Delhi High Court
Union Of India & Ors vs M/S Motherson Sumi Electric Wires on 1 May, 2023
Author: Satish Chandra Sharma
Bench: Chief Justice, Subramonium Prasad
Neutral Citation Number: 2023:DHC:3366-DB
$~20, 21 & 25
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Date of Decision: 01.05.2023
% LPA 362/2019 & CM APPLs. 24661-62/2019 & 8299-8300/2020
UNION OF INDIA & ORS ..... Appellant
versus
AUROBINDO PHARMA LTD ..... Respondent
% LPA 65/2019 & CM APPLs. 4621-23/2019 & 8297-98/2020
UNION OF INDIA & ORS ..... Appellants
versus
M/S MOTHERSON SUMI ELECTRIC WIRES ..... Respondent
% LPA 616/2018 & CM APPLs. 45510-12/2018 & 8211-12/2020
UNION OF INDIA & ORS ..... Appellants
versus
M/S DEEPAK ENTERPRISES ..... Respondent
MEMO OF APPEARANCE:
Ms. Shivalakshmi, CGSC with Ms. Ridhima Malhotra and Ms. Srishti
Rawat, Advocates for the Appellants/ UOI.
Mr. V. Lakshmikumaran, Ms. Charanya Lakshmi Kumaran,
Mr.Yogendra Aldak and Mr. Kunal Kapoor, Advocates for the
Respondents.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
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SATISH CHANDRA SHARMA, CJ. (ORAL)
1. Regard being had to the controversy involved in the aforesaid three
cases, they were heard analogously and a common judgment is being passed
in these matters. The facts of LPA 616/2018 titled Union of India & Others
Vs. M/s Deepak Enterprises are being dealt with hereunder.
2. M/s Deepak Enterprises is a manufacturer of Motor Vehicle Parts
(Back Plates) having a unit located in a Domestic Tariff Area (DTA). The
Respondent herein filed a writ petition before this Court claiming that during
the period January, 2012 to April, 2013, it supplied Back Plates to two 100%
Export Oriented Units (EOU's), namely, M/s Danblock Brakes India Pvt.
Ltd and M/s Roulands Braking (India) Pvt. Ltd. It was further stated in the
writ petition that the said goods were excisable goods and were cleared on
payment of excise duty by the aforesaid EOUs and the said EOUs did not
provide CT-3 certificates to the Petitioner.
3. It was further stated that it was permissible to supply the goods on
payment of Terminal Excise Duty (TED) and subsequently claim refund.
The Respondent herein/ Petitioner applied for refund of TED aggregating to
Rs.67,18,748/- in respect of goods supplied during the period January, 2012
to 17.04.2013. However, the said claim was rejected by the Joint Director
General of Foreign Trade on 05.06.2013 with the endorsement - "as supply
is made to 100% EOU, TED is not admissible in terms of policy circular
dated 15.03.2013".
4. It is pertinent to note that on 18.04.2013, the Central Government
published Notification No. 4 (RE-2013)/2009-2014 in exercise of powers
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conferred by Section 5 of the Foreign Trade (Development & Regulation)
Act, 1992 amending the FTP by substituting paragraphs 8.3(c) and 8.4 of the
FTP.
5. The Respondent herein/ Petitioner resubmitted its claim for refund of
TED relying on the judgment delivered in the case of Kandoi Metal
Powders Mfg. Co. Pvt. Ltd. v. Union of India & Ors, 2014 (302) E.L.T. 209
(Del.), which was delivered by a Division Bench of this Court on
11.02.2014. The Respondent herein/ Petitioner's subsequent claim was also
rejected by a communication dated 28.08.2014 clarifying that the Policy
Relaxation Committee (PRC) had allowed the refund of TED only to Kandoi
Metal Powers Manufacturing Pvt. Ltd.
6. The Respondent herein/ Petitioner being aggrieved by the orders
dated 05.06.2013, 23.01.2014 & 28.04.2014 and also the minutes of the
meeting of the Policy Interpretation Committee held on 04.12.2012,
preferred a writ petition and the learned Single Judge has allowed the said
writ petition vide judgment dated 19.01.2018. The relevant portion of the
said judgment - as contained in paragraphs 20 to 27, reads as under:
"20. In Kandoi Metal Powders MFG. Co. Pvt. Ltd. (supra),
the Division Bench of this Court had held that the Cenvat
regime under the Central Excise Act, 1944 operate on its own
terms and is independent on the rights and liabilities of the
parties under the import export policies framed under the Act.
