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2016 (4) TMI 185 - MADRAS HIGH COURT

2016 (4) TMI 185 - MADRAS HIGH COURT - 2016 (340) E.L.T. 668 (Mad.) , [2016] 92 VST 513 (Mad) - Rejection of refund claim - Reimbursement of Central sales Tax - Inter-state purchase made by an EOU from another EOU - Manufacture and export of injectable drugs and infusion technologies - Held that:- when the policy provides for reimbursement under paragraph 6.11, the said objective was prevented or diluted by the Appendix. The Appendix is meant for effectuating the rights contained in the policy a .....

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making an amendment in the procedure. The petitioner can be prevented only if the policy is amended prohibiting refund of tax for the purchases made from an 100% EOU. The procedure was to be prescribed by an authority in implementing the policy and must be in consonance with the policy. If the procedural norms are in conflict with the policy, then the policy will prevail and the procedural norms to the extent they are in conflict with the policy, are liable to be held to be bad in law. Since the .....

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orarified Mandamus to call for the records relating to the communication dated 28.04.2014 to the first respondent, pursuant to the communication daed 11.04.2014 of the third respondent and quash the same and direct the first respondent to grant refund. In W.P.No.26004 of 2014, the petitioner has sought for issuance of a Writ of Certiorari to call for the records relating to the communciation dated 11.04.2014 of the first respodnent and to quash the same. 2. Since the issue involved in both these .....

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registered with the Development Commissioner, Madras Export Processing Zone (MEPZ), Tambaram, Chennai-45, the third respondent herein, as a 100% Export Oriented Unit to manufacture and export of injectable drugs and infusion technologies formed in the year 2009 and is a subsidiary of Hospira Inc, Lake Forest, Illinois, U.S.A. According to the petitioiner, Hospira group is one of the world's largest producer of generic injectable pharmaceuticals, manufacturing generic acute-care and oncology .....

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after execution of Letter of Undertaking (LUT) to procure duty free capital goods, raw materials, consumables etc., The petitioner is also duly registered with the Central Excise Department and are issued with Private Bonded Warehouse Licence and In-Bond Manufacture permission in terms of Secs.58 and 65 of the Customs Act, 1962 respectively. The petitioner is importing from time to time, customs duty free capital goods, raw materials and consumables in terms of exemption Notification No.52/2003 .....

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tional Duty (SAD) and Education Cess, which are however not collected when imported by 100% EOU. When the raw materials are imported, in terms of Customs Notification dated 31.03.2003 the petitioner Company, being an 100% EOU was allowed to import duty free on the strength of the Procurement Certifcate (PC) issued by the jurisdictional Central Excise Authorities to the customs authorities who allowed such clearances at the Port of import. Similarly, the raw materials procured indigenously, from .....

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nistry, notified by the Mnistry of Finance, New Delhi. The customs/central excise duties are exempted by virtue of exemption notifications issued by Government of India, Ministry of Finance, New Delhi for imported as well as indigenous raw materials/capital goods. The imported goods are not subject to sales tax or Value Added Tax (VAT) or Central Sales Tax (CST) in terms of the provisions contained in CST Act 1956. However, the taxes on sale of goods imposed by States, is not exempted under vari .....

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place during the course of inter-state sale there is no exemption available under CST Act, 1956. The supplier of raw material therefore charge CST at concessionial rate of 2% on the strength of Form-C issued by the petitioner. The said CST is not cenvatable or can be availed as input tax credit, and therefore is a cost to petitioner as well as similar buyers. Taking this cost of CST which is not exempt for EOUs a special provision has been brought in the Foreign Trade Policy to the effect that C .....

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icals & Pharmaceutials Limited, situated in Aurangabad, Maharashtra, who is supplying the goods by charging CST 2% against Form-C for a long time. According to the petitioner, in terms of Para 6.11 of Foreign Trade Policy read with provisions contained in the Hand Book of Procedures (HBP), the petiitoner has been filing periodical refund claims every quarter for refund of CST paid on purchase made from the said 100% EOU. The quarterly claims are to be filed with the Development Commissioner, .....

