Delhi High Court
M/S. Alstom Transport India Ltd. vs Uoi And Ors. on 9 July, 2018
Bench: S. Ravindra Bhat, A.K. Chawla
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 09.05.2018
Pronounced on: 09.07.2018
+ W.P.(C) 10544/2017 & C.M. APPL.43171-43173/2017
+ W.P.(C) 10558/2017 & C.M. APPL.43245-43247/2017
M/S. ALSTOM TRANSPORT INDIA LTD. ..... Petitioner
Through: Sh. Sujit Ghosh, Sh. Krishna Rao and Sh.
Gaurav Singh, Advocates.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through: Sh. Dev. P. Bhardwaj, CGSC, for Respondent Nos.1 to 4.
Sh. Sanjeev Narula, Sr. Standing Counsel with Ms. Anumita Chandra, Advocates, for Respondent No.5.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A.K. CHAWLA MR. JUSTICE S. RAVINDRA BHAT %
1. The petitioner Alstom Transport India Ltd, holds excise registration number, and operated as a subcontractor with respect to the construction of the Chennai Metro Rail Project (hereinafter referred to as "CMR Project" or "the said project"). The primary project authority for the same is Chennai Metro Rail Limited (hereinafter referred to "CMRL"). CMRL followed the procedures of International Competitive Bidding and appointed Alstom Projects India Ltd. ("APIL") as the main contractor. The Petitioner, in turn was appointed by APIL, as a sub-contractor to supply 33 train sets to CMRL.W.P.(C) 10544/2017 & 10558/2017 Page 1 of 21
The Petitioner manufactured and supplied 6 Train sets between 26.02.2014 & 30.08.2014. It is aggrieved by and seeks appropriate directions to the respondents (officials of the Directorate General of Foreign trade, and the Central Excise department) to refund the amounts of terminal excise duty ` 12,42,18,219/- collected from it, and further seeks quashing of part of Para 7.05(ii)(a) of the Foreign Trade Policy 2015-2020 ("New FTP") and quashing of limited portions of Para 8.3(c) and Para 8.4(d) of the New FTP.
2. The relevant facts of this case are that the CMR project was funded by the Japan International Cooperation Agency ("JICA"), which was notified by the Department of Economic Affairs, Ministry of Finance, Government of India by Notification No. 1 (FT)/DEA/2010, New Delhi, dated 05.05.2010 for the purpose of 'Deemed Export' benefits under the purview of para 8.2(d) of the old FTP. JICA's name also figured in Appendix 13 of the old FTP. JICA was removed from Appendix 13 after introduction of the new FTP with effect from 01.04.2015. Under Section 5 of the FTDR Act, the Central Government is empowered from time to time to formulate and announce by Notification in the Official Gazette, its export and import policy which it can also amend from time to time. Such policies are usually formulated by the Central Government for 5 years and amended by means of an Annual Supplement each year. The old FTP, under Chapter 8, provided for various benefits in relation to the goods supplied under various categories of 'Deemed Exports' specified therein. 'Deemed Exports' refer to those transactions in which the goods manufactured in India are supplied, which do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange. By specifying some projects under the category of 'Deemed Exports', Parliament and the executive W.P.(C) 10544/2017 & 10558/2017 Page 2 of 21 authorities intended to treat supplies to such projects as equivalent to actual physical exports and to grant fiscal benefits to such supplies, which are otherwise available only to actual physical exports. By their intrinsic nature, such projects are crucial to the national economy have, therefore, to be incentivized. Para 8.2 of the old FTP covers the categories of supplies that are classified as "Deemed Exports" and has been extracted as follows:
"Paragraph 8.2 Categories of Supply Following categories of supply of goods by main/ subcontractors shall be regarded as "Deemed Exports" under FTP, provided goods are manufactured in India:
(a) Supply of goods against Advance Authorisation /Advance Authorisation for annual requirement /DFIA;
(b) Supply of goods to EOU/STP/EHTP/BTP;
(c) Supply of capital goods to EPCG Authorisation holders;
(d) Supply of goods to projects financed by multilateral or bilateral Agencies/ Funds as notified by Department of Economic Affairs(DEA), MoF under International Competitive Bidding (ICB) in accordance with procedures of those Agencies/Funds, where legal agreements provide for tender evaluation without including customs duty;
