Supreme Court - Daily Orders
Union Of India vs M/S Arvind Cotspin (Division Of Arvind ... on 15 November, 2022
Bench: Dinesh Maheshwari, Sudhanshu Dhulia
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8875 OF 2022
(Arising out of SLP (Civil) No.646 of 2012)
UNION OF INDIA & ORS. APPELLANT(S)
VERSUS
M/S ARVIND COTSPIN RESPONDENT(S)
ORDER
Leave granted.
2. Having regard to the fact that this case has remained pending since the year 2012 and having regard to the subject-matter, we have heard learned counsel for the parties finally at this stage itself.
3. In this appeal, the appellants related with revenue have questioned the judgment and final order dated 10.03.2011 passed by the High Court of Judicature at Bombay in Writ Petition No. 9378 of 2010 whereby, the High Court has set aside the orders dated 08.06.2009 and 08.09.2010 passed by the Development Commissioner and Appellate Authority respectively; and has held that the Development Commissioner could not have reviewed his own original order after the same had been fully implemented.
4. An outline of the relevant factual matrix of the present appeal may briefly be set forth as follows:
Signature Not Verified
4.1.Digitally signed by
A letter of intent was issued on 12.07.1991 to the respondent for Neetu Khajuria Date: 2022.11.24 18:39:08 IST the manufacture and export of cotton yarn under 100% Export Oriented Reason:
Scheme. In accordance with Government Policy, the Export Oriented 1 Units1 were also granted permission to sell the products in Domestic Tariff Areas2 as per the prescribed limit.
4.2. On 06.10.1999, the respondent applied for DTA sale for April to September 1999 under Para 9.9(b) of the EXIM Policy 1997-2002.
According to the respondent, in this application, DTA sale entitlement was calculated upon consideration of both physical exports and deemed exports. Subsequently, on 26.11.1999, the Joint Commissioner granted DTA sale permission for Rs. 12,64,00,000/- to the respondent on the basis of clubbed value of physical exports and deemed exports. The respondent, therefore, availed a concessional rate of excise duty under Section 3(1) of the Central Excise Act, 1944 as prescribed under notification Nos. 8/97-CE and 02/95-CE. However, it appears that on 04.04.2000, the Ministry of Commerce directed a letter to the Development Commissioner clarifying that Appendix 42 of the Hand Book of Procedure had been amended to only include “physical export” for DTA entitlement.
4.3. Later on, by a letter dated 17.02.2004, the Central Excise Authorities informed the Development Commissioner that DTA sale permission granted to the respondent was required to be reviewed because the value of deemed exports was taken into consideration while granting such permission. The respondent also received a show cause notice No. F.No.V(52)15-113/Adj./PIII03/138 dated 01.03.2004 1 ‘EOU’, for short.
2 ‘DTA’, for short.
2 demanding Central Excise duty amounting to Rs. 8,29,13,149/- for the period from 01.04.1999 to 07.07.2001, inter alia, stating that value of deemed exports cannot be taken into consideration for granting DTA sale permission.
4.4. Thereafter, on 05.05.2004, the Assistant Development Commissioner reviewed the sale permission earlier granted and decided that the unit was required to pay differential duty on the deemed exports valued at Rs. 12,64,00,000/-. This order was essentially premised on the aforesaid ground that DTA entitlement was only against physical exports and not deemed exports.
