Refund of TED is not available in case supplies of goods to EOU under circular no. 16(RE-2012/2009-14) dated 15.03.2013.

PJ/CASE LAW/2014-15/2469

Case:SANDOZ PVT. LTD. VERSUS UNION OF INDIA AND ORS

Citation:2014-TIOL-1779-HC-MUM-CX

Brief Facts:The writ petition filed under section 226 of the Constitution of India seeks the following reliefs:-
“(a) this Hon’ble Court be pleased to declare the said Policy Circular No. 16(RE-2012/2009-14) dated 15.03.2013 issued by the Director of Foreign Trade (Respondent No. 2) as ultra-viruses, null and void;
(b) this Hon’ble Court be pleased to issue a writ of Certiorari or writ in nature of Certiorari under Article 226 of the Constitution of India, calling for the records pertaining to the impugned Policy Circular No. 16(RE-2012/2009-14) dated 15.3.2013 issued by the Director of Foreign Trade (Respondent No.2) and communication Nos. (i) SEEPZ SEZ/EOU/TED-184/J-S, 2012/3937 dated April 1, 2013 (ii) SEEPZ SEZ/EOU/TED-184/J-S, 2012/3937 dated April 1, 2013 issued by Respondent No.4 after going into the validity and legality thereof to quash and set aside the same:
(c) this Hon’ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order or direction ordering and directing the Respondents by themselves, their subordinate servants and agents (I) to withdraw and/or cancel the impugned policy Circular No.16 (RE 2012/2009-14) dated 15.3.2013 issued by the Director of Foreign Trade (Respondent No.2) and communication Nos.(i) SEEPZ SEZ/EOU/TED-184/J-S, 2012/3937 dated April 1, 2013, (ii) SEEPZ SEZ/EOU/TED- 55/J-M, 2012/3978 dated April 1, 2013 issued by Respondent No.4 and (II) to forthwith sanction and grant the Petitioner's Refund Claims."
The reliefs are claimed in the backdrop of the claim of refund by the petitioner. The petitioner claims to be a 100% Export Oriented Unit (EOU) engaged, inter alia, in the manufacture of goods falling under Chapter 30 of the Schedule to the Central Excise Tariff Act, 1985 and they have a factory at Navi Mumbai. The petitioner states that they approached the authorities by referring to the foreign trade policy No.16 (RE-2012/2009-14) because of the activities of supplying goods. The unit of the petitioners uses the goods which have been supplied by another unit of the petitioner called DTA unit which has been supplying goods on payment of Cenvat duty under claim for rebate to the petitioner's export oriented unit. The export was of the final product by the petitioner's exported oriented unit. Reliance was placed on the policy which contained the concept of deemed exports. Deemed exports are eligible for any / all the benefits in respect of manufacture and supply of goods subject to the terms and conditions appearing in the Handbook of Procedure, Volume 1. Reliance is placed on 8.1, 8.3 and 8.5 of the Foreign Trade Policy where-under the supply of goods will be eligible for refund of terminal excise duty provided recipient of goods does not avail Cenvat credit / rebate on such goods. Refund application in that behalf has to be disposed off within 30 days from the receipt of complete application. The petitioner clarified that they did not claim or avail Cenvat credit in respect of the duty paid by the DTA unit. Meaning thereby, they did not invoke the provisions of Cenvat Credit Rules, 2004. The petitioner's DTA unit did not claim the TED refund and a certificate of disclaimer was relied upon. Therefore, the petitioner's export oriented unit regularly filed the application with respondent No.3 claiming refund of terminal excise duty paid by the petitioner's DTA unit on the goods supplied to the petitioner's export oriented unit. These applications were granted from time to time. However, there are two applications, details of which are in chart in para No.11 of the petition at serial Nos.1 & 2. They have been stated to be rejected by the authorities not by a speaking order and after hearing the petitioner but merely by two communications, copies of which are annexed to this writ petition at annexures E-1 and E-2 at page Nos.32 & 33. They read as under:-

"SEEPZ SEZ/EOU/TED-184/J-S, 2012//2012-13/3937 April 1, 2013,
M/s. Sandoz Pvt. Ltd.
MIDC Plot No.8-A1/1,8-A/2, 8-B,
TTC Industrial Area, Kalwe Block.
Village Dighe, Navi Mumbai-400708.
Sub : Application for refund of TED claim for the period July- Sept., 2012- reg.
Sirs,

Kindly refer to your application dated 29.10.2012 and 22.11.2012 on the subject cited above.
In this connection we write to inform you that Director General of Foreign trade Ministry of Commerce & Industry has issued Policy Circular No.16 (RE-2012/2009-14) dated 15.3.2013 wherein it is stated that "Prudent financial management an 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, if, 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". A copy of Policy Circular is also enclosed herewith. In view of the above your request for refund of TED claim for the period November-2011 is hereby rejected.”