Supply and installation of goods and equipment (single responsibility of turnkey contracts )to projects financed by multilateral or bilateral Agencies/Funds as notified by DEA, MoF under ICB, in accordance with procedures of those Agencies/Funds, which bids may have been invited and evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured abroad;
(e) Supply of capital goods, including in unassembled/disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till stage of commercial production, and spares to extent of 10% of FOR value to fertilizer plants;
W.P.(C) 10544/2017 & 10558/2017 Page 3 of 21(f) Supply of goods to any project or purpose in respect of which the MoF, by a notification, permits import of such goods at zero customs duty;
(g) Supply of goods to power projects and refineries not covered in (f) above;
(h) Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided said containers are exported out of India within 6 months or such further period as permitted by customs;
(i) Supply to projects funded by UN Agencies; and
j) Supply of goods to nuclear power projects through competitive bidding as opposed to ICB. Benefits of deemed exports shall be available under paragraphs (d), (e), (f) and (g) only if the supply is made under procedure of ICB."
3. Paras 8.3 and 8.4 of the old FTP, as were in force during the period when supplies were made (26.02.2014 to 30.08.2014) by the Petitioner cover the benefits to be extended to 'Deemed Exports' are extracted as follows:-
"Paragraph 8.3 Benefits for Deemed Export Deemed exports shall be eligible for any/all of following Exports benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to terms and conditions as in HBP vi:-
(a) Advance Authorisation/Advance Authorisation for annual requirement IDFIA.
(b) Deemed Export Drawback
(c) "Refund of terminal excise duty will be given if exemption is not available. Exemption from TED is available to the following categories of supplies:
(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 /HTP/STP/BTP unit W.P.(C) 10544/2017 & 10558/2017 Page 4 of 21 Thus such categories of supply which are exempt ab initio will not be eligible to receive refund of TED".
Paragraph 8.4 Benefits to the Supplier Following table shows the benefits available to different categories of supplies as mentioned in Para 8.2 above. In respect of such supplies supplier shall be entitled to the benefits listed in paragraphs 8.3 (a), (b) & (c) of the Policy, whichever is applicable."
Relevant sub- Benefit available as given in para 8.3, whichever is
para of 8.2 applicable.
(a) (b) (c)
(a) Yes Yes (i)Exemption in
(for (against ARO case of
intermediate or Back to invalidation.
supplies against Back letter of (ii) Refund in
an invalidation credit) case of ARO
letter) or back to
back letter of
credit.
(b) Yes Yes Exemption
(c) Yes Yes Refund
(d) Yes Yes Exemption
(f) Yes Yes (i) Exemption
(ii) Exemption, if
ICB.
Refund, if
without ICB.
(h) No Yes Refund
(i) Yes Yes No
(j) Yes Yes Refund
W.P.(C) 10544/2017 & 10558/2017 Page 5 of 21
4. The petitioner urges that with effect 01.04.2015, FTP 2009-2014 was replaced by FTP 2015-2020. Consequently 'Deemed Exports' were now covered under Chapter 7 of the new FTP where Para 7.02 covered the categories of deemed exports and Para 7.03 and 7.04 covered the benefits available to Deemed Exports and Para 7.05 categorically covered the conditions for refund of Terminal Excise Duty. The said new provisions are extracted as follows:
"7.02 Categories of Supply Supply of goods under following categories (a) to (d) by manufacturer and under categories (e) to (h) by main/subcontractors shall be regarded as "Deemed Exports":
A. Supply by manufacturer:
(a) Supply of goods against Advance Authorisation/Advance Authorisation for annual requirement IDFIA;
(b) Supply of goods to EOU/STP/EHTP/ BTP;
(c) Supply of capital goods against EPCG Authorisation;
(d) Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided said containers are exported out of India within 6 months or such further period as permitted by customs;
B. Supply by main/sub-contractor (s):
(e) (i) Supply of goods to projects financed by multilateral or bilateral Agencies/ Funds as notified by Department of Economic Affairs (DEA), MoF, where legal agreements provide for tender evaluation without including customs duty.