4.5. The aforesaid order dated 05.05.2004 was challenged by the respondent before the Appellate Committee under the Ministry of Commerce and Industry. In its order dated 23.09.2004, though the Appellate Committee rejected the appeal on the ground of maintainability, particularly when representation of the respondent was pending before the Development Commissioner but, directed the Development Commissioner to hear the party and pass an appropriate order. Thereafter, the Development Commissioner issued a show cause notice dated 16.12.2004 to the respondent, asking as to why they were not liable to pay the differential duty on ineligible DTA sales. 4.6. On the other hand, on 10.01.2005, the Commissioner of Central Excise passed the order confirming the duty to the tune of Rs. 4,58,77,896/- while upholding the show cause notice dated 01.03.2004. 3 We may notice at this juncture itself that the said order dated 10.01.2005 was challenged in appeal before the Customs Excise and Service Tax Appellate Tribunal by the present respondent and that appeal was allowed on 10.11.2005 with the Tribunal finding that the permission granted by the Development Commissioner was under challenge and the proceedings by way of show cause notice had been initiated. It was not in dispute before the Tribunal that the questions relating to validity of permission had not attained finality. In the given status of record, the Tribunal remanded the matter to the Commissioner of Central Excise for re-decision ‘after awaiting the proceedings on correctness of the permission granted by the Development Commissioner’ and after taking note of the Tribunal’s decision in the case of Ginni International Ltd. v. Commissioner of Central Excise: 2002 (139) ELT 172 (Tri.-Del.). 4.7. Reverting to the show cause notice dated 16.12.2004 issued by the Development Commissioner, it is noticed that in response thereof, the respondent contended, inter alia, that the permission was granted as back as on 26.11.1999 and before issuance of the initial letter dated 05.05.2004, the unit had arranged its business according to the terms of permission; and any modification at belated stage was bad in law and in violation of the principles of natural justice. The respondent also contended that according to Para 9.9(b) of the EXIM Policy 1997-2002, as it stood on 01.04.1999, the DTA sales were allowed based on FOB value of exports which covered export of foreign countries to general 4 currency area and inter-State supplies. Therefore, the transaction in the nature of deemed exports was covered under FOB value of exports. It was also submitted that deemed exports were treated at par with exports for the purpose of fulfilment of other obligations of policy and, therefore, the same ought to be the treatment of DTA sales. It was also submitted that when the DTA sale was being made against foreign currency, it should be treated same as physical exports; and even in cases where deemed exports were received in Indian Rupees, it should be taken into consideration for DTA sales because no such distinction of currency was made as regards deemed exports in the Policy.
4.8. On 08.06.2009, the Development Commissioner proceeded to pass the Order-in-Original against the respondent, inter alia, relying upon the aforesaid communication of the Ministry of Commerce and Industry dated 04.04.2000 to the effect that DTA sales would be available only against physical exports. It was observed that the said clarification was pertaining to the changes made in the EXIM Policy w.e.f. 01.04.1999, and in the respondent’s case, the DTA sale permission for the period from April-September, 1999 was issued on 19.11.1999, therefore, the changes made in the EXIM Policy about the mode of computation of DTA sale entitlement effective from 01.04.1999 were applicable. It was, thus, held that the unit was not entitled to claim DTA sale on deemed exports made under Para 9.9(b) of EXIM Policy and was entitled for DTA sale only on physical exports. Hence, it was further held that the jurisdictional Central 5 Excise and Customs Authorities could recover differential duty on DTA sale of Rs. 1087.62 lakhs made by the unit.
4.8.1. The respondent also referred to a decision of this Court in the case of Virlon Textile Mills Ltd. v. Commissioner of Central Excise, Mumbai: 2007 (211) ELT 353. In this regard, it was observed that the Ministry of Commerce and Industry under its letter dated 24.12.2008 had stated that the supplies made against deemed exports could not be considered for calculating DTA entitlement because the said decision had no bearing on the quantum of DTA entitlement, which is determined with reference to physical exports.
4.9. The appeal of the respondent against the aforesaid order dated 08.06.2009 was rejected by the Appellate Authority, Ministry of Commerce and Industry by its order dated 08.09.2010 while holding, inter alia, that the supplies made against deemed exports could not be considered for calculation of DTA sale, which was to be decided with reference to physical exports of the EOU.
4.10. In challenge to the aforesaid orders dated 08.06.2009 and 08.09.2010, the respondent preferred a writ petition in the High Court that has been considered and allowed by the impugned order dated 10.03.2011. The High Court essentially proceeded to rely upon its own judgment dated 23.02.2011 in Writ Petition No. 1718 of 2003: Hanil Era Textiles Ltd. & Anr. v. Union of India & Ors., where it was held that once the Development Commissioner had granted permission to clear the 6 goods for DTA sales and goods were accordingly sold in DTA, the Development Commissioner could not review his own order because of absence of any such power of review.
5. Learned counsel for the appellants has submitted that the reliance placed on the case of Hanil Era (supra) was completely unfounded as that decision was rendered in a context different than the present appeal. Further, it has been argued that there was a difference between deemed exports and physical exports at the time the DTA sale was applied for. It has also been argued that the Development Commissioner could review the earlier order granting DTA sale permission since it was an administrative order and not an adjudication order.
