FTP - Once there was clear stipulation in policy itself, then, all that circular does is to clarify this obvious position - If there was no obligation to pay duty, then, there is no question of claiming refund - Petitions dismissed: High Court
By TIOL News Service
MUMBAI, AUG 17, 2016: THE petitioner (100% EOU) has been receiving supplies of intermediate products from its sister concern in the DTA. It is claimed that the said unit has been supplying these goods, on payment of CENVAT duty under claim for rebate, to the petitioners EOU unit. The petitioners' case is that these goods are used in the manufacture of goods cleared for export.
In terms of the FTP, supply of goods will be eligible for refund of terminal excise duty (TED) provided recipient of goods does not avail cenvat credit of duty paid by the DTA unit under the provisions of the CCR, 2004. The petitioners DTA unit did not claim benefit of TED refund and to this effect the DTA unit has issued its disclaimer certificate to enable the petitioners EOU to claim the refund of the TED paid on goods cleared by the DTA unit.
These applications were granted from time to time, except the refund applications involving the period commencing from January, 2012 to December, 2012. The refunds were rejected on the ground that there is a policy circular 16/(RE-2012)/2009-14, dated 15th March, 2013, by which the Director General of Foreign Trade purported to clarify, inter alia, that no refund of TED should be provided by the Development Commissioners / DGFT as supplies are ab-initio exempted from payment of excise duty. It is held that the policy circular issued by DGFT is a mere clarification which is effective from the date of issuance of the FTP and not from the date of issuance of the circular.
Aggrieved by the rejection, the present Writ Petitions are filed.
The High Court after extracting the provisions of the FTP distinguished the Delhi High Court decision in Kandoi Metal Powders Mfg. Co. Pvt. Ltd - 2014-TIOL-230-HC-DEL-EXIM and observed thus -
++ The respondents have rightly taken note of the provisions of the FTP and Handbook procedure Volume I 2009-2014 and the clarification issued by the DGFT. It is common ground that the interpretation and implementation of the policy by the DGFT is a permissible exercise and does not run counter to the scheme of the FTDR Act. After para 6.2 of the FTP is reproduced and particularly clause (b) thereof so also para 6.11 of the FTP which states that the EOU shall be entitled to exemption from payment of central excise duty on goods procured from DTA on goods manufactured in India, what the respondents have held is that the policy circular is merely clarificatory.
++ We have no hesitation in accepting this contention for the simple reason that para 6.2(b) and 6.11(c)(ii) of the FTP states that no refund of TED should be provided by Regional authorities of the DGFT or the office of the Development Commissioners because such supplies are ab initio exempted from payment of excise duty. The harmonious reading of this policy and particularly the paragraphs referred to above enabled the respondents to arrive at the conclusion that the refund was not admissible.
++ Once there was a clear stipulation in the policy itself, then, all that the circular does is to clarify this obvious position. If there was no obligation to pay duty, then, there is no question of claiming a refund in the manner done. If this is what has been held and appears to be the essential finding, then, that is not in any manner contrary to the mandate of the provisions and particularly of section 5 of the FTDR Act.
++ This is not a case where anything is being stated and for the first time so as to term it as an amendment to the policy and, therefore, would apply prospectively. Insofar as the subject issue is concerned, all that the respondents have done is to clarify that para 8.3(c) and para 6.2(b) and 6.11(c)(ii) of the FTP read harmoniously and together imply that no refund on supplies under para 8.3 is admissible. When there is an exemption, then, this refund claim was rightly disallowed.
++ Though in the past such claims have been granted does not mean that the practice or the past orders should govern the issue necessarily. When the petitioners themselves were aware of a policy circular and sought to urge that it would not be governing the controversy and for the period for which refund is claimed, then, it is clear that they were required to overcome the said stipulations and the circular itself.
Concluding that the refund applications were properly and correctly disallowed, the Writ Petitions were dismissed.
(See 2016-TIOL-1753-HC-MUM-CUS)