(ii) Supply and installation of goods and equipment (single responsibility of turnkey contracts) to projects financed by multilateral or bilateral Agencies/Funds W.P.(C) 10544/2017 & 10558/2017 Page 6 of 21 as notified by Department of Economic Affairs (DEA), MoF, for which bids have been invited and evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured abroad.
(iv) Supplies covered in this paragraph shall be under International Competitive Bidding (ICB) in accordance with procedures of those Agencies/Funds.
(v) A list of agenc1es, covered under this paragraph, for deemed export benefits, is given in Appendix 7 A.
(f) (i) Supply of goods to any project or for any purpose in respect of which the Ministry of Finance, by Notification No. 12/2012 -Customs dated 17.3.2012, as amended from time to time, permits import of such goods at zero customs duty subject to conditions specified in the above said Notification. Benefits of deemed exports shall be available only if the supply is made under procedure of ICB.
(ii) Supply of goods required for setting up of any mega power project, as specified in the list 32A, at Sl. No. 507 of Department of Revenue Notification No. 12/2012-Customs dated 17.03.2012, as amended from time to time, shall be eligible for deemed export benefits provided such mega power project conforms to the threshold generation capacity specified in the above said Notification.
(iii) For mega power projects, ICB condition would not be mandatory if the requisite quantum of power has been tied up through tariff based competitive bidding or if the project has been awarded through tariff based competitive bidding.
(g) Supply of goods to United Nations or International Organizations for their official use or supplied to the projects financed by the said United Nations or an International organisation approved by Government of India.
List of such organisation and conditions applicable to such supplies is given in the Excise Notification No I 08/95-CE, W.P.(C) 10544/2017 & 10558/2017 Page 7 of 21 dated 28.08.1995, as amended from time to time. A list of Agencies covered under this paragraph, is given in Appendix 7B.
(h) Supply of goods to nuclear power projects provided:
(i) Such goods are required for setting up of any Nuclear Power Project as specified in the list 33 at Sl. No. 511 of Notification No. 12/2012 -Customs dated 17.3.2012, as amended from time to time.
(ii) The project should have a capacity of 440 MW or more.
(iii) A certificate to the effect is required to be issued by an officer not below the rank of Joint Secretary to Government of India, in Department of Atomic Energy.
(iv) Tender IS invited through National competitive bidding (NCB) or through ICB.
7.03 Benefits for Deemed Exports Deemed exports shall be eligible for any/all of following benefits in respect of manufacture and supply of goods, qualifying as deemed exports, subject to terms and conditions as given in HBP and ANF-7A:
(a) Advance Authorisation/Advance annual authorisation for requirement IDFIA.
(b) Deemed Export Drawback.
(b) Refund of terminal excise duty, available if exemption is not available.
7.04 Benefits to the Supplier /Recipient Categories of Benefits on supplies, as given in para 7.03 above, supplies as per whichever is applicable.
Para 7.02 Para 7.03 (a) Para 7.03 (b) Para 7.03 (c)
Advance Duty Terminal Excise
Authorization Drawback Duty
W.P.(C) 10544/2017 & 10558/2017 Page 8 of 21
(a) Yes Yes (i) Exemption
(for (against ARO in case of
intermediate or Back to Invalidation
supplies against Back letter of Letter.
an invalidation credit) (ii) Refund in
letter) case of ARO or
back to back
letter of credit.
(iii) No
exemption/refund
against supply to
DFIA as CVD is
not exempted.