6. Per contra, it has been submitted by the learned counsel for the respondent that since the DTA clearances had already been effectuated, cancellation or modification of permission would amount to a review of order. It has been submitted that reviewing the DTA permission 10 years later would not be sustainable in terms of laches. It has also been argued that at the time of application, the respondent was entitled to DTA sale on deemed exports as well, in consonance with Para 9.9(b) of the EXIM Policy, since it provided for DTA sale up to 50% of the FOB value of exports; and physical exports were treated at par with deemed exports within the policy and the former were covered by the term “FOB value of exports”. Further, the Ministry’s letter dated 04.04.2000 stating that DTA sale policy would only be applicable to physical exports could not be 7 applied retrospectively.
7. Leaving aside other aspects of the matter, we may examine in the first place the basic question of entitlement of the respondent to DTA sale on deemed exports.
8. It would appear that at the time the respondent applied for DTA sale entitlement, there was no overt distinction made between physical exports and deemed exports. Para 9.9(b) of the EXIM Policy as it stood in 1999 stated as follows3: -
“(b) DTA sale up to 50% of the FOB value of exports may be made subject to payment of applicable duties and fulfillment of minimum NFEP prescribed in appendix 1 of the Policy. In the case of EOU/EPZ units in toys, agriculture. including agro processing, aquaculture, animal husbandry, biotechnology, floriculture, horticulture, poultry, viticulture and sericulture such sales may be subject to positive NFEP only. No DTA sale shall be permissible in respect of motor cars, alcoholic liquors and such other item as may be stipulated by Directorate General of Foreign Trade by a Public Notice issued in this behalf.” (emphasis supplied) 8.1. The term “FOB value of exports” has also been used in the application format whereby deemed exports had been considered at par with physical exports. As a consequence, the respondent submitted deemed export data at the time of applying for DTA sale. Although the appellants have contended that this requirement was only for the purpose of calculation of NFEP achievement, it appears that there was no explicit distinction between deemed exports and physical exports during the application process.
9. The decision of this Court in Virlon Textile (supra) also supports 3 Reproduced from the counter-affidavit filed by the respondents.8
the case of the respondent wherein this Court, inter alia, held as under: -
“7. ….Firstly, on examination of the EXIM Policy we find that the said Policy as a rule stated that every 100% EOU was obliged to manufacture or produce from duty-free imported raw materials capital goods, etc., finished products/articles and as a rule every 100% EOU was obliged to export its entire production and earn foreign exchange. This was what was called as physical exports. However, this rule had certain exceptions. In this civil appeal, we are concerned with DTA sales. As an exception, there existed two types of DTA sales under the said Policy, namely, DTA sales against rupee and DTA sales against foreign exchange which was similar to physical exports. This latter category was known as "Other Supplies in DTA". Therefore, to put it in brief, "Other Supplies in DTA” was equated with physical exports which, as stated above, was the general rule for 100% EOU. In other words, the general rule was physical exports and other supplies in DTA was equated to physical exports. This equation was necessary because other supplies in DTA gave certain benefits to the economy like preservation of foreign exchange, import substitution, savings of transportation costs and to provide competitiveness and level playing field for Indian exporters. According to the Revenue, the expression occurring in the second proviso to Section 3(1), namely, "allowed to be sold in India" was applicable only to DTA sales against rupee and not DTA sale against foreign exchange. In this civil appeal, we are concerned with the law as it stood prior to 11-5-2001. In our view, DTA sale against foreign exchange was covered by the expression "allowed to be sold in India" and, therefore, such sale fell under the proviso to Section 3(1) of the 1944 Act. In the circumstances, the duty liability of the assessee (appellant herein) was required to be determined after allowing to it the benefit of Notification No. 2/95-CE. That notification granted partial exemption to the assessee from duties in respect of goods manufactured in 100% EOU and allowed to be sold in India under paras 9.9 (a), (b), (c) and (d). Once DTA sales against foreign exchange are held to be covered by the proviso to Section 3(1) of the 1944 Act then the whole difference between DTA sales against rupee and DTA sales against foreign exchange, for the purposes of Notification No. 2/95-CE would stand eliminated. This would be, however, subject to the compliance with other conditions of Notification No. 2/95- CE. Therefore, in our view, the Tribunal had erred in relying on para 9.9(b) for limiting the benefits of exemption under Notification No. 2/95-CE by imposing a new condition to the effect that the benefits would be admissible only in respect of 50% of such DTA sales against foreign exchange. Secondly, once the permission was granted by the competent authority under the EXIM Policy to make DTA sales against foreign exchange, the assessee (appellant herein) was entitled to the benefit of concessional rate of duty under Notification No. 2/95-CE. If DTA sales against rupee 9 were allowed the benefit of Notification No. 2/95-CE, then DTA supplies against foreign exchange, which were on a par with physical exports, cannot be denied the same benefits and they cannot be subjected to a higher duty….."
