Madras High Court
M/S.Lenovo India Pvt Ltd vs Union Of India on 11 August, 2022
Author: Anita Sumanth
Bench: Anita Sumanth
W.P.No.9576, 9580 & 16056 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 11.08.2022
CORAM
THE HONOURABLE DR. JUSTICE ANITA SUMANTH
W.P.No.9576, 9580 & 16056 of 2019
M/s.Lenovo India Pvt Ltd
Rep. by Mr.R.C.Pillai
Tax Director and Head of Taxation
Sl.No.19/1A Edayarpalayam,
Cuddalore Main Road, Thavalakkuppam
Puducherry -605007. ...Petitioner
Vs.
1.Union of India
Rep. by its Secretary, Ministry of Commerce
Department of Foreign Trade,
New Delhi 110 001.
2.The Director General of Foreign Trade
Ministry of Commerce and Industry
Government of India, Udyog Bhawan
New Delhi 110 001. ...R1 & R2 to all WPs
3.The Zonal Additional Director General of
Foreign Trade and Appellate Authority
26 Haddows Road, Shastri Bhavan,
Annexe Chennai 600006. ...R3 in WP.No.9576 of 2019
& R4 in WP.No.9580 of 2019
4.The Joint Director of Foreign Trade
No.19 -C, 2nd Cross Jawahar Nagar,
Bommiyanpet, Puducherry 605005. ...R4 in WP.No.9576 of 2019
& R4 in WP.No.16056 of 2019
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W.P.No.9576, 9580 & 16056 of 2019
5.The Zonal Additional Director General of
Foreign Trade
26 Haddows Road, Shastri Bhavan,
Annexe Chennai 600006. ...R3 in WP.No.16056 of 2019
& 16056 of 2019
6.The Commissioner of GST and Central Excise
Puducherry No.1, Goubert Avenue,
Beach Road, Puducherry.
7.Goods and Service Tax Network (GSTN)
Worldmark No.1 East Wing 4th
Floor Aerocity New Delhi - 110 037.
(R5 & R6 suo motu impleaded vide
order dated15.07.2022) ...R5 & R6 in all WPs
PRAYER in WP.No.9576 of 2019: Writ Petition filed under Article 226 of the
Constitution of India, to issue a Writ of certiorarified mandamus calling for the
records relating to the impugned order vide F.No.1 (01) Addl. DGFT /ECA /
Che /AM 17 Pondy dated 08/02/2019 issued by the 3rd respondent quash the
same and direct the 3rd respondent to sanction refund of Terminal Excise Duty
to the Petitioner.
PRAYER in WP.No.9580 of 2019: Writ Petition filed under Article 226 of the
Constitution of India, to issue a Writ of certiorarified mandamus calling for the
records relating to the impugned order vide F.No.25/41/083/00023/AM and
25/41/083/00026/AM/17 dated 28.02.2019 issued by the 3rd respondent, quash
the same and direct the 3rd respondent to sanction refund of Terminal Excise
duty to the petitioner.
PRAYER in WP.No.16056 of 2019: Writ Petition filed under Article 226 of
the Constitution of India, to issue a Writ of certiorarified mandamus calling for
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W.P.No.9576, 9580 & 16056 of 2019
the records relating to the impugned order vide
F.No.aTED/DBK/Claims/Lenovo/2018-19 dated 06.03.2019 issued by the 3rd
respondent quash the same direct the 3rd respondent to sanction refund of
Terminal Excise duty to the petitioner.
In all WPs
For Petitioner : Mr.Rohan Muralidharan &
Mr.Ganesh Aravindh for
M/s. Lakshmi Kumaran and Sridharan
Attorneys
For Respondents : Mr.V.Chandrasekaran [R1 to R5]
Senior Panel Counsel
Mr.A.P.Srinivas [R5 & R6]
Senior Standing Counsel
ORDER
These three writ petitions have been filed seeking refund of terminal excise duty (TED) claimed by the petitioner in regard to the duty paid on supply of laptops to licence holders of Export Promotion Capital Goods (EPCG) Scheme.
The petitioner had made the claim initially in 2013, that had come to be rejected on various dates between February and August 2013.