(b) Yes Yes Exemption
(c) Yes Yes Refund
(d) Yes Yes Refund
(e) Yes Yes Exemption
(f) Yes Yes Exemption, if
supplies under
ICB. Refund, if
supplies under
tariff based
competitive
bidding.
(g) Yes Yes Exemption
(h) Yes Yes Refund
7.05 Conditions for refund of terminal excise duty
(i) Supply of goods will be eligible for refund of terminal excise duty as per Para 7.03 (c) of FTP, provided recipient of goods does not avail CENVAT credit/rebate on such goods.
(ii) However, supply of goods which are exempted ab initio from payment of Terminal Excise Duty would be ineligible to get refund of TED. Exemption from TED is available to the following:
(a) Supplies under ICB;W.P.(C) 10544/2017 & 10558/2017 Page 9 of 21
(b) Supplies of intermediate goods, against invalidation letter, made by an Advance Authorisation holder to another Advance Authorisation holder;
(c) Goods Procured by EOU/ EHTP/STP /BTP unit from a unit in DTA; and
(d) Supply of goods to UN/International Organisation or project funded by it."
5. The Petitioner contends that contents of Para 8.3 of the old FTP are more or less identical to Para 7.05(ii) of the new FTP. It submits that in terms of the aforesaid provisions, being an eligible claimant under the old FTP (2009-2014), it moved an application, dated 29.10.2014, for refund of Terminal Excise Duty (hereinafter referred to as "TED") amounting to `12,42,18,219/- paid on the manufacture of the said Trains, before the third respondent. It is submitted that while the benefit of excise exemption is contemplated under the FTP in respect of supplies made under ICB, to debar TED refund, such excise exemption is applicable only if the said goods in respect of ICB supplies are also exempt from Customs Duties. Thus, all supplies against ICB are not automatically exempt from excise duty. Therefore, it is stated that in the present case, since there are no Customs Duties exemptions, the supplies are not exempt from Excise Duty, even though they were supplied under ICB. Therefore, the Petitioner claims it cannot be denied TED refund.
6. Counsel for the Petitioner explained that attested copies of Central Excise invoices were not available because the Superintendent before whom the requisite application was made stated that such requirement was not in consonance with the prevailing guidelines for the purpose. Reliance is placed W.P.(C) 10544/2017 & 10558/2017 Page 10 of 21 on the Superintendent's letter dated 22.04.2016 in that regard. The petitioner has relied on a copy of the payment certificate issued by the M/s Chennai Metro Rail Limited submitted along with the requisite Cenvat declaration. The petitioner was thereafter asked, by letter dated 06.02.2017 to submit documents including ANF-7 A (the format that comes under the purview of the new FTP), Payment Certificate as per Appendix-7D, Annexure -I, Annexure -III, ANF-I and a cancelled cheque. The letter also mentioned no refund of TED was admissible as the supply was under ICB which was ab- initio exempt as per Para 7 .02-B( e)(i) & (ii) of FTP, 2015 read with Para 7.05 (ii) (a) of FTP, 2015-20-Supply of goods to projects. The abovementioned letter also directed the Petitioner to file the above said documents within 90 days from the date of issue of the letter, failing which the demand would be considered as withdrawn. The Petitioner responded by its letter dated 04.05.2017 and:
(i)Reiterated its submissions on the non-applicability of ab initio exemptions after drawing references to excise and customs notifications.
(ii)Refiled its application under the Format of ANF 7 A without prejudice to its submissions that the same did not apply to it given that the period of supplies in its case was covered by the FTP of 2009-14.
(iii)Submitted form ANF-1 along with the attested bank statement along with the payment certificate in the form of Appendix 22-C. It also submitted that the Submission of Annexure I and Annexure III with respect to ANF-7A would be submitted as and when the same were issued.