The said decision squarely covers the controversy in the present
case.
21. In Joint Director general of Foreign Trade v. IFGL
Refractories Ltd.: 2002 (143) ELT 294 (Cal) - which was also
referred to by this Court in Kandoi Metal Powders Mfg Co. Pvt.
Ltd's case - the Calcutta High Court had held once the policy
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provides for refund of TED, the said right could not be taken
away for want of a procedure under the Hand Book of
Procedures. The court further held that "In case of refund of
terminal excise duty, the concerned authority is DGFT to whom
petition has been moved for refund of terminal excise duty.
Therefore, there s no question to approach the excise
department for refund of any excice duty".
22. Mr Narula's contention that the said decision did not
refer to the policy circular dated 15.03.2013 and, therefore,
ought to distinguished cannot be accepted. A plain reading of
the said decision indicates that the Division Bench had taken
note of the policy circular dated 15.03.2013. More importantly,
the reasons as indicated in the said circular were rejected. The
relevant extract of the said decision is as under:-
"9. The authorities in this case appear to have
proceeded to make an order adverse to the
petitioner and proceeded to hold that the petitioner
was disentitled to the benefit of refund in view of
some clarification given by the Policy
Interpretation Committee, in its meeting of
04.12.2012 to the effect that "refund of CENVAT
credit provisions are available under Excise rules
and CENVAT rules which should be availed of
rather than claiming refund". This reasoning
appears to have prevailed with the Policy
Relaxation Committee as well in this case. This
Court is unable to comprehend the rationale of the
decision of the second and third respondents who
also seem to have suggested that the petitioner
should approach the DGFT for appropriate relief
or clarification. Neither of the authorities dispute
that the petitioner supplied goods to the EOU at
the relevant time. Its entitlement, therefore, was
defined in terms of the existing policy, i.e. refund
in terms of paras 8.2, 8.3, 8.4 and 8.5 of the 2009
policy as discussed above. That a subsequent
amendment was made to the existing regime which
in effect liberalized the position further and
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exempted payment of TED altogether cannot
surely be a reason for denying the scheme for
refund of payment already made. The Court also is
unable to see the reason why the respondents were
of the view that refund claim or benefit under the
CENVAT regime under the Central Excise Act or
the other statutory schemes framed under it is
available. In this Court's opinion, that regime
operates in its own terms and is independent of the
rights and liabilities of the petitioner and the
respondents under the import-export policies
framed under the 1992 Act. This Court notices that
its reasoning is fortified by the decision of the
Division Bench of the Calcutta High Court in
JDGFT v. IFGL Refractories Limited, 2002 (143)
ELT 294 (Cal). There, the Court ruled that once
the supply of goods falls within the category of
deemed export, the unit would be entitled to refund
of TED."
23. Mr Narula also referred to the decision of the Bombay
High Court in Sandoz Private Limited and Lupin Limited v.
Union of India: 2016 (341) E.L.T. 22 (Bom.) and contended
that the Court had distinguished the decision of the Division
Bench of this Court in Kandoi Metal Powders Mfg. Co. Pvt.
Ltd. (supra) and the same was not applicable in the facts of this
case. However, a closer examination of the decision of the
Bombay High Court indicates that the Court has in fact differed
from the view expressed by this Court in Kandoi Metal Powders
Mfg. Co. Pvt. Ltd. (supra). The Bombay High Court was of the
view that the Court was unable to comprehend "the rationale of
the decision of the second and third respondents". The Court
was also of the view that the policy circular dated 15.03.2013
was merely clarificatory and the DGFT had the power to
interpret and implement the policy. This is different from the
view of this Court in Kandoi Metal Powders Mfg. Co. Pvt. Ltd.
(supra), wherein the Court had opined that Cenvat regime
under Central Excise operates in its own terms and is
independent of the rights and liabilities of the parties under the
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FTP. This Court is also unable to concur with the view of the
Bombay High Court that the Policy Circular dated 15.03.2013
clarifies an obvious position. Plainly, in such case, there was
no requirement to amend the FTP.