2.Challenging the rejection, the petitioner had filed W.P.Nos.23507 to 23809 of 2014. Those writ petitions had come to be allowed by a learned Single Judge of this Court by order dated 24.10.2016, applying the decisions of the Delhi High Court in the case of Kondoi Metal Powers Mfg. Co. Ltd. Vs. Union of India 3/14 https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 [(2014) 302 ELT 209 (Del.) and Raja Crowns and Cans Pvt. Ltd. Vs. Union of India and Another [(2015) 310 ELT 40 (Mad.)].
3. With the setting aside of the order impugned in those Writ Petitions, the 3rd respondent was directed to process the refund claims in accordance with law, taking into consideration the aforesaid case law as well. In WP.No.23509 of 2014, the petitioner had challenged Policy Circular No.16 dated 15.03.2013, that came to be closed in light of the direction of this Court in the other two writ petitions on the merits of the refund claim.
4. The orders impugned in W.P.Nos.9580 and 9576 of 2019 dated 28.02.2019 and 08.02.2019 respectively have been passed by the respondents as a consequence of order of this Court dated 24.10.2016. As far as another batch of refund claims was concerned, the authority rejected the same on 13.08.2018, as against which the petitioner filed appeals before the appellate authority.
5. Those appeals come to be rejected by the Director General of Foreign Trade on 06.03.2019, as non-maintainable in terms of Section 15(1) of the Foreign Trade Development and Regulation Act, 1992. The ground of rejection was that the orders impugned therein constituted administrative decisions and not orders of adjudication. This order is challenged in W.P.No.16056 of 2019.
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6. On the merits of the matter, subject to the claim of the petitioner being in order, the position of law has been settled by a judgment of the Hon'ble Supreme Court in the case of Sandoz Private Limited Vs. Union of India and Others, [(2022) 1 TMI 225].
7. After noticing the relevant provisions of Chapter 8 of the Foreign Trade Policy relating to supply benefits for deemed exports, benefits to the supplier and benefits in respect of supply of goods made to EOU/EHTP/STP/BTP, the Court, at paragraphs 20 to 24 holds as follows:
20. .....
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 DTA supplier. That does not mean that EOU is eligible for those entitlements, on its own accord as, amongst other, it is obliged to obtain disclaimer from DTA supplier as a precondition.
21. As aforementioned, para 8.2 lists the categories of supply of goods which are regarded as deemed exports including supply of goods to EOU [para 8.2 (b)]. The specified transactions are provided certain benefits mentioned in para 8.3, subject to terms and conditions in the handbook procedures, volume I, published under FTP. Para 8.3(c), inter alia, envisages that exemption from TED is available for supplies made against International Competitive Bidding31 and also to Advance Authorisation Holder to a manufacturer holding another advance authorisation if such manufacturer supplies the products to an ultimate exporter. In other cases, (would include other DTA 5/14 https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 suppliers of goods to EOU), however, refund of TED will be given. Further, the expression “will” is to be construed as a mandate to give refund to such DTA suppliers, being its entitlement under FTP. This does not whittle down the ab initio exemption of payment of duty given to EOU in respect of supply from DTA.
22. Notably, para 8.3(c) of FTP does not provide in-built eligibility “category” unlike specified in sub-paras (a) and (b) for ICB and Advance Authorisation Holder. The expression “in other cases” in sub-para (c) needs to be understood in proper perspective. Concededly, paras 8.4.1 to 8.4.7 provide for benefits to the supplier of goods to EOU as being deemed export. It is essentially an entitlement of DTA supplier — as listed in para 8.3(a), (b) and (c) of FTP, as may be applicable. It is seen that para 8.4.2 was substituted by the revised FTP of 2012, wherein a table was inserted32 . As per that table, benefits available under para 8.2 to specified categories of supplies including supply to EOU in para 8.2(b) had been extended benefits under para 8.3, as applicable.
23. The eligibility for refund of TED/drawback in terms of para 8.3(c) of FTP is made dependent on the non-availment of CENVAT credit/rebate on such goods by the recipient thereof, as is envisaged in original para 8.5. The same 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. 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.6/14
https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 [Para 8.5, after amendment, in 2012-2013 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 supplies shall however be eligible for deemed export drawback on customs duty paid on inputs/components. (amendments highlighted) 8.5.1 Simple interest @ 6% per annum will be payable on delay in refund of duty drawback and terminal excise duty under deemed export scheme, if the case is not settled within 30 days of receipt of complete application (as in paragraph 9.10.1 of HBP v1).”