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, filed by the petitioner, they were informed orally that the claims were not released on the ground that the procurements were made from another 100% EOU by the petitioner company and the objection is raised as to the eligibility of the same under Foreign Trade Policy which only allows reimbursement for procuremetns from a Company in Domestic Tariff Area. The petitioner informed the third respondent that the sanction of their earlier claims were also procurements from 100% EOU and the sanction .....

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by periodically communicating to the respondents. The petitioner reeived a communication dated 28.04.2014 from the Assistant Development Commissioner, MEPZ, Chennai, wherein, it was informed that the third respondent was not in a position to consider their request for reimbursement of CST claims for the inputs procured from another EOU, M/s Orchid Chemicals & Pharmaceuticals limited, Aurangabad, for the period from January 2012 to September 2013. Further, the petitioner was informed that the .....

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) suffered while procuring inputs from another EOU and the same was questionable as the Hand Book of Procedure Vol-I had allowed Central Sales Tax (CST) reimbursement for only supplies from Domestic Tariff Area (DTA). The Ministry of Commerce by letter dated 11.4.2014 has suggested to Director General of Foreign Trade (DGFT) to consider a suitable amendment in the Foreign Trade Policy (FTP) as deemed fit. According to the respondents, paragraphs 6.11 and para 9.21 of the Foreign Trade Policy rea .....

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and Appendix 14.I-I is an application form providing for particulars, as required by the second respondent for granting reimbursement of CST. Further, the learned Senior Counsel contended that paragraph 6.11 of the Policy provides for benefit basis goods manufactured in "India" and there is no restriction or qualification as provided for exemption from Central Excise Duty under Sub-clause (ii) of sub para (c) of Para 6.11 of the Policy. Therefore, as long as the goods are manufactured .....

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he purchases made from units in DTA. 14. Further, the learned Senior Counsel submtited that the Appendix 14.1I-I is solely a procedural provision notified in exercise of delegted legislative powers by the second respondent and the same is meant for effectuating the rights contained in the Policy and cannot be a handle for narrowing or frustrating the objective and operation of the substantive right granted to the petitioner. Further, the learned Senior Counsel submitted that the Foreign Trade Po .....

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r vs National Federation of the Blind and others, wherein the Apex Court has held as follows: 45) The heading of a Section or marginal note may be relied upon to clear any doubt or ambiguity in the interpretation of the provision and to discern the legislative intent. However, when the Section is clear and unambiguous, there is no need to traverse beyond those words, hence, the headings or marginal notes cannot control the meaning of the body of the section. Therefore, the contention of Responde .....

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ss or category, there must be a rational basis for discriminating between one commodity and another for the purpose of imposing tax. It is commonly known that considerations of economic policy constitute a basis for levying different rates of sales tax. For instance, the object may be to encourage a certain trade or industry in the context of the State policy for economic growth, and a lower rate would be considered justified in the case of such a commodity. There may be several such considerati .....

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f Central Excise, wherein the Apex Court has held as follows: 23. Substantive law refers to a body of rules that creates, defines and regulates rights and liabilities. Right conferred on a party to prefer an appeal against an order is a substantive right conferred by a statute which remains unaffected by subsequent changes in law, unless modified expressly or by necessary implication. Procedural law establishes a mechanism for determining those rights and liabilities and a machinery for enforcin .....

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period of limitation. Procedural law is retrospective meaning thereby that it will apply even to acts or transactions under the repealed Act. 25. Law on the subject has also been elaborately dealt with by this Court in various decisions and reference may be made to a few of those decisions. This Court in Garikapati Veeraya v. N. Subbiah Choudhry [AIR 1957 SC 540] , New India Insurance Co. Ltd. v. Shanti Misra [(1975) 2 SCC 840], Hitendra Vishnu Thakur v. State of Maharashtra [(1994) 4 SCC 602 : .....

