Delhi High Court
Kandoi Metal Powders Mfg. Co. Pvt. ... vs Union Of India And Others on 11 February, 2014
Author: S.Ravindra Bhat
$~17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on 11.02.2014
+ W.P.(C) 5160/2013
KANDOI METAL POWDERS MFG. CO. PVT. LTD.
..... Appellant
Through: Sh. M.P. Devnath and Sh. Aditya,
Advocates.
versus
UNION OF INDIA AND OTHERS ..... Respondent
Through: Sh. Akshay Chandra, Advocate,
for Resp. Nos. 1 to 4.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.V. EASWAR
MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)
%
1. The petitioner challenges the respondents' action in denying its
refund claim in terms of the provisions of the Foreign Trade Policy
2009-14 framed under the Foreign Trade (Development and
Regulation) Act, 1992.
2. The brief facts are that the petitioner inter alia manufactures
metal powders which suffers excise duty. It claims to have supplied
manufactured goods to 100% Export-oriented Units (EOUs) in
consonance with the said Foreign Trade Policy (FTP). Claiming that it
W.P.(C)5160/2013 Page 1
was entitled to refund of Terminal Excise Duty (TED) for the supplies
made during two relevant periods - January 2012 to March 2012 and
April 2012 to June 2012 - the writ petitioner made applications in this
regard to the third respondent. The applications for refund were
made on 29.08.2012 and 16.11.2012. The third respondent denied
these refund claims by separate orders dated 19.10.2012 and
02.11.2012. In compliance with the provisions of the policy, the
petitioner wrote to the second respondent, claiming relaxation, by
two letters dated 27.12.2012 and 28.12.2012. These two were turned
down on 14.05.2013.
3. It is contended by the petitioner that its unit and the supplies
are entitled to be treated as "deemed export" - as defined by para
6.11 of the 2009 policy in question. Elaborating on this, it is
submitted that by para 8.1, "deemed export" refers to categories of
supplies outlined in para 8.2. The petitioner in this context relies on
para 8.2(b) and goes on to claim the benefits of deemed export unit
in terms of para 8.3(c). It is submitted that the benefit entitled to
such deemed export units is spelt out in para 8.4. The relevant
provision, i.e. the first column which deals with para 8.2 mentions the
category falling within para 8.2(b). It is submitted that the benefit of
exemption outlined in para 8.3(c) follows as a consequence of the
affirmative mentioned in column (c) of para 8.4. Learned counsel
highlighted that with effect from 01.04.2013, the policy has been
further relaxed in that such category of units do not have to even
W.P.(C)5160/2013 Page 2
deposit or pay TED but are entitled to claim complete exemption. He
relies upon the relevant notification, i.e. 22/2003 dated 31.03.2003 in
this regard. The relevant amendment carried-out by this circular to
the earlier Foreign Trade Policy of 2009 in material particulars, i.e.
para 8.4(b) clearly states in the last column that the unit is entitled to
claim exemption from payment of TED.
4. Learned counsel for the respondents relied upon the
averments in the counter affidavit as well as the letter addressed by
the third respondent, of 31.05.2013, directing consequential
instructions to be issued to field formations in the light of the
amended circular dated 15.03.2013. It is submitted that in case the
petitioner wishes to seek refund, the relevant statutory regime would
be under the concerned provisions of Central Excise Act.
5. As is evident from the above discussion, the petitioner claims
to be engaged in entirely deemed export - an assertion which is not
essentially disputed. The entitlement of such units which supply
goods to export oriented units is spelt-out in paras 6.11 and 8.1 of
the 2009 policy. Para 8.2 to the extent it is relevant reads as follows:
"8.2 Categories of Supply
Following categories of supply of goods by main-
sub-contractors shall be regarded as "Deemed Exports":
W.P.(C)5160/2013 Page 3
(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;
XXXXXX XXXXXX XXXXXX"
6. The benefits for deemed export before its amendment from
01.04.2013 are outlined in paras 8.3 and 8.4 which read as follows:
"8.3 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 in HBPv1:-
(a) Advance Authorisation/Advance Authorisation for
annual requirement/DFIA.
(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.
8.4 Benefits to the Supplier
W.P.(C)5160/2013 Page 4
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) and (c) of the
Policy, whichever is applicable.
Relevant sub- Benefit available as given in Para 8.3,
para of 8.2 whichever is applicable
(a) (b) (c)
(a) Yes (for Yes (against Yes (Against
intermediate ARO or Back ARO or Back
supplies) to Back letter to Back letter
of credit) of credit)
(b) Yes Yes Yes
(c) Yes Yes Yes
(d) Yes Yes Yes
(f) Yes Yes Yes
(h) No Yes Yes
(i) Yes Yes No
(j) Yes Yes Yes
7. The eligibility for refund is provided by para 8.5 in the following
terms:
"8.5 Eligibility for refund of terminal excise
duty/drawback
W.P.(C)5160/2013 Page 5
Supply of goods will be eligible for refund of terminal
excise duty in terms of Para 8.3(c) of FTP, provided
recipient of goods does not avail CENVAT credit/rebate
on such goods. A declaration to this effect, in Annexure II
of ANF 8, from recipient of goods, shall be submitted by
applicant. Similarly, supplies will be eligible for deemed
export drawback in terms of para 8.3(b) of FTP of Central
Excise Duty paid on inputs/components, provided
CENVAT credit/rebate has not been availed of such duty
paid by supplier of goods. A declaration to this effect, in
Annexure III of ANF 8, from supplier of goods, shall be
submitted by applicant. Such supplies shall however be
eligible for deemed export drawback on customs duty
paid on inputs/components.
XXXXXX XXXXXX XXXXXX"
8. It would thus be seen that supplies made to EOUs in terms of
para 8.2(b) are entitled to be regarded as deemed exports. The
benefits for deemed exports include inter alia exemption from TED
where supplies are made against ICD (a term which means
"International Competitive Bidding"). In the present case,
concededly, the petitioner did not make any supplies against the ICD.
Therefore, it would be covered by latter part of para 8.3(c), i.e. cases
where refund of TED will be given. This intention is given effect by the
second entry in column (a) of para 8.4 read with corresponding
benefits spelt-out in column (c) which states that entitlement in
terms of para 8.3 to refund is permissible. The eligibility for refund,
therefore, would be in terms of these provisions and the unit has to
apply for such refund under para 8.5.
W.P.(C)5160/2013 Page 6
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
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
W.P.(C)5160/2013 Page 7
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.
10. In view of the above discussion, the impugned orders are
hereby quashed. The respondents are hereby directed to process and
pass appropriate orders in accordance with the 2009 policy in respect
of the petitioner's refund claims made through its applications dated
29.08.2012 and 16.11.2012 within three months from today. The writ
petition is allowed in the above terms. No costs.
S. RAVINDRA BHAT
(JUDGE)
R.V. EASWAR
(JUDGE)
FEBRUARY 11, 2014
W.P.(C)5160/2013 Page 8