SEEPZ SEZ/EOU/TED-55/J-M, 2012//2011-12/3978

April 1, 2013,

MIDC Plot No.8-A1/1,8-A/2, 8-B
TTC Industrial Area, Kalwe Block
Village Dighe, Navi Mumbai-400708.

Sub : Application for refund of TED claim for the period Jan- Mar., 2012- reg.
Sirs,
Kindly refer to your application dated 20.04.2012, 22.11.2012 and 20.12.2012 on the subject cited above.
In this connection we write to inform you that Director General of Foreign trade, Ministry of Commerce & Industry has issued Policy Circular No.16 (RE-2012/2009-14) dated 15.3.2013 wherein it is stated that "Prudent financial management an 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, if, 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". A copy of Policy Circular is also enclosed herewith
In view of the above your request for refund of TED claim for the period Jan-Mar., 2012 is hereby rejected.

Reasoning of Judgment:High Court considered submission from both parties and have perused these communications. The argument of the petitioner is that no reliance could have been placed on the policy or any amendment to the existing policy which came into effect after the petitioner sought the necessary reliefs. The respondents, therefore, could not have addressed such communications in disposing of the refund application by relying on the policy circular dated 15th March, 2013.

Court enquired from Mr.Singh as to why the refund application which is stated to have invoked the policy has not been disposed of by passing a speaking order and in compliance with the principles of nature justice, Mr.Singh sought time to take instructions.

The matter was placed today as per the request of the parties. What we have noted is that a claim for refund has been decided on earlier occasions not by such cryptic communications but by passing proper and speaking order. It is in these circumstances that High Court are of the opinion that a communication of the nature relied upon cannot be termed as an order dealing with and disposing of a refund application.
Minimal request of the petitioner for a personal hearing and a speaking order dealing with all the contentions and objections could have been fulfilled had the respondents complied with the same.
In these circumstances, High Court expected the respondents not to raise any objection in dealing with the refund application as such and passing a speaking order thereon after hearing the petitioner or its representative. High Court are happy that the learned Additional Solicitor General has agreed to our suggestion and on instructions stated before us that a personal hearing would be given to the Petitioner and a speaking order will be passed by the Respondents thereafter. High Court accept these statements as undertakings given to this Court. High Court direct accordingly.
Mr.Shah submits that the respondents should not merely rely upon the policy circular to reject the refund application or by relying on the same alone reject the same.
High Court are of the opinion that the rival contentions can be raised for being dealt with by the appropriate / competent authority. High Court need not consider the same and at this stage. We have no doubt in our mind that once the petitioner is given an opportunity of personal hearing and raising all contentions, then, a speaking order assigning reasons can be passed by the respondents dealing with them. It could not be that a cryptic communication satisfies the requirement of a proper and speaking order being passed. Therefore, it would be open for the petitioner to raise all contentions, including that the policy circular, a copy of which is annexed to the writ petition as annexure-B, should not be relied upon to deny the refund. Court have further no doubt that in the event such a contention is raised by the petitioner, then, the respondents shall deal with the same while passing a speaking order on the Refund Application. Needless, therefore, to clarify that a fresh order which the authorities must pass, shall not only rely on the communications or the contents of annexures E-1 and E-2.
With the above clarification and direction that a fresh order shall be passed as expeditiously as possible and within a period of 8 weeks from the date of receipt of the copy of this order, this writ petition is disposed of. No order as to costs.

Decision: Petition disposed off

Comment: The essence of this case is that no refund shall be granted to petitioner as supplies of goods to EOU are ab initio exempted from payment of excise duty vide Public Circular no. 16/(RE-2012/2009-14) dated 15.03.2013. Accordingly, appeal is disposed off.

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PJ/CASE LAW/2014-15/2469

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