Gujarat High Court
Messrs Meghmani Dyes And Intermediates ... vs Union Of India on 9 January, 2020
Equivalent citations: AIRONLINE 2020 GUJ 318
Author: Bhargav D. Karia
Bench: J.B.Pardiwala, Bhargav D. Karia
C/SCA/8297/2019 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8297 of 2019
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MESSRS MEGHMANI DYES AND INTERMEDIATES LLP
Versus
UNION OF INDIA
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Appearance:
AMAL PARESH DAVE(8961) for the Petitioner(s) No. 1,2
MR PARESH M DAVE(260) for the Petitioner(s) No. 1,2
MR. PARTH H BHATT(6381) for the Respondent(s) No. 1,2,3
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 09/01/2020
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs;
"(A) That Your Lordships may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate writ, direction or order directing Respondent No.3 herein to return and restitute Rs.18,28,199/- deposited under protest by the Petitioner, with interest at appropriate rate for the period from October, 2017 till the actual repayment and reimbursement thereof.
(B) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to direct Respondent No.3 herein to forthwith return and restitute Rs.18,28,199/- to the petitioner on the terms and conditions that may be deemed fit by this Hon'ble Court.Page 1 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER
(C ) An ex-parte ad-interim relief in terms of para 22(B) above may kindly be granted.
(D) Any other further relief as may be deemed fit in the facts and circumstances of the case may also please be granted."
2. The short facts, giving rise to this writ application, are that the writ applicants were running 100% Export Oriented undertaking for manufacture of various dyes by virtue of the license/permission issued in its favour by the office of the Development Commissioner, Kandla Special Economic Zone by letter of permission dated 3rd July, 2003.
3. It is the case of the writ applicants that by letter of permission issued in their favour, the manufacturing operations in the Export Oriented Union were being conducted in accordance with the Foreign Trade Act and Foreign Trade Policy constituted thereunder. The Unit of the writ applicants was allowed to procure duty free raw materials, consumables, capital goods etc. for using the same in relation to manufacture of goods for export and, accordingly, the writ applicants had been availing benefit of such duty free procurements in accordance with the provisions of the Central Excise Act, 1944 and the Rules framed thereunder as regards the domestic procurements and the provisions of the Customs Act, 1962 and the Regulations framed thereunder in respect of the procurements by way of imports.
4. In addition to the exemption from the payment of excise duties and custom duties for domestic procurements as well as the imported procurements respectively, an Export Oriented Unit (for short "EOU") is also allowed reimbursement of Central Sales Tax on the goods manufactured in India.
Page 2 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER5. The writ applicants had been purchasing various materials from various suppliers in India including several EOUs who sold and supplied various goods and materials to the writ applicants on payment of Central Sales Tax (for short "CST").
6. As the writ applicants had been entitled to reimbursement of the CST on the goods manufactured in India by virtue of Para-6.11(c)(i) of the Foreign Trade Policy, the writ applicants had been submitting applications for refund/reimbursement of such central sales tax in accordance with Form/Annexure attached to Appendix 14-I-I of the Hand Book of Procedures submitting therewith all required details.
7. It is the case of the writ applicants that various such applications have been made by the writ applicant-Firm during the period from 2007 to 2017, and all such applications have been scrutinized and allowed by the Office of the 3rd respondent, i.e., the Development Commissioner, Kandla Special Economic Zone (for short "KASEZ") .
8. According to the writ applicants, the auditors of the Department of Commerce raised an issue in the year 2012 that CST reimbursement was not admissible when the goods were procured by an EOU like the writ applicant from any other EOU because Appendix 14-I-I refers to full entitlement of the reimbursement of CST paid by EOU and such other units on purchase made from the Domestic Tariff Area (DTA).
9. Circular No.13/8/2013-EOU dated 11th April, 2014 was issued by the Department of Commerce, Government of India, referring to the above position and informing the Development Page 3 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER Commissioner, in charge of various SEZ areas that suitable action for recovery of CST reimbursement should be taken in view of the Appendix 14-I-I of the Foreign Trade Policy.