24. Similarly, benefit under para 8.3(b) of FTP regarding deemed export drawback can be availed, provided CENVAT credit/rebate has not been availed by DTA supplier and subject to complying other formalities. Para 8.4.2 as originally stood, is indicative of option given only to supplier (DTA) in connection with supply of goods to EOU, as specified in para 8.3 (a), (b) and
(c) of FTP. That has remained intact despite the amendment of 2012, until March 2013. Be it noted that the purport of para 8.5 states that supply of goods will be eligible for TED refund only if CENVAT credit/rebate has not been availed on such goods. These 7/14 https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 stipulations demonstrate that the scheme of FTP is explicit and not ambiguous nor silent in respect of benefits and entitlements of the concerned entities. It needs no elaboration. Thus, an argument having potential of defeating the intent of the applicable FTP, in any manner, ought to be negated.
8. At para 25, the Bench summarises the scheme under the Foreign Trade Policy holding that EOUs were entitled, ab initio, to an exemption from the payment of central excise duty in respect of goods procured from DTA and goods manufactured in India, as the import of goods was to be made after the payment of duty.
9. Thus, the EOU, upon obtaining a suitable disclaimer from the supplier is entitled to the benefit available to the supplier under Chapter 8 of the policy. Their conclusions, from para 26 to 32 are as follows:
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 8/14 https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 Policy Circular No. 16 (RE-2012/2009-14) Dated: 15th March, 2013 To, All Regional Authorities All Development Commissioners, SEZ. Subject: Clarification regarding TED Refund where TED exemption is available.
It has come to the notice of this Directorate that some RAs of DGFT and the Officers of Development Commissioners of SEZ are providing refund of TED even in those cases where supplies of goods, under deemed exports, is ab-initio exempted.
2. There are three categories of supplies where supply of goods, under deemed exports, are ab-initio exempted from payment of excise duties. These are as follows:
(i) Supply of goods under Invalidation letter issued against Advance Authorisation [Para 8.3(c) of FTP];
(ii) Supply of goods under ICB [Para 8.3(c) of FTP]; and
(iii) Supply of goods to EOUs [Para 6.11(c)(ii) of FTP]
3. Prudent financial management and adherence to discipline of budget would be compromised if refund is provided, in cases, where exemption is mandated. In fact, in such cases the relevant taxes should not have been collected to begin with. And if, there has been an error/oversight committed, then the agency collecting the tax would refund it, rather than seeking reimbursement from another agency.
Accordingly, it is clarified that in respect of supplies, as stated at Para 2 above, no refund of TED should be provided by RAs of DGFT/Office of Development Commissioners, because such supplies are ab-initio exempted from payment of excise duty.
4. This issue with the approval of DGFT.
(Jay Karan Singh) Joint Director of Foreign Trade …..” (emphasis supplied)
27. As regards the claim for refund of TED by EOU, therefore, need to be governed by the dispensation provided in para 6.11(a) read 9/14 https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 with entitlement of DTA supplier under Chapter 8 of FTP. However, it may have to be processed by the authorities under the FTP keeping in mind the principle underlying the refund of CENVAT credit granted under Rule 5 of the 2004 Rules and in the manner provided therefor, though not covered by Rule 5. That is because in law it is a case of deemed export by virtue of applicable FTP.
28. If the refund claim is by the EOU, the same needs to be processed by the authorities under the FTP by reckoning the entitlement of DTA supplier specified in Chapter 8 of the FTP concerning the goods supplied to it, being a case of deemed exports. The EOU on its own, however, is not entitled for refund of TED, as the mandate to EOU is to procure 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 reversed to the CENVAT credit account of the concerned entity instead of paying cash.
30. If, the claim for refund by DTA supplier under the scheme of FTP is allowed, it can be in cash if TED had been paid in cash. Else, it can be in the form of reversal of commensurate CENVAT credit amount to the concerned account of DTA supplier.