24. Mr Narula had also referred to the decision of the
Division Bench of this Court in Union of India and Ors. v.
Alstom India Limited: 2015 (325) ELT 72 (Del) and on the
strength of the said decision contended that the Division Bench
had not accepted the earlier decision in Kandoi Metal Powders
Mfg. Co. Pvt. Ltd. (supra). He further stated that the Court had
set aside the observations of the learned Single Judge directing
the authorities to examine the case of the Alstom India Ltd.
keeping in mind certain observations and the judgment of this
Court in Kandoi Metal Powders MFG. Co. Pvt. Ltd. (supra),
and therefore, the said decision could be distinguished. The
said contention is plainly without any merit. A plain reading of
the decision of the Division Bench in Union of India and Ors. v.
Alstom India Ltd. (supra) indicates that the Court had not
expressed any opinion on any of the issues involved in the
present petition. The observations made by the learned Single
Judge in that case had been set aside only on the principle that
a Court cannot direct a statutory authority to exercise
discretion in a particular matter. The Division Bench held that
since the learned Single Judge had held that no interference of
the Court is warranted at that stage, the learned Single Judge
ought not to have directed the DGFT to pass an order keeping
in mind the observations made by the learned Single Judge.
Although, this Court has certain reservations as to the said
decision, the same are not relevant for the purpose of the
present case. However, it is clear that the Court had not
expressed any final opinion on the issue at hand.
25. It is also relevant to note that in that case Alstom India
Ltd. had supplied goods against the International Competitive
Bidding (ICD). Paragraph 8.3(c) of the FTP, expressly
provided that such supplies would be exempted from TED and
in other cases refund of TED would be given. Thus, Union of
India and Ors. v. Alstom India Ltd. (supra) would have little
application in the facts of the present case.
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26. In view of the above, the petiton is allowed. The
impugned orders/communications - orders dated 05.06.2013,
23.01.2014 and 28.08.2014 - rejecting the petitioner's claim for
refund of TED in respect of the goods supplied between
January, 2012 and 17.04.2013 on the ground that the said
goods were exempted from excise duty, are set aside. The
minutes of Policy Interpretation Committee dated 04.12.2012
and the Policy Circular dated 15.03.2013 insofar as the same
are relied upon to reject the claim of the petitioner for refund of
TED are set aside. The respondents are directed to process the
petitioner's claim for refund of TED.
27. The pending application is also disposed of."
7. The Appellants/ Union of India (UOI) have preferred the present writ
appeals being aggrieved by the aforesaid judgment of the learned Single
Judge, whereby the claim of the DTAs for refund of TED paid by them at
the time of supply of the goods to EOUs by utilizing their CENVAT credit,
has been allowed.
8. Learned Counsel for the Appellants/ UOI has stated before this Court
that a common issue arises in all the three appeals, i.e. whether the DTA
Units who had paid Excise Duty at the time of supply of goods to the
EOU's, utilizing their CENVAT Credit, can claim refund of the same in
light of the provisions of the FTP (2209-2014).
9. It has been stated before this Court that the said issue stands covered
by the judgment delivered by the Hon'ble Supreme Court in Sandoz Private
Limited Vs. Union of India & Others, 2022 SCC OnLine SC 10, wherein
the Hon'ble Supreme Court while allowing the claim for refund of TED has
held that in the case of DTA supplier of goods to EOU, if TED has been
paid by utilizing CENVAT credit, the refund would be in the form of
reversal of commensurate amount of CENVAT credit amount. The
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operative portion of the said judgment delivered by the Hon'ble Supreme
Court - as contained in paragraphs 44 to 59, reads as under:
"44. 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.
45. 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.
46. 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.
47. 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
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goods/services.
