitted by applicant. Such su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8.3(b) of FTP on Central Excise paid on inputs/components, provided CENVAT credit facility/rebate has not been availed. 26. Upon conjoint reading of the relevant para and its clauses, it leaves no manner of doubt that the intent of the subject FTP was to encourage DTA suppliers by providing refund of TED in terms of para 8.3(c), subject to fulfilment of formalities and stipulations in Chapter 8 of FTP. This was also to generate foreign exchange as a consequence of goods supplied as inputs or otherwise, were finally exported by the EOU. The EOU, on the other hand, could only avail of the entitlement of the DTA supplier if the DTA supplier had not taken rebate or CENVAT credit facility (as per para 8.5) treating it as deemed export. This dispensation was uniformly followed until the issue of policy circular dated 15.3.2013. That circular reads thus:­ "Government of India Ministry of Commerce and Industry Directorate General of Foreign Trade Udyog Bhawan, New Delhi Policy Circular No. 16 (RE­2012/2009­14) Dated: 15th March, 2013 To, All Regional Authorities All Development Commissioners, SEZ. Subject: Clarification regardi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or import goods from DTA supplier, without payment of duty in view of the express ab initio exemption provided in terms of para 6.2(b) read with para 6.11(c)(ii). However, despite such express obligation on the EOU, if the EOU has had imported goods from DTA supplier by paying TED, it can only claim the benefit of refund provided to DTA supplier under para 8.4.2 read with paras 8.3(c) and 8.5 subject to obtaining disclaimer from DTA supplier in that regard and complying with other formalities and requirements. 29. We thus agree with the conclusion reached by the Bombay High Court that the EOU is not entitled to claim refund of TED on its own. However, we add a caveat that EOU may avail of the entitlements of DTA supplier specified in Chapter 8 of FTP on condition that it will not pass on that benefit back to DTA supplier later on. In any case, the refund claim needs to be processed by keeping in mind the procedure underlying the refund of CENVAT credit/rebate of excise duty obligations. If CENVAT credit utilised by DTA supplier or EOU, as the case may be, cannot be encashed, there is no question of refunding the amount in cash. In that case, the commensurate amount must be rever....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntage of any law, particularly which is more beneficial. Accordingly, learned Single Judge issued directions to pay the refundable amount along with interest at the rate of 12 % per annum. The appeal filed by the Department against the said decision was rejected by the Division Bench of the Calcutta High Court in Joint Director General of Foreign Trade. The Division Bench, however, directed the DGFT to refund TED amount as it was the concerned Authority under the FTP, subject to assessee completing necessary formalities as provided for in the FTP. This decision was then affirmed by this Court consequent to dismissal of special leave petition being S.L.P. (C) No.5368 of 2002, on 7.10.2002. 34. The next decision is of the High Court of Gujarat in the case of Commissioner of Central Excise and Customs vs. NBM Industries 2012 (276) ELT 9 (Guj.). The Division Bench of the High Court considered the question whether DTA supplier of goods to EOU is entitled for refund of the CENVAT credit despite Rule 5 of the 2004 Rules, dealing with refund of CENVAT credit. The Authorities had held that not being a case of export of goods out of India, the assessee was not entitled for refund of CENVA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Union of India vs. Alstom India Limited 2015 (325) ELT 72 (Del.), Commissioner of Central Excise, Delhi II vs. Welspring Universal 2018 (359) ELT 635 (Del.), Deepak Enterprises vs. Union of India 2018 (360) ELT 905 (Del.), Alstom Transport India Ltd. vs. Union of India 2018 (363) ELT 69 (Del.), Motherson Sumi Electric Wires vs. Union of India 2018 (364) ELT 91 (Del.), Multitex Filtration Engineers Limited vs. Union of India 2020 (373) ELT 68 (Del.) and Hindustan Tin Works Limited vs. Union of India 2020 (373) ELT 217 (Del.). 38. The view taken by the Calcutta High Court and followed by the High Court of Delhi commended even to the High Court of Karnataka in Acer India Pvt. Ltd. 39. The view taken in these decisions at the instance of the DTA supplier of specified goods to EOU is in consonance with the view taken by us in this judgment. To that extent, we affirm these decisions and hold that the DTA supplier of goods to EOU would be entitled for refund of TED on the basis of applicable para 6.11(a) read with paras 8.3(c), 8.4.2 and 8.5 of the FTP under consideration. The modality of refund, however, ought to be in the form of reversal of commensurate amount in the CENVAT credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e FTP. 42. In conclusion, we hold that the EOU entities, who had procured and imported specified goods from DTA supplier, are entitled to do so without payment of duty [as in para 6.2(b)] having been ab initio exempted from such liability under para 6.11(c)(ii) of the FTP, being deemed exports. Besides this, there is no other entitlement of EOU under the applicable FTP. Indeed, under para 6.11(a) of the FTP, EOU is additionally eligible merely to avail of entitlements of DTA supplier as specified in Chapter 8 of the FTP upon production of a suitable disclaimer from the DTA supplier and subject to compliance of necessary formalities and stipulations. It would not be a case of entitlement of EOU, but only a benefit passed on to EOU for having paid such amount to the DTA supplier, which was otherwise ab initio exempted in terms of para 6.11(c)(ii) of the FTP coupled with the obligation to import the same without payment of duty under para 6.2(b). 43. Besides, if the DTA supplier as well as EOU had utilized its CENVAT credit for importing goods in question, the refund would be in the form of reversal of commensurate amount of CENVAT credit to the account of the concerned entity. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order as to costs. Pending application(s), if any, are disposed of accordingly. ------------------- Notes: 1. Civil Appeal Nos. 3358 and 3359 of 2020 2. 2016 (341) ELT 22 (Bom.) 3. for short, "Bombay High Court" 4. Civil Appeal No.3360 of 2020 5. 2020 (373) ELT 217 (Del.) 6. Civil Appeal No.3705 of 2020 7. 2020 (371) ELT 658 (Kar.) 8. for short, "EOU" 9. for short, "DTA Unit" 10. for short, "TED" 11. for short, "impugned circular" 12. for short, "DGFT" 13. for short, "said notification" 14. for short, "FTP" 15. for short, "1992 Act" 16. for short, "the CESTAT" 17. for short, "1944 Act" 18. 5A. Power to grant exemption from duty of excise.- (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon: Provided that, unless specifically provided in su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aph 8.4 above. 8.4.4 (i) This paragraph is deleted because the contents of this paragraph reflected in table given in paragraph 8.4 above. (ii) This paragraph is deleted because the contents of this paragraph reflected in paragraphs 8.2(d) and 8.4 above. (iii) This paragraph is deleted because the contents of this paragraph reflected in paragraph 8.2 (f) above. (iv) This paragraph is deleted because the contents of this paragraph reflected in paragraphs 8.2 and 8.4 above. (v) Deleted 8.4.5 Deleted. 8.4.6 This paragraph is deleted because the contents of this paragraph reflected in table given in paragraph 8.4 above. 8.4.7 This paragraph is deleted because the contents of this paragraph reflected in paragraphs 8.2 and 8.4 above." 22. Section 5, as it existed before amendment in 2010: 5. Export and import policy. - The Central Government may, from time to time formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in the like manner, amend that policy. Section 5, as substituted by Act 25 of 2010 w.e.f. 27.8.2010: 5. Foreign Trade P....