7. It is urged that despite the Petitioner's compliance with the numerous requirements posed by the respondents, the refund application was rejected by the fourth respondent on 31st May, 2017 stating that no TED refund was W.P.(C) 10544/2017 & 10558/2017 Page 11 of 21 admissible as the supply was under ICB, which was ab-initio exempted in terms of para 7.02-B(e)(i) & (ii) of the FTP, 2015-20 read with para 7.05(ii)(a) of the FTP, 2015-20.
8. Mr. Sujit Ghosh, learned counsel for the petitioner, argues that there is no question of Paras 7.02-B(e)(i) and (ii) and Para 7.05 (ii) (a) of the FTP of 2015-2020 being made applicable to the case of the Petitioner, because the FTP-2015-2020 was introduced only on 01.04.2015 and the supplies made by the Petitioner were during 26.02.2014 to 30.08.2014. Moreover,the Petitioner filed its application for deemed exports on 29.10.2014 for the said period. Therefore, the Petitioner was governed by FTP of 2009-2014 which was extended from 01.04.2014 to 31.03.2015 by Notification No. 69 (RE- 2013)/2009-2014 dated 19.02.2014, specifically para 8.3(c) therein, which was operative during the period 27.08.2009 to 31.03.2015. The Petitioner had resubmitted its application dated 29.10.2014 on 04.05.2017 under the Format of Annexure 7A without prejudice to its submissions that the FTP of 2015-2020 had no application in its case. Moreover, this refiling was only done on the insistence of fourth respondent, who by letter dated 06.02.2017, directed the petitioner to do so. Naturally the provisions, as they stood, at the time when deemed export supplies were actually made by Petitioner, would apply in determining its eligibility and not provisions that were introduced subsequently after 8 months. The impugned orders have missed out this fundamental principle and have applied Paras 7.02(b)(e)(i), 7.02(b)(e)(ii) and 7.05(ii)(a) instead of para 8.3(c) of the old FTP solely to non-suit the Petitioner. Hence they are liable to be set aside. A copy of the notification dated 19th February, 2014 extending the period of FTP beyond 31st March, 2014 "until further orders" under Section 5 of the Foreign Trade W.P.(C) 10544/2017 & 10558/2017 Page 12 of 21 (Development & Regulation) Act, 1992, is relied on.
9. Mr. Ghosh argues that arguendo para 7.05(ii)(a) of the new FTP is applicable to the case of the Petitioner, the restrictive covenant qua denial of TED refund prescribed under the same does not apply to it and consequently it could not have been denied its refund claim. This is for the reasons that firstly, Para 7.05(ii) of the new FTP provides "however supply of goods which are exempted ab initio from payment of terminal excise duty would be ineligible to get refund of TED". It is submitted that the present case squarely falls outside the restriction contained in the opening language of the said para since the supplies made by the Petitioner to the Chennai Metro Rail Project were never exempted "ab initio" from the payment of Excise Duty for the reason that the Central Excise Notification, namely Notification No. 12/2012-CE dated 17.03.2012 at S.No. 336 (read with Condition No. 41) provides an excise duty exemption to goods supplied against International Competitive Bidding, provided such goods are also exempt from various Customs Duties. The relevant Customs Notification namely, Notification No. 12/2012-Cus dated 17.03.2012 at S. No. 354 (subject to condition 40) only provides an exemption from Customs Duty to goods supplied to Delhi Metro Rail Corporation Ltd ("DMRC"). Condition 40 in turn prescribes for relevant certificates to be issued by the concerned personnel of DMRC certifying that the goods concerned were used in Phase-I and specific corridors of Phase-II. It is stated, therefore, that a plain reading of the said notifications indicate that no Customs Duty exemption to goods supplied to the Chennai Metro Rail Project. Consequently, there is no question of any ab initio excise exemption operating in the petitioner's favor under Notification 12/2012 dated 17.03.2012 in respect of the supplies made by it. Therefore, W.P.(C) 10544/2017 & 10558/2017 Page 13 of 21 the bar prescribed under Para 7.05(ii) is inapplicable.