48. The earliest decision is that of the learned Single Judge of
the Calcutta High Court in IFGL Refractories Limited (2001)
132 ELT 545 (Cal.). The High Court noted that the Export and
Import Policy for the relevant years was adopted amongst other
to promote export of Indian products to foreign countries
aiming at to earn foreign exchange and to increase global
market. The scheme was propounded to encourage indigenous
supplier by providing certain benefits and entitlements, either
by way of exemption from payment of excise duty or to get
refund of excise duty, if already paid. The object of the scheme
was to provide exporters duty-free input for production of
export materials and for that reason, it exempted supplier from
payment of any excise duty and, if paid, to provide for refund of
TED. The High Court further noted that merely because such
refund was not permissible to the DTA supplier under the 1944
Act and the rules framed thereunder, that would not deprive the
DTA supplier to avail of the entitlements and benefits under the
FTP. It held that it is open to the assessee to take advantage 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 (2002) 143 ELT
294 (Cal.). 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.
49. The next decision is of the High Court of Gujarat in the
case of Commissioner of Central Excise and Customs v. 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
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of export of goods out of India, the assessee was not entitled for
refund of CENVAT credit amount utilised in respect of subject
goods supplied to EOU. The High Court relying on its earlier
decision in Commissioner of Central Excise v. Shilpa Copper
Wire Industries (2011) 269 ELT 17 (Guj.), negatived that stand
of the Department. Instead, the High Court held that the claim
for refund was in reference to the applicable FTP and not on
the basis of the provisions of the 1944 Act and the rules framed
thereunder. The entitlement of DTA supplier was specified in
the applicable FTP being deemed exports which in law are
regarded as physical exports for the purpose of entitling refund
of unutilised CENVAT credit.
50. Then came the decision of the High Court of Delhi
in Kandoi Metal Powders Manufacturing Company Private
Limited (2014) 302 ELT 209 (Del.). Even, this was a case of
supplier manufacturing goods supplied to EOU in reference to
the applicable FTP. The High Court not only relied on the
decision of the Division Bench of the Calcutta High Court
in Joint Director General of Foreign Trade (2002) 143 ELT
294 (Cal.), but independently opined that DGFT having
formulated the FTP, the claim of the assessee was governed by
the entitlements specified therein in paras 8.2, 8.3, 8.4 and 8.5
as applicable at the relevant time. Accordingly, the High Court
allowed the writ petition and relegated the writ petitioner
before the Authority concerned for deciding the refund claim of
the petitioner. This judgment has been followed in subsequent
decisions, not only by the coordinate Benches of the High Court
of Delhi, but also by other High Courts.
51. The Madras High Court in the case of Raja Crowns and
Cans Pvt. Limited v. Union of India (2015) 317 ELT 40
(Mad.) dealt with similar claim of the DTA supplier of goods to
EOU and whilst following the decisions of the High Court of
Delhi and Calcutta High Court referred to above, opined that
the assessee was entitled to maintain an application for refund
of TED. The High Court, accordingly, directed the Authorities
concerned to consider the refund application of the writ
petitioner. Later on, the Madras High Court took the same view
in Lenovo (India) Pvt. Ltd. (2017) 346 ELT
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12 (Mad.) and Manali Petrochemical Limited v. Additional
Director General of Foreign Trade, New Delhi W.P. No. 23194
of 2009, decided on 16.9.2019.
52. As aforesaid, the decision in Kandoi Metal Powders
Manufacturing Company Private Limited (2014) 302 ELT
209 (Del.) has been subsequently followed by the High Court of
Delhi in Union of India v. Alstom India Limited (2015) 325 ELT
72 (Del.), Commissioner of Central Excise, Delhi
II v. Welspring Universal (2018) 359 ELT 635 (Del.), Deepak
Enterprises v. Union of India (2018) 360 ELT
905 (Del.), Alstom Transport India Ltd. v. Union of India
(2018) 363 ELT 69 (Del.), Motherson Sumi Electric
Wires v. Union of India (2018) 364 ELT 91 (Del.), Multitex
Filtration Engineers Limited v. Union of India (2020) 373 ELT
68 (Del.) and Hindustan Tin Works Limited v. Union of India
(2020) 373 ELT 217 (Del.).
53. 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. (2018) 361 ELT 44 (Kar.).
54. 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 credit account of the DTA supplier, if the DTA
supplier had utilized CENVAT credit account in respect of
goods supplied to EOU; and if it had paid the amount in cash,
the DTA supplier would be entitled for refund of cash with
simple interest at the rate of 6% per annum as provided in para
8.5.1 of the applicable FTP on delay in refund of duty
drawback and TED under deemed exports scheme.