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emedial is substantive in nature. 26. Therefore, unless the language used plainly manifests in express terms or by necessary implication a contrary intention a statute divesting vested rights is to be construed as prospective, a statute merely procedural is to be construed as retrospective and a statute which while procedural in its character, affects vested rights adversely is to be construed as prospective. (iv) 1986 (25) ELT 867 (SC) (Commissioner of Sales Tax, U.P vs Auriaya Chambe of Commer .....

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must set to work on the constructive task of finding the intention of Parliament.... and then he must supplement the written words so as/to give 'force and life' to the intention of legislature .... A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should .....

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sible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticized. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsman have not provided for this or that, or have been guilty of some or other ambiguity. It wou .....

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nd then he must supplement the writter word so as to give force and life' to the intention of the legislature. That was clearly laid down by the resolution of the judges in Heydon's case, and it is the safest guide today. Good practical advice on the subject was given about the same time by Plowden. . . . . . Put into homely metaphor it is this: A judge should ask himself the question: If the makers of the Act had themselves come across this ruck in the texture of it, how would they have .....

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this sub-section is to be liberally construed so as to give effect to the governing principles embodied in the legislation (Winchester Court Ld v Miller); and I think we should do the same. Whenever a statute comes up for consideration it must be remembered *499 that it is not within human powers to fresee the manifold sets of facts which may arise, and even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathemati .....

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In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the langug of the statute, but also from a consideration of the social conditions which gave rise to it and of the mischief which it was passed to remedy, and then he must supplement the written word sc as to give " force and life" to the intention of the legislat .....

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er the material of which it is woven, but he can and should iron out the creases". (viii) 2000 (3) SCC 40 (Kunj Behai Lal Butail vs State of H.P, whrein the Apex Court has held as follows: "15. We are also of the opinion that a delegated power to legislate by making rules 'for carrying out the purposes of the Act' is a general delegation without laying down any guidelines; it cannot be so exercised as to bring into existence substantive rights or obligations or disabilities not .....

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instant case, since the impugned circulars and the public notice issued by DGFT are in conflict with the policy, the same are liable to be quashed and set aside. 16. Countering the submissions made by the learned Senior Counsel for the petitioner, Mr.V.P.Sengottuvel, learned Standing Counsel appearing for the respondents, submitted that paragraphs 6.11 and 9.21 would clearly establish that the petitioner is not entitled to claim refund of CST. Further, the learned Standing Counsel submitted that .....

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judgments: (i) 2004 (11) SCC 798 (Commissioner of Central Excise, Chandigarh-I vs Mahaan Dairies), wherein the Apex Court has held as follows: 8. It is settled law that in order to claim benefit of a Notification a party must strictly comply with the terms of the Notification. If on wordings of the Notification the benefit is not available then by stretching the words of the Notification or by adding words to the Notification benefit cannot be conferred. The Tribunal has based its decision on a .....

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cted to provide for development and regulation of Foreign Trade by facilitating imports into, and augmenting exports from India. Under Section 3, the Central Government is empowered by Order published in the Official Gazette to make provision for the development and regulation of foreign trade. Under sub-section (2) of Section 3 the Central Government may by Order published in the Official Gazette prohibit, restrict or otherwise regulate import/export of goods subject to such exceptions as it ma .....

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2004-09) DGFT is empowered to interpret the Policy. If any doubt or question arises in respect of interpretation of any provision in FTP or in the matter of classification of any item in the ITC (HS) or in the Handbook, the said question or doubt shall be referred to the DGFT, whose decision thereon shall be final and binding. (iii) 2011 (1) SCC 640 (Bajaj Hindustan Limited vs Sir Shadi Lal Enterprises Limited and another), wherein, the Apex Court has held as follows: 21. It is settled law that .....

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hift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committed in the execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se be interfered with by the court. 93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Co .....

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upon the unchartered ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the executive and legislative authorities as the case may be. 18. On a careful consideratioin of the materials available on record, the submissions made by the learned counsel on either side and considering the judgments relied upon by the learned counsel on either side, it could be seen .....