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31. As regards the refund claim of DTA supplier, as noted earlier, it needs to be processed by the authorities under the FTP keeping in mind the purport of stipulations spelt out in Chapter 8 of subject FTP, such as the goods imported or supplied to EOU shall be with actual user condition and shall be utilised for export production and that the EOU did not avail CENVAT credit or rebate in relation to the goods supplied to EOU. Similarly, if the DTA supplier has utilised the CENVAT credit, commensurate amount needs to be reversed to its CENVAT credit account, in which case, there is no question of refunding the amount in cash to the DTA supplier.
32. We shall now revert to the judicial pronouncements dealing with the subject FTP. Except the decision of the Bombay High Court commended to us, which is under challenge in the first two appeals pertaining to refund claim by EOU, all other reported decisions are in respect of DTA supplier of specified goods/services.
10. There is thus no doubt in my mind and Mr.Chandrasekaran, learned Senior Panel for R1 to R5 would fairly accede to the position, that a supplier to a EOU/licence holder under the EPCG scheme, is entitled to refund of terminal excise duty. In the present case, there is no dispute on the position that the petitioner has, in fact, paid the refund at the first instance. At para 10 of order dated 25.01.2017, the officer states as follows:
10. There is clear circumvention of the policy by paying the Central Excise Duty on the supplies which were exempted ab-
initio. This payment was made with intend to seek refund of unutilized CENVAT credit so that the refund, which otherwise is not available, can be claimed. Thus, evidently, this amounts to monetization/encashment of unutilized CENVAT credit. The entire supplies which are otherwise not eligible for refund of unutilized CENVAT credit. The entire exercise of to first use the unutilized CENVAT credit for making the payment of Central Excise duty 11/14 https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 and then to claim refund is against the provisions of FTP/CENVAT Credit Rules and ought not to be allowed. Government does not allocate money for such refund being ab- initio exemption.
11. The provisions of exemption from payment of duty is available since long time. Therefore it is incorrect to say that the Policy has been changed through Policy Circular No. 16 dated 15.03.2013. In view of the detailed position given in the preceding Paras, it is reiterated that in terms of Para 6.2(b) & Para 6.11 (c) (ii) of the FTP, red with CBEC Circular No.851/9/2007 dated 03.05.2007, the goods supplied by a DTA unit to an EOU/STP/EHTP/BTP are entitled to exemption from payment of Excise Duty.
11. Thus, the factum of payment of duty by the petitioner stands established.
In the case of Sandoz Private Limited (supra), the Hon'ble Supreme Court has directed credit of the duty paid to the CENVAT Register of that assessee for the reason that, pending litigation, the era of Central Excise had been subsumed into Goods and Service Tax regime with no avenue available for receipt of the amount in cash.
12. The GST Authorities were thus impleaded to ascertain the mechanism presently in vogue. In their counter dated 10.08.2022, the GST & Central Excise Authority have merely distanced themselves from the present litigation stating that it is for the DGFT to take a view in regard to the refund. In view of the aforesaid discussion, the position of law in regard to refund not being res integra any longer as well as the admitted position that the petitioner has, indeed, paid the duty in the 12/14 https://www.mhc.tn.gov.in/judis W.P.No.9576, 9580 & 16056 of 2019 first instance, the impugned orders are set aside and R3 is directed to grant credit of the amount of duty paid in the electronic credit register of the petitioner. Let this exercise be done within a period of eight weeks from date of receipt of copy of this order. These writ petitioners are allowed in the aforesaid terms. No costs.
11.08.2022 ska Index : Yes Speaking Order To
1.Union of India Rep. by its Secretary, Ministry of Commerce Department of Foreign Trade, New Delhi 110 001.
2.The Director General of Foreign Trade Ministry of Commerce and Industry Government of India, Udyog Bhawan New Delhi 110 001.
3.The Zonal Additional Director General of Foreign Trade and Appellate Authority 26 Haddows Road, Shastri Bhavan, Annexe Chennai 600006.4.The Joint Director of Foreign Trade No.19 -C, 2nd Cross Jawahar Nagar, Bommiyanpet, Puducherry 605005.
5.The Zonal Additional Director General of Foreign Trade 26 Haddows Road, Shastri Bhavan, Annexe Chennai 600006.
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ska
6.The Commissioner of GST and Central Excise Puducherry No.1, Goubert Avenue, Beach Road, Puducherry.
7.Goods and Service Tax Network (GSTN) Worldmark No.1 East Wing 4th Floor Aerocity New Delhi - 110 037.
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