10. It is the case of the writ applicants that the validity of the aforesaid circular and also the action taken by the Development Commissioner, in seeking to recover the amount of CST reimbursement already allowed in favour of the various EOUs have come up before this Court in the Special Civil Application No.16301 2016 and this Court by judgment rendered in the case of M/s. Asahi Songwan Colors Ltd., reported in 2017 (356) ELT 532 (Guj.) has held that the CST reimbursement was permissible to EOUs even when the goods and materials were purchased from other EOUs located in the country and that the circular issued by the Government clarifying a contrary position, was set aside.
11. The writ applicants, thereafter, applied for exit from the EOU scheme in the year 2017. However, the respondents herein had raised an issue of CST reimbursement coupled with several other issues relating to CST in respect of the goods and the materials purchased from the other EOUs. The writ applicants, therefore, applied for 'No Objection Certificate' for exiting from the EOU scheme from the Central Excise Authorities and also from the KASEZ Authorities. The Central Excise Authority issued such certificate on 26th September, 2017. However, the KASEZ Authorities declined to issue such 'No Objection Certificate', and by letter dated 5th October, 2017, intimated the writ applicants that a sum of Rs.18,28,199/- was outstanding and that such amount should be deposited by the writ applicants for getting 'No Objection Page 4 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER Certificate'.
12. The writ applicants, thereafter, pointed out to the KASEZ Authority that no outstanding amount is payable by the writ applicants and the writ applicants have not received any audit objection in respect of the above amount. The writ applicants also pointed out that the only dispute raised by the Department, so far, was in respect of the CST reimbursement, but the amount of CST reimbursement for the materials procured from the other EOUs was also not as large as Rs.18,28,199/-.
13. The writ applicants, thereafter, deposited the aforesaid amount under protest so as to get the NOC. The writ applicants, thereafter, filed an application on 29.10.2018 for refund of the aforesaid amount of Rs.18,28,199/- deposited by the writ applicants towards the CST reimbursement. However, the KASEZ Authorities had not responded to the application of the writ applicants. As the respondents are not deciding the application of the writ applicants for refund of the aforesaid amount, the writ applicants have come up with this writ application.
14. Mr. P.M. Dave, the learned counsel appearing for the writ applicants, submitted that appropriate direction may be given to the respondents to decide the application of the writ applicants for refund of the amount of Rs.18,28,1999/- within the stipulated time period in view of the judgment in the case of M/s. Asahi Songwon Colors Ltd. (supra), wherein it is held as under;
"18. A minute scrutiny of these provisions contained in Page 5 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER para 6.11 would reveal that the language used in clauses
(a), (b) and (c), in general, was not made limited to the supplies from a DTA unit. As noted, clauses (a) and (b) both confined their application to the supplies made by the DTA unit. Clause (c) itself contained two situations. In sub-clause (i) what was envisaged was reimbursement of CST on goods manufactured in India. Sub-clause (ii) envisaged exemption from payment of CST on goods purchased from DTA on goods manufactured in India.
Thus the policy wherever intended to limit the benefit of an EOU on procurement made from a DTA unit, it was so specifically provided. When therefore, sub-clause (i) of clause (c) of para 6.11 did not make any such reference to the procurement from a DTA unit but used the expression "goods manufactured in India", it must be understood that this clause would govern the goods purchased by EOU unit from any unit as long as the condition of goods being manufactured in India is satisfied. In plain terms, therefore, the Foreign Trade Policy, 2004-2009 did not limit the benefit of CST reimbursement to a EOU on purchases made only from a DTA unit.