10. The respondents argue that the provisions of Chapter 8 of the FTP- 2009-14, titled as "Deemed Exports" are self-contained code in itself which defines what is meant by deemed export and which categories of supplies of goods shall be considered as exports, benefits derived there from and to whom they are available as per the terms in vogue or Para 8.3 of FTP-2009-
14. It is stated that the Department of Economic Affairs by Public Notice No. 1(FT)/DEA/2010 dated 05.05.2010 notified the organizations viz. International Bank of Reconstruction and development (IBRD) and International Development Association (IDA), International Fund for Agricultural Development (IFAD), Asian Development Bank (ADB), Organization of the Petroleum Exporting Countries (OPEC), 'Yen' credit channelized through Japan International Co-operation Agency (JICA) [development component only] and Swedish International Development Agency (SIDA) for the purpose of deemed export benefits under para 8.2(d) of FTP, 2009-14 subject to the condition that the supplies to projects were made under ICB procedure only. To give effect to the DEA's Public Notice, DGFT by Public Notice No.67 on 25th May, 2010 incorporated these agencies in the Appendix 13 of HBP Vol. I appearing in para 8.2(d) of FTP 2009-14 (amended as on 5.6.2012) to be eligible for deemed export benefits under para 8.3 of FTP, 2009. However, the deemed export benefits for supplies made to the projects funded by these agencies were discontinued in the new FTP 2015-20 notified on 01.04.2015 and only two agencies, viz. International Bank of Reconstruction and Development (IBRD) and International Development Association (IDA).
11. It is argued that under para 8.3 of FTP 2009-14, deemed export W.P.(C) 10544/2017 & 10558/2017 Page 14 of 21 supplies were eligible for any/all of the following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to terms and conditions as in HBP Vol.l:
(a) Advance Authorisation /Advance Authorization for annual requirement IDFIA.
(b) Deemed Export Drawback.
(c) 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 Authorization holder to a manufacturer holding another-Advance Authorization if such manufacturer, in turn, supplies the product(s) to an ultimate exporter.
12. It is submitted that as the supplies to the projects funded by JICA notified by DGFT's Public Notice No.67 dated 25th May, 2010 were made against ICB and hence were eligible for ab-initio exemption from payment of terminal excise duty under para 8.3(c) of FTP, 2009-14. It is stated that to further clarify the matter, the respondents issued the Policy Circular No.16 dated 15.03.2013, with approval of the Director General of Foreign Trade (DGFT) which clarifies the provisions of the Policy which were already in existence. The circular did not introduce any amendment or new provisions or new conditions in the FTP. Any amendment made in the FTP, 2009-14, is duly done only through a Notification issued by the Government of India and not through a policy circular.
13. It is further argued that Para 8.3 (c) of FTP-2009-14, provides for benefit of the Terminal Excise Duty (TED). This covers both-TED refund as well as TED exemption, applicable for different types of cases. TED refund W.P.(C) 10544/2017 & 10558/2017 Page 15 of 21 is allowed where TED exemption is not available. The Respondents submit that these provisions have been clarified vide Policy Circular No.16 dated 15.03.2013 issued by the DGFT. The respondents also submit that this policy circular has not introduced any new conditions/provisions; it has merely clarified the provisions of Para 8.3(c) of FTP-2009-14, which has already been in existence. It is also urged that no provision in the Handbook of the Procedure or the Foreign Trade policy permits an exporter to make a choice on the method of seeking benefit regarding the TED. It is no where mentioned that the exporter may first opt the benefit provided for in FTP- 2009-14, by reading various provisions of FTP-2009-14, in a harmonious manner.
14. It is also admitted that Para 8.3(c) extends the benefits under deemed exports for the supplies which qualify as deemed exports. The qualified Deemed Exports are undoubtedly eligible for the corresponding benefits, as applicable under Para8.3(c), one of the benefits is the TED. Para 8.3 (c) of FTP-2009-14 covers both TED refund as well as exemption from TED for different types of cases. TED refund is allowed where TED exemption is not available.