55. Reverting to the case of EOU considered by the Bombay
High Court in the impugned judgment, we hold that EOU is
entitled only for ab initio exemption from payment of central
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excise duty in terms of para 6.11(c)(ii) of the FTP; and obliged
to import the goods from DTA supplier without payment of duty
in terms of para 6.2(b) of the FTP. The arrangement provided
in para 6.11(a) is, however, in the nature of "benefit" given to
EOU in the event it had paid the amount towards TED in
relation to goods procured by it to DTA supplier. In that case,
EOU will be eligible only for obtaining entitlements of DTA
supplier as specified in Chapter 8 of the FTP upon obtaining a
suitable disclaimer from DTA supplier. Accordingly, in addition
to ab initio exemption, the EOU is additionally eligible to
receive entitlements of DTA supplier as specified in Chapter 8
of the FTP subject to complying with necessary requirements
and formalities. In other words, EOU is not entitled for refund
of TED on its own accord, but can avail of the entitlements of
DTA supplier on complying essential procedure. As mentioned
earlier, the interest on the refundable amount, if paid in cash
ought to be refunded with simple interest at the rate of 6% per
annum as provided in para 8.5.1 of the applicable FTP, even in
the case of application for refund by EOU.
56. The next question is : the refund claim should be set up
before which Authority? As noted earlier, since the entitlement
of exemption and refund of TED flows from the provisions of
1992 Act and FTP framed thereunder by the Central
Government, which is an independent dispensation than the one
provided in the 1944 Act and the rules framed thereunder, with
the avowed purpose of promoting export and earning foreign
exchange, it is the obligation of Authority responsible to
implement the subject FTP, to deal with refund claim of the
concerned entities. For, it is not a case of refund under the
1944 Act or 2002 Rules or 2004 Rules as such, but under the
applicable FTP.
57. 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
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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).
58. 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.
However, if TED has been paid in cash by the EOU, the EOU
may get refund of that amount from Authority implementing the
applicable FTP in cash with simple interest at the rate of 6%
per annum for the delayed refund of duty (para 8.5.1) on
condition that it would not pass on that benefit to the DTA
supplier owing to such refund/rebate.
59. As regards DTA supplier of goods to EOU, it is entitled to
receive the refund of TED in terms of para 8.3(c) read with
paras 8.4.2 and 8.5 of the applicable FTP subject to complying
necessary formalities and stipulations provided therein, being a
case of deemed exports. Even, in the case of DTA supplier of
goods to EOU, if TED has been paid by utilizing CENVAT
credit, the refund would be in the form of reversal of
commensurate amount in its CENVAT credit account. And if the
amount towards TED has been paid in cash by the DTA
supplier to the Authorities under the 1944 Act, the refund of
TED amount would be made by the Authority implementing the
applicable FTP in cash with simple interest at the rate of 6%
per annum for the delay in refund of TED as per para 8.5.1."
10. Learned Counsel for the parties are ad idem that the issue involved in
the present case stands concluded on account of the judgment delivered by
the Hon'ble Supreme Court in Sandoz Private Limited (supra). However, it
has been argued before this Court that with the introduction of Goods &
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Services Tax Regime, the erstwhile concept of CENVAT credit register has
been done away with. He has further stated that in cases where the duty was
paid through credit, there is no way that the refund can now be granted in
credit account and, therefore, the refund has to be made in terms of Section
142(3) of the Central Goods and Services Tax Act, 2017 which provides that
any amount of refund accruing to any assessee shall be paid in cash.
11. This Court has carefully gone through the judgment delivered by the
Hon'ble Supreme Court in Sandoz Private Limited (supra) and the issue
involved in the present case stands concluded on account of the said
judgment. Therefore, the Respondent herein/ Petitioner shall be entitled for
refund in accordance with law.
12. The present LPAs are, accordingly, disposed of.
SATISH CHANDRA SHARMA, CJ
SUBRAMONIUM PRASAD, J.
MAY 01, 2023 B.S. Rohella LPA 362/2019, 65/2019 & 616/2018 Page 14 of 14 Signature Not Verified Digitaaly Signed By:BHUPINDER SINGH ROHELLA Signing Date:16.05.2023 11:41:18