Summary
For the historical Foreign Trade Policy governing these supplies, the Court distinguished an EOU’s exemption from terminal excise duty from a DTA supplier’s conditional refund entitlement. An EOU could claim the supplier’s benefit only with a suitable disclaimer and compliance with the policy. The March 2013 circular could not retrospectively withdraw suppliers’ existing rights; the April 2013 policy amendment operated prospectively. FTP authorities had to process the claims: cash payments could yield cash refunds with prescribed delayed-refund interest, while credit-funded payments required corresponding CENVAT credit reversal. Both sets of appeals partly succeeded.
Issues
- Whether EOUs and DTA suppliers had the same terminal excise duty refund entitlement under the applicable FTP.
- Whether the 2013 circular could withdraw existing supplier entitlements.
- Which authority and refund mode applied to eligible claims.
Provisions considered
- Paragraphs 6.2(b), 6.11(a) and 6.11(c)(ii), Foreign Trade Policy, 2009-2014EOUs were to procure goods duty-free, but could obtain a supplier’s Chapter 8 benefit with its disclaimer and compliance with conditions. (¶¶ 15-19, 25-29, 40, 42)
- Paragraphs 8.2(b), 8.3(c), 8.4.2, 8.5 and 8.5.1, as applicable to the supplies, Foreign Trade Policy, 2009-2014DTA supplies to EOUs qualified for conditional TED refunds; payment mode controlled refund mode and delayed cash refunds attracted 6% simple interest. (¶¶ 20-25, 30-31, 39-45)
- Section 5, Foreign Trade (Development and Regulation) Act, 1992The FTP could be amended through the prescribed governmental notification; a policy circular could not retrospectively defeat existing DTA-supplier rights. (¶ 26)
Held
- The applicable FTP constituted an independent export-promotion dispensation. Claims under it were not confined by the Central Excise Act refund regime, and an unsuccessful excise refund application did not extinguish an otherwise available FTP entitlement. (¶¶ 12-14, 41, 45)
- EOUs had ab initio exemption and were obliged to procure the specified goods without duty. They had no independent Chapter 8 refund entitlement, but could claim the DTA supplier’s benefit with a suitable disclaimer, compliance with the requisite conditions and no subsequent passing back of that benefit to the supplier. (¶¶ 18-19, 25, 28-29, 40, 42-43)
- DTA suppliers had a conditional refund entitlement for the relevant deemed exports. The FTP conditions, including actual use for export production and absence of disqualifying CENVAT credit or rebate, required verification; refund was not automatic merely on the description of a supply as deemed export. (¶¶ 21-25, 31, 44)
- The 15 March 2013 circular introduced a new restriction for DTA suppliers rather than merely clarifying their existing position. It could not take away accrued rights. The 18 April 2013 notification changed the policy prospectively; its validity was not decided. (¶ 26)
- Authorities implementing the FTP were responsible for processing the claims. If TED was paid through CENVAT credit, relief required corresponding restoration to the credit account rather than cash encashment. Cash payment could support a cash refund with 6% simple interest for delay under paragraph 8.5.1. (¶¶ 27, 29-31, 39-45)
- The EOU appeals against the Bombay judgment and the Department’s appeals concerning DTA suppliers each partly succeeded subject to the Court’s differentiated entitlements, conditions and refund modalities. (¶ 47)
Result
Both EOU appeals and Department appeals partly allowed on the stated FTP entitlements, conditions and refund modalities; no order as to costs.