15. The respondents state that providing exemption from payment of duty, rather than paying duty first and then taking a refund, is a facilitating measure provided by the Government as it reduces paper work of Exporter/ Government Authorities, funds of the supplier are not blocked and reduces transaction cost. In spite of this the supplier in the present case had not chosen to avail exemption. Therefore, its claim in these proceedings is unjustified.
Analysis and Findings W.P.(C) 10544/2017 & 10558/2017 Page 16 of 21
16. The above facts show that Department of Economic Affairs by Public Notice No. 1(FT)/DEA/2010 dated 05.05.2010 notified the organizations, viz. IBRD, IDA, IFAD, ADB, OPEC, JICA, SIDA for the purpose of deemed export benefits under para 8.2(d) of FTP, 2009-14 subject to the condition that the supplies to projects were made under ICB procedure only. To give effect to the DEA's Public Notice DGFT by Public Notice No.67 on 25th May, 2010 incorporated these agencies in the Appendix 13 of HBP Vol. I appearing in para 8.2(d) of FTP 2009-14 (amended as on 5.6.2012) to be eligible for deemed export benefits under para 8.3 of FTP 2009. The deemed export benefits for supplies made to the projects funded by these agencies were discontinued in the new FTP 2015-20 notified on 01.04.2015 and benefits were only available in respect of two agencies, viz. International Bank of Reconstruction and development (IBRD) and International Development Association (IDA).
17. The relevant Central Excise Notification, namely Notification No. 12/2012-CE dated 17.03.2012 at S. No. 336 (read with Condition No. 41) provided an excise duty exemption in respect of goods in all chapters of the Central Excise Tariff Act goods supplied against International Competitive Bidding, provided such goods are also exempt from various Customs Duties. This precondition (exemption from payment of customs duties) was by virtue of Note 41 (to the tabular chart of Notification No. 12/2012 CE) i.e. "If the goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India."
The relevant Customs Notification namely notification No.2/2012-Cus dated W.P.(C) 10544/2017 & 10558/2017 Page 17 of 21 17.03.2012 at S. No. 354 (subject to condition 40) only provides an exemption from Customs Duty to goods supplied to Delhi Metro Rail Corporation Ltd ("DMRC"). Condition 40 in turn prescribes for relevant certificates to be issued by the concerned personnel of DMRC certifying that the goods concerned were used in Phase-I and specific corridors of Phase II.
18. It is quite clear therefore, that both the central excise and customs exemption notifications would spell out that no customs duty exemption to goods supplied to the Chennai Metro Rail Project was given to the petitioner; it cannot be said that such exemption was ever enjoyed by it. Therefore, the respondents' argument that excise duty was exempt "ab initio" in respect of supplies made under the contracts funded by JICA, to the Chennai Metro, are factually incorrect. The exemption was not "ab initio" (i.e. per se) exempt; it was conditional upon availability of customs duty exemption, by virtue of Note 41 to the Excise Duty exemption notification. However, the customs duty exemption notification restricted duty exemption only to supplies made to specified contracts relating to the Delhi Metro Rail Corporation. Thus, the respondent authorities, in the opinion of the court, proceeded on an entirely erroneous premise.
19. There is no doubt that in terms of the Export Import Policy and Hand Book of procedures, the primary power of interpretation is with the authorities specified in that instrument. In the light of these provisions which are a matter of record, the question which to be decided is whether the terminal excise duty refund, claimed by the petitioner was not available.
20. The Supreme Court's ruling in Director General of Foreign Trade and Ors. v. Kanak Exports and Ors. (2016) 2 SCC 226 has now authoritatively settled the issue that provisions of the Export Import Policy W.P.(C) 10544/2017 & 10558/2017 Page 18 of 21 and the related Handbook are statutory. Therefore, any clarification issued by any official: howsoever high in rank she or he might be, cannot override the policy. The benefit claimed is refund of TED on account of the supplies in question made under the internationally funded contract, which is described in Para 8.2 (d) of the FTP 2009-14. Para 8.3 stated that
(c) "Refund of terminal excise duty will be given if exemption is not available. Exemption from TED is available to the following categories of supplies:
(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 /HTP/STP/BTP unit Thus such categories of supply which are exempt ab initio will not be eligible to receive refund of TED".
