Bombay High Court
Vns Switchgear (I) Pvt Ltd vs The Union Of India And 3 Ors on 25 January, 2023
Author: Abhay Ahuja
Bench: Nitin Jamdar, Abhay Ahuja
2023:BHC-OS:786-DB
1 13 wp 3287-21-os-----.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3287 OF 2021
VNS Switchgear (I) Private Limited ... Petitioner
V/s.
The Union of India and ors. ... Respondents
---
Mr.Prakash Shah with Mr.Mohite Raval and Mr.Viraj Bhate i/by M/s
PDS Legal, Advocates for the Petitioner.
Mr.J.B.Mishra with Mr.Satyaprakash Sharma and Mr.Ashutosh Mishra,
Advocates for the Respondents.
---
CORAM : NITIN JAMDAR AND
ABHAY AHUJA, JJ.
DATE : 25 JANUARY 2023.
P.C.:
1. By this petition, the Petitioner is aggrieved by the denial of refund of Terminal Excise Duty (TED) paid on the inputs purchased by the Petitioner and used in the manufacture of the final products exported by the Petitioner.
2. The Petitioner, during relevant year, was a 100% duly registered Export Oriented Unit (EOU) and was engaged inter alia in the Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 :::
2 13 wp 3287-21-os-----.doc manufacture of control panel switch-gear and completely knocked down parts of control panels which were exported out of India.
3. The Petitioner, during its regular business, procured inputs required to manufacture final products from the supplier in the Domestic Tariff Area (DTA). At the relevant time, the DTA units were supplying goods on payment of CENVAT (Excise duty) to Petitioner, and the Petitioner used the goods in the manufacture of the final products cleared for export. The Petitioner did not claim or avail CENVAT credit or duty paid by the DTA units under the provisions of the CENVAT Credit Rules, 2004. The DTA units also did not claim the benefit of TED refund, and the said DTA units had issued its disclaimer certificate to enable Petitioner to claim a refund of TED paid on the goods cleared by the DTA units.
4. There is no dispute about the procurement of inputs on payment of CENVAT duty or use of the said inputs for the manufacture of the final products by the Petitioner for exports and not taking credit of duty so paid by the DTA units.
5. In terms of paragraph No.8.2 (d) of the Foreign Trade Policy 2009-2014 ("FTP"), supply of goods to an EOU is a deemed export and entitled to the benefits of deemed export in terms of paragraph No. 8.3 read with paragraph No.8.5 of the FTP. In paragraph No.8.3, deemed exports are eligible for all the benefits in respect of manufacture and supply of goods qualifying as deemed export subject Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 ::: 3 13 wp 3287-21-os-----.doc to terms and conditions as contained in the Handbook of Procedure. In terms of paragraph No.8.5 of the FTP, supply of goods is eligible for a refund of TED in terms paragraph No.8.3 (c) of FTP, provided the recipient of goods does not avail CENVAT credit /rebate of such goods. The said paragraph 8.3(c) is quoted as under:-
"Exemption from terminal excise duty where supplies are made against ICB. In other cases, refund of terminal excise duty will be given. Exemption from TED shall also be available for supplies made by an Advance Authorisation holder to a manufacturer holding another Advance Authorisation if such manufacturer, in turn, supplies the product(s) to an ultimate exporter."
6. By a circular dated 15 March 2013, the Director General of Foreign Trade ("DGFT") has clarified that no refund of TED should be provided to supplies that are ab-initio exempted from payment of excise duty. The said circular is also quoted as under :-
"Government of India Ministry of Commerce and Industry Directorate General of Foreign Trade Udyog Bhawan, New Delhi 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 Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 ::: 4 13 wp 3287-21-os-----.doc 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 ETP);
(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 it, 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
xx xx xx"
By notification dated 18 April 2013 paragraph 8.3 (c) was substituted and the following paragraph was inserted:-
"Refund of terminal excise duty will be given if exemption is not available. Exemption from TED is available to the following categories of supplies:
Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 :::
5 13 wp 3287-21-os-----.doc
(i) Supplies against ICB;
(ii) Supplies of intermediate goods, against invalidation letter, made by an Advance Authorisation holder to another Advance Authorisation holder; and
(iii) Supplies of goods by DTA unit to EOU/EHTP/ STP/BTP unit Thus such categories of supply which are exempt ab initio will not be eligible to receive refund of TED."
(emphasis supplied) Therefore, such categories of supply, including supplies of goods by DTA unit to EOU, which were exempted ab-initio were eligible to receive refund of TED.