19. If this be the conclusion, the immediate question that would arise is, could the authorities have restricted the benefit only in case of procurement from a DTA unit through the procedure laid down for implementation of Foreign Trade Policy? We have noticed that the Director General of Foreign Trade in terms of Section 6 of the Act has certain delegated powers which would include powers to frame such procedures. Sub-section (3) of Section 6 however, excludes the delegation of such powers to those contained under Sections 3, 5, 15, 16 and 19 of the Act. In exercise of powers under Section 6, the Director General of Foreign Trade could not have framed or altered the Foreign Trade Policy. We may refer to the Division Bench's judgment of this Court in case of Alstom India Ltd. v. Union of India reported in (Guj.), in which it was observed as under :
"28. We find that the Respondent No. 2, namely, DGFT, through Para 8.3.6 of the HOP has incorporated by reference the provisions of Duty Drawback Rules mutatis mutandis to the FTP and HOP. We find substance in the contention of Mr. Ghosh that the HOP is nothing but an administrative guideline as would appear from a Page 6 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER combined reading of Para 2.4 of the FTP and Section 6 of the FTDR Act. We have already pointed out that Section 3 of the FTDR Act grants power to the Respondent No.1 to make provisions relating to imports and exports and the Respondent No. 1 under Section 5 of the FTDR Act can formulate and announce the foreign trade policy. It further appears from Section 6(3) of the FTDR Act that of the powers conferred upon the Respondent No. 1 under the FTDR Act, except those provided in Sections 3, 5, 15, 16 and 19, all others can be delegated to the Respondent No. 2 by order published in the Official Gazette. We find that the Respondent No. 2 through Para 8.3.6 of the HOP has sought to incorporate the provisions of Duty Drawback Rules to deemed exports mutatis mutandis which is not permissible in view of the fact that no power has been granted to the DGFT under the FTDR Act to legislate either directly or by way of incorporation by reference. It is now a settled law that the separation of power between the Legislature and executive forms part of the basic structure of the Constitution of India and any attempts by the executives to legislate without appropriate authority under the law would amount to violation of the basic structure of the Constitution of India. The power to legislate is incorporated under Article 246 of the Constitution of India and such power has been conferred on the Parliament and the State Legislature. Moreover, the power to frame Duty Drawback Rules under the FTDR Act can be legislated by the Central Government only in exercise of power conferred under Section 19 in the manner prescribed under the FTDR Act and the same cannot be delegated to the Respondent no. 2 as expressly prohibited by Section 6(3) of the above Act.
29. We, thus, find that any attempt by the executives to legislate without the authority of law should be branded as a colourable device and therefore, the same is in violation of Article 246 of the Constitution of India. If we accept the contention of Mr. Raval that the Respondent No. 2 is authorized to incorporate the duty drawback Rules by reference, it would amount to acceptance of the proposition that the Respondent No. 2 is authorized to deal with under the FTDR Act, the similar matters relating to duty and tax refunds as provided under Section 75 of the Customs Act, Section 37 of the Central Excise Act and Section 93A read with Page 7 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER Section 94 of the Finance Act, 1994 although not authorized under the FTDR Act. We are in agreement with Mr. Ghosh, the learned advocate for the petitioner, that the conferment of such power to the Respondent No. 2 to adopt the duty drawback rules without any power to legislate either expressly or otherwise would amount to permitting the levy or collection of tax without authority of law in violation of Article 265 of the Constitution of India."
20. Our attention was also drawn to the decision of learned Single Judge of Madras High Court in case of Hospira Health Care India Pvt. Ltd. v. Development Commissioner, MEPZ Special Economic Zone & Heous and Ors. reported in (2016) 4 MLJ 179, in which similar issue had come up for consideration and it was held that the demand for refund of the reimbursement benefits were in conflict with para 6.11 of the Foreign Trade Policy.