21. For a fuller appreciation of the issue, it was necessary for the respondent authorities to determine whether under the relevant central excise notification, the goods were (or were not) exempt, or were exempt subject to any condition. Per se exemption, (or to put it, in the language of the respondent's pleadings and notifications, ab initio exemption) could only mean unconditional exemption from payment of duty. In the present case, a combined reading of the central excise exemption notification and the customs duty exemption notification made it clear that such unconditional exemption was not extended to the goods. Rather, unconditional exemption was given only to goods supplied under contracts funded to the Delhi Metro Rail Corporation. This meant that the goods in question, supplied by the petitioner were dutiable. Clearly, therefore it was entitled to terminal excise W.P.(C) 10544/2017 & 10558/2017 Page 19 of 21 duty refund, on a plain analysis of Para 8.3 of FTP 2009-2014.
22. This Court is of the opinion that so far as supplies made after the new FTP came into force are concerned, the goods would be covered by the provisions and the benefits extended by it. In the present case, the Petitioner manufactured and supplied 6 train sets between 26.02.2014 and 30.08.2014 and claims benefit of the old policy in W.P.(C) 10544/2017. They were covered by the old foreign trade policy and consequently covered by the excise and customs duty notifications which did not grant ab initio exemption. Consequently, the Petitioners' claims to TED refund could not have been rejected.
23. As far as W.P.(C) 10558/2017 is concerned, the supplies were made to Chennai Metro during the period 31.10.2014 to 04-03-2015. Para 7.05(ii)(a) of the new FTP is applicable from the date FTP 2015-2010 came into force. The restrictive condition in regard to denial of TED refund is to be considered in the light of the new FTP. Para 7.05(ii) of the new FTP provides "however supply of goods which are exempted ab initio from payment of terminal excise duty would be ineligible to get refund of TED". Like in the case of the previous FTP, the petitioner's case falls outside the restriction contained in the opening language of the said para since the supplies made to Chennai Metro Rail Project were never exempted "ab initio" from the payment of Excise Duty for the reason that the Central Excise Notification, namely Notification No. 12/2012-CE dated 17.03.2012 at SI No. 336 (read with Condition No. 41) provides an excise duty exemption to goods supplied against International Competitive Bidding, provided such goods are also exempt from various Customs Duties. The relevant Customs Notification namely Notification No. 12/2012-Cus dated W.P.(C) 10544/2017 & 10558/2017 Page 20 of 21 17.03.2012 at S. No. 354 (subject to condition 40) only provides an exemption from customs duty to goods supplied to Delhi Metro Rail Corporation Ltd ("DMRC"). Condition 40 in turn prescribes for relevant certificates to be issued by the concerned personnel of DMRC certifying that the goods concerned were used in Phase-I and specific corridors of Phase-II. It is clear, here again that no customs Duty exemption to goods supplied to the Chennai Metro Rail Project was ever given. Such exemption is the basis for excise duty exemption. Consequently, there is no question of any ab initio excise exemption operating in the Petitioner's favor under Notification 12/2012 dated 17.03.2012 in respect of the supplies made by it. Therefore the bar prescribed under Para 7.05(ii) is inapplicable.
24. Having regard to the above discussion, the impugned orders/letters denying refund of TED are hereby quashed. The Respondents are directed to process the petitioners' claim for TED refund for the concerned period and release the amounts which they are entitled to in respect of supplies made under within eight weeks from today. The writ petitions are allowed in these terms.
S. RAVINDRA BHAT (JUDGE) A.K. CHAWLA (JUDGE) JULY 09, 2018 W.P.(C) 10544/2017 & 10558/2017 Page 21 of 21