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ort Oriented Units. It would be useful to extract paragraph-6.11 of the Foreign Trade Policy 2009-2014. 6.11 Entitlement for supplies from the DTA (a) Supplies from DTA to EOU/EHTP/STP/BTP from the DTA units will be regarded as " deemed exports" and DTA supplier shall be eligible for relevant entitlements under chapter 8 of FTP, besides discharge of export obligation, if any, on the supplier. Notwithstanding the above, EOU/EHTP/STP/BTP units shall, on production of a sutiable disclaime .....

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0 days of receipt of complete application (as in paragraph 9.10.1 of HBP v1) (ii) Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India. (iii) ... (iv).... 19. Under paragraph 2.4 of the Policy, the Directorate General of Foreign Trade (DGFT) may, specify the procedure to be followed by an exporter or importer or by any licensing/regional authority or by any other authority for purposes of implementing provisions of FIDR Act, the Rules and the or .....

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on supplies made to Export Oriented Units (EOUs) and units in Electronic Hardware Technology Par (EHTP) and Software Technology Park (STP). Note: Please see para 6.11(c)(i) of the Chapter 6 of Foreign Trade Policy. 1. The procedure given hereunder shall be applicable for reimbursement of Central Sales, 2. The Export Oriented Units (EOUs) and units in Electronic Hardware Technology park (EHTP) and Software Technology Park (STP) will be entitled to full reimbursement of Central Sales Tax (CT) pai .....

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from Domestic Tariff Area. 22. Insofar as Central Excise Duty is concerned, exemption is available if the goods are manufactured in India and if the goods are procured from DTA, whereas for reimbursement of CST, the only requirement is that the goods must be manufactured in India. There is no requirement of a specific place of procurement, such as DTA. 23. In Paragraph 9.21 DTA has been defined as " area within India, which is outside SEZs and EOU/EHTP/STP/BTP". Similarly, paragraph 9. .....

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5. The objective of the Hand Book as per paragraph 1.2 is to implement provisions of FT (D&R) Act, Rules and Orders made thereunder and FTP (2009-14) by laying down simple, transparant and EDI compatible procedures, which are easy to comply with and administer, for effacious management of foreign trade. Therefore, as per paragraph 1.2 of the Hand Book, the Handbook and the Appendix are procedural instruments, required and notified to operationalise the substantive rights contained in the pol .....

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or effecting this right, however, is restricted only to the purchases made from units in DTA. 27. It is a settled position that the procedure formulated under any Policy is ony to operationalise the right and not to prevent the same. If a statute is workable even without framing of the rules, the same has to be given effect to When the petitioner had stated that in respect of the purchases made from EOUs was earlier allowed by the respondents, the same would establish that the respondents had fo .....

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ve provision has remained identical and unchanged as was originally provided in paragraph 6.11 of the 2009-2014 Policy. In the case of any amendment made in 2015-2020 Foreign Trade Policy, with regard to paragraph 6.11 of 2009-2014 policy, in that case, the respondents can take a stand that the Appendix 14-I-I and 6-H are in consonance with the terms of the policy. 30. On a perusal of both the policies i.e., 2009-2014 and 2015-2020, it is clear that the authorities have not made any change in th .....

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ix 6-H, it is clear that CST paid on the purchases made by an EOU from another EOU qualifies for reimbursement in terms of paragraph 6.11(c)(ii) of the new policy. Appendix 6-H makes it clear that the purchases made by an EOU from another EOU qualifies for reimbursement, which is also the case of the petitioner. 32. Though there is absolutely no dispute with regard to the ratios laid down in the judgments, relied upon by the learned counsel for the respondents, the same are not applicable to the .....

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added or stretched. 33. In the present case, when the policy provides for reimbursement under paragraph 6.11, the said objective was prevented or diluted by the Appendix. As already stated, the Appendix is meant for effectuating the rights contained in the policy and not to frustrate the operation of the substantive right. The Appendix should be meant only for reaching the objective and definitely should not be meant for defeating a person from getting the fruits of the substantive right provide .....

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