21. Even otherwise, the Handbook of Procedures and in particular Appendix-14-I-I contained therein nowhere aims to lay down any policy but prescribes the procedure to be followed for reimbursement of CST. It is undoubtedly true that para 2 of this Appendix restricts the CST reimbursement on purchases made by an EOU from a DTA unit. However, this restriction in our opinion would run counter to the terms of FTP itself and ultra vires the powers of the Director General of Foreign Trade. The title of the Appendix itself provides that it is a procedure to be followed for reimbursement of Central Sales Tax. Para 1 further clarifies that the procedure given in the said annexure shall be applicable for reimbursement of CST. There is little doubt therefore, that Appendix 14-I-I aimed to lay down the procedure for claiming the benefit. In any case, such procedure could not have restricted the benefit by excluding the purchases from certain source which exclusion did not flow from the Foreign Trade policy itself.
22. Perhaps a contention could have been raised by the respondents that the Foreign Trade Policy itself envisaged such a restriction since only when the goods are manufactured in a DTA area, it may be stated that same are manufactured in India and by a deeming fiction any manufacturing activity taking place in an EOU should be excluded from such expression. The respondents Page 8 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER would draw our attention to sub-section (l) of Section 3 of the Central Excise Act, 1944, which besides others, envisages levy of excise duty on manufacture by a hundred per cent. export unit undertaking which goods are brought to any other place in India. In other words, on the goods manufactured in an EOU, excise duty would be leviable, only when such goods are brought to any other place in India. We would have certainly considered this angle further, but for the fact that in the later year, the Government of India itself has recognised the benefit of CST reimbursement on the purchases made by the EOU from another EOU. It was for this purpose that we had referred to and noted relevant portion of the Foreign Trade Policy, 2015-2020 and the procedure for claiming the CST reimbursement. We may recall that insofar as base policy is concerned for grant of such CST reimbursement, no change has been brought about in the Foreign Trade Policy, 2015-2020 as compared to the Foreign Trade Policy, 2004-2009. Despite this, base policy being the same, the procedure for claiming reimbursement of CST on supplies made to EOU under the current policy now envisages such reimbursement on any sales made to a EOU not only from DTA but also from EOU, SEZ, etc.
23. Once again the contention of the Union of India was that the policy itself does not envisage grant of such reimbursement on procurement from an EOU, the question would immediately arise is whether such benefits could have been recognized through a procedure framed for claiming such a benefit? This further development would effectively prevent the respondents from contending that the original Foreign Trade Policy, 2004-2009 did not envisage CST reimbursement by an EOU upon procurement of goods manufactured in another EOU.
24. There is yet another angle why we would not permit the respondents to make recoveries. As noted, the claim pertained to period between 2006 and 2008. They were made at the relevant time and granted by the respondents without any dispute. Such reimbursements are now sought to be recovered for which show cause notice came to be issued on 10-7-2015. It is not the case of the respondents that the petitioner was responsible for any misrepresentation or misstatement of facts which resulted into such erroneous reimbursement being Page 9 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020 C/SCA/8297/2019 ORDER granted and which came to the notice later on. That being the position, it was not possible for the respondents to make recoveries after unduly long period of time which in the present case happens to be more than seven years, that too, without any explanation for such delayed action.
25. In the result, the petition is allowed. The impugned order-in-original dated 22-8-2016 is set aside. We further hold that the circular of Government of India dated 11-4- 2014 does not lay down the correct legal position and same is also quashed. In view of this declaration, it is not necessary to independently strike down the prevalent procedure for claiming the reimbursement of CST. Petition is disposed of."
15. On the other hand, Mr. Parth Bhatt, the learned counsel appearing for the respondents, has made a statement that the respondents shall dispose of the application of the writ applicants for refund of the amount of Rs.18,28,199/- within a period of three months from the date of the receipt of the writ of this order.
16. In view of such statement being made by the learned counsel appearing for the respondents, this writ application is disposed of directing the respondents to dispose of the refund application fled by the writ applicants within a period of three months from the date of the receipt of the writ of this order taking into consideration the judgment in the case of M/s. Asahi Songwon Colors Ltd. (supra). Notice stands discharged.
(J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) Vahid Page 10 of 10 Downloaded on : Sun Feb 16 15:44:44 IST 2020