10. In view of the above position of law emanating from Para 9.9(b) of the EXIM Policy as stood at the relevant time and the decision of this Court in Virlon Textile (supra), the very basis of the show cause notice issued in this matter to the respondent seeking to question the permission granted after about 10 years when it had already been operated and executed, cannot be countenanced. For this reason alone, this appeal is required to be dismissed.
11. For what has been discussed and held hereinabove, the question as to whether the Development Commissioner could have reviewed his own order need not detain us, particularly when on the facts of the present case, we are satisfied that the impugned orders dated 08.06.2009 and 08.09.2010 cannot be sustained on merits. The High Court has, of course, essentially set aside the order impugned as passed by the Development Commissioner for want of power of review while relying on its own decision in the case of Hanil Era (supra), wherein it was held that without the statute having conferred any such power, the order earlier passed could not have been reviewed. However, it is noticed that the said decision of the High Court was examined by this Court in the judgment dated 03.10.2013 in Civil Appeal No. 8966 of 2012 [arising out of SLP(C) No. 647 of 2012], wherein, while leaving aside the question of power of review, this Court permitted the Ministry of Commerce and Industry to 10 issue appropriate show cause notice. In the present case, as aforesaid, when the orders impugned are not being sustained on merits, we would leave this question open to be examined in an appropriate case.
12. This appeal stands dismissed accordingly. No costs.
…………………………., J.
[DINESH MAHESHWARI] …………………………., J.
[SUDHANSHU DHULIA] NEW DELHI;
NOVEMBER 15, 2022.
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ITEM NO.9 COURT NO.7 SECTION IX
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 646/2012
(Arising out of impugned final judgment and order dated 10-
03-2011 in WP No. 9378/2010 passed by the High Court Of Judicature At Bombay) UNION OF INDIA & ORS. Petitioner(s) VERSUS M/S ARVIND COTSPIN (DIVISION OF ARVIND PRODUCT LTD.) Respondent(s) (IA No. 1/2011 - CONDONATION OF DELAY IN FILING AND IA No. 2/2013 - PERMISSION TO FILE ANNEXURES) Date : 15-11-2022 This matter was called on for hearing today. CORAM :
HON'BLE MR. JUSTICE DINESH MAHESHWARI HON'BLE MR. JUSTICE SUDHANSHU DHULIA For Petitioner(s) Mr. Sanjay Jain, ASG Mr. Arijit Prasad Sr Adv.
Mr. Padmesh Mishra Adv Ms. Alka Agarwal Adv Mr. Shashank Bajpai Adv Mr. Arkaj Kumar Adv Ms. Harshita Sukhija, Adv.
Ms. Tanya Aggarwal, Adv.
Mr. Nakul Rai, Adv.
Mr. Raj Bahadur Yadav, AOR For Respondent(s) Ms. Charanya Lakshmikumaran, Adv.
Ms. Apeksha Mehta, Adv.
Ms. Mounica Katuri, Adv.
Mr. Pranav Mundra, Adv.
Mr. M. P. Devanath, AOR UPON hearing the counsel the Court made the following O R D E R Delay condoned.
Leave granted.12
The appeal stands dismissed in terms of the signed order.
Pending applications also stand disposed of.
(NEETU KHAJURIA) (RANJANA SHAILEY)
ASTT. REGISTRAR-cum-PS COURT MASTER
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