7. The object of FTP was to encourage DTA suppliers by providing a refund of TED in terms of para 8.3(c), subject to fulfillment of formalities and stipulations in Chapter 8 of FTP. This would generate foreign exchange as a consequence of goods supplied as inputs or otherwise, 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 was followed until the issue of the Policy Circular dated 15 March 2013.
8. The Petitioner, on 10 December 2014 filed five applications with the Development Commissioner claiming a refund of CENVAT duty paid by the DTA units on the inputs supplied to the Petitioner for three quarters in the year 2011 and two quarters in the year 2012.
Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 ::: 6 13 wp 3287-21-os-----.doc
9. It is the case of the Petitioner that without affording an opportunity of hearing the Assistant Development Commissioner by five communications, all dated 12 September 2014 received by Petitioner on 16 September 2014 referring to the policy circular dated 15 March 2013 rejected/returned Petitioner's refund claim of TED.
10. The Petitioner contended that Petitioner shifted its factory from Navi Mumbai to Ambernath in the year 2015, the documents about the refund claim were misplaced and could be located only in and around 2019, after which its sought advice from its consultants. Therefore, vide letter dated 9 July 2019; Petitioner made a detailed submission requesting Respondent No.4 to grant TED refund. It is submitted that upon receipt of the said letter, Respondent No.4 had directed TED refund to Petitioner and therefore, vide letter dated 24 July 2019, Petitioner submitted the original documents to Respondent No.3 after which a meeting was scheduled on 18 November 2019.
11. Respondent No.4, by its letter dated 28 November 2019, returned the original documents to the Petitioner. Instead of granting the TED refund, which has led to filing of this petition.
12. Mr.Prakash Shah, learned counsel for the Petitioner, would submitted that during the pendency of this petition, the Hon'ble Supreme Court in the case of Sandoz Private Limited Vs. Union of India1 has considered Chapter 8 of the FTP, including paragraph 8, 1 2022(379) E.L.T.279(S.C.) Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 ::: 7 13 wp 3287-21-os-----.doc as well as the policy circular dated 15 March 2013 and has held that EOU entities who had procured and imported specified goods from DTA supplier are entitled to do so without payment of duty having been ab-initio exempted from such liability under paragraph No.6.11
(c)(ii) of the FTP being deemed exports. Learned counsel submits that the Hon'ble Court also goes on to hold that under paragraph No.6.11
(a) of the FTP, EOU is additionally eligible merely to avail of entitlement of DTA supplier as specified in Chapter 8 of FTP upon production of a suitable disclaimer of DTA supplier and subject to compliance of necessary formalities and stipulations. That it would not be a case of entitlement of EOU, but only a benefit passed on to EOU for having paid such amount to DTA supplier which was otherwise ab-initio exempted coupled with the obligation to import the same without payment of the import duty.
13. The Hon'ble Supreme Court in the case of Sandoz Private Limited in paragraphs No.41 and 42 observed as under :
"41. 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 Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 ::: 8 13 wp 3287-21-os-----.doc case of refund under the 1944 Act or 2002 Rule or 2004 Rules as such, but under the applicable 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 under 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)."
14. Mr.J.B.Mishra, learned counsel for the Respondents, would submit that earlier in view of the decision of this court in Sandoz Private Limited Vs. Union of India2, it was inter alia held that an EOU is not entitled to claim refund of TED of its own, this conclusion of this Court has been upheld by the Hon'ble Apex Court; however, the issue regarding additional eligibility of EOU had been reversed by the Hon'ble Supreme Court.
15. Since the Supreme Court has held that EOU is additionally eligible to avail of the entitlement of the DTA even though no duty was 2(2016 (341) ELT 22 (Bom.) Priya Soparkar ::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 ::: 9 13 wp 3287-21-os-----.doc paid by them being ab initio exempt from payment of such duty subject to a suitable disclaimer from the DTA supplier and subject to compliance of other necessary formalities, in view of the change in law, the matter can be remanded to the concerned Commissioner for consideration.
16. In light of the above, communications dated 12 September 2014 annexed at Exhibit F (collectively) are quashed and set aside, and the refund claims submitted by the Petitioner on 10 December 2012 stands restored to file of Respondent No.2 to be forwarded to Respondents No. 3 and 4, as the case may be. The Petitioner's claim to be decided in light of what is observed above.
17. It is open to the Petitioner to file additional submissions in support of their representation/ application in light of the change in legal position brought about by the Hon'ble Supreme Court in the case of Sandoz Private Limited Vs. Union of India (supra).
18. Petition stands disposed in the above terms.
(ABHAY AHUJA, J.) (NITIN JAMDAR, J.)
Priya Soparkar
::: Uploaded on - 01/02/2023 ::: Downloaded on - 31/05/2023 12:05:57 :::