TMI Blog2017 (7) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... India. Thus the policy wherever intended to limit the benefit of an EOU on procurement made from a DTA unit, it was so specifically provided. When therefore, subclause( i) of clause (c) of para 6.11 did not make any such reference to the procurement from a DTA unit but used the expression “goods manufactured in India”, it must be understood that this clause would govern the goods purchased by EOU unit from any unit as long as the condition of goods being manufactured in India is satisfied. In plain terms, therefore, the Foreign Trade Policy 20042-009 did not limit the benefit of CST reimbursement to a EOU on purchases made only from a DTA unit. We have noticed that the Director General of Foreign Trade in terms of section 6 of the Act has certain delegated powers which would include powers to frame such procedures. Subsection( 3) of section 6 however, excludes the delegation of such powers to those contained under sections 3, 5, 15, 16 and 19 of the Act. In exercise of powers under section 6, the Director General of Foreign Trade could not have framed or altered the Foreign Trade Policy. On the goods manufactured in an EOU, excise duty would be leviable, only when such goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following background : 2. The petitioner is a company registered under the Companies Act and is engaged in manufacturing various chemicals for export. The manufacturing unit of the petitioner is situated in Kandla Special Economic Zone and is a 100% Export Oriented Unit ( EOU for short) having necessary license. 3. For its manufacturing activity, the petitioner would purchase raw materials manufactured in India. Such manufacturers would be situated either in Domestic Tariff Area ( DTA for short) or non Domestic Tariff Area such as EOU. As per the Foreign Trade Policy 2004-2009, during the period between between 2006 and 2008, the petitioner claimed Central Sales Tax reimbursement on such purchases made including from the manufacturing units situated in EOU. The respondent authorities also granted such claims and reimbursed the Central Sales Tax component on the petitioner's purchases made during the said period between 2006 and 2008, total of which comes to ₹ 55.75 lacs (rounded off). For many years thereafter, there was no further development in this respect. However, on 26/30.9.2013, the Accounts officer of KASEZ wrote to the petitioner and conveyed as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Appendix14II does not provide for reimbursement of CST paid on goods supplied from one EOU to another EOU. In view of the above, it is requested to clarify if the prescribed procedure under Appendix14II was strictly followed in allowing reimbursement of CST in some cases, by your office and to take suitable action for recovery of the said reimbursement, if required. 8. It may be noted that in this letter reference is made to Appendix 14II which lays down the procedure for reimbursement of Central Sales Tax on supplies made to Export Oriented Units and units in Electronic Hardware Technology Park (EHTP) and Software Technology Park (STP). Para.2 of this procedure provides interalia that EOUs and units in Electronic Hardware Technology Park and Software Technology Park will be entitled to full reimbursement of CST paid by them on purchases made from the DTA for production of goods and services as per EOU scheme, subject to fulfillment of terms and conditions as provided therein. According to the petitioner, this restriction provided in the Appendix contained procedure for reimbursement of CST. Limiting the benefit of reimbursement on sales made from DTA area, to the exclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of such policy pertained to EOUS, EHTPS STPs and BioTechnology Parks (BTPs). Para 6.5 would require such an eligible unit to have positive Net Foreign Exchange Earnings to be calculated cumulatively in block of five years, starting from commencement of production. As per para. 6.9, certain kinds of sales made by an EOU to a DTA will count for fulfillment of positive Net Foreign Earnings. Para. 6.11 carries the title Entitlement for supplies from the DTA and reads as under : 6.11 Entitlement for supplies from the DTA Supplies from DTA to EOU/EHTP/STP/BTP units will be regarded as deemed exports and the 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 suitable disclaimer from the DTA supplier, be eligible for obtaining entitlements specified in chapter 8 of FTP. For claiming deemed export duty drawback, they shall get Brand Rates fixed by the Development Commissioner wherever All Industry Rates of Drawback are not available. ( b) Suppliers of precious and semiprecious stones, synthetic s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be entitled to full reimbursement of Central Sales Tax (CST) paid by them on purchases made from the Domestic Tariff Area (DTA), or Export Oriented Unit (EOU) or Special Economic Zone (SEZ) or EHTP or STP or BTP, for production of goods and services as per EOU Scheme on the following terms and conditions....... 14. Thus in terms of the above procedure EOU would be entitled to CST reimbursement on purchases made from another EOU as well. 15. In context of such provisions, counsel for the petitioner submitted that the policy of the Government to deny the benefits of CST reimbursement to an EOU such as the present petitioner on its purchases from another EOU is wholly illegal and impermissible. He would contend that as per the Foreign Trade Policy 2004-2009 prevailing at the relevant time, there was no such restriction and permitted CST reimbursement on any purchases of goods manufactured in India. The expression goods manufactured in India would include manufacturing units situated in EOU also. The Procedure of Hand Book could not have limited this benefit by qualifying that such reimbursement would be available only when the purchases are made from a unit situated in DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... starts with the expression In addition, EOU/EHTP/STP/BTP units shall be entitled to the following . Subcause (i) of clause(c) provides for reimbursement of Central Sales Tax (CST) on goods manufactured in India. Subclause( ii) provides for exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India. 18. A minute scrutiny of these provisions contained in para. 6.11 would reveal that the language used in clauses (a), (b) and (c), in general, was not made limited to the supplies from a DTA unit. As noted, clauses(a) and (b) both confined their application to the supplies made by the DTA unit. Clause(c) itself contained two situations. In subclause( i) what was envisaged was reimbursement of CST on goods manufactured in India. Subclause (ii) envisaged exemption from payment of CST on goods purchased from DTA on goods manufactured in India. Thus the policy wherever intended to limit the benefit of an EOU on procurement made from a DTA unit, it was so specifically provided. When therefore, subclause( i) of clause (c) of para 6.11 did not make any such reference to the procurement from a DTA unit but used the expression goods manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the FTDR Act to legislate either directly or by way of incorporation by reference. It is now a settled law that the separation of power between the legislature and executive forms part of the basic structure of the Constitution of India and any attempts by the executives to legislate without appropriate authority under the law would amount to violation of the basic structure of the Constitution of India. The power to legislate is incorporated under Article 246 of the Constitution of India and such power has been conferred on the Parliament and the State Legislature. Moreover, the power to frame Duty Draw Back Rules under the FTDR Act can be legislated by the Central Government only in exercise of power conferred under Section 19 in the manner prescribed under the FTDR Act and the same cannot be delegated to the Respondent no. 2 as expressly prohibited by Section 6(3) of the above Act. 29. We, thus, find that any attempt by the executives to legislate without the authority of law should be branded as a colourable device and therefore, the same is in violation of Article 246 of the Constitution of India. If we accept the contention of Mr Raval that the Respondent No.2 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y when the goods are manufactured in a DTA area, it may be stated that same are manufactured in India and by a deeming fiction any manufacturing activity taking place in an EOU should be excluded from such expression. The respondents would draw our attention to subsection( 1) of section 3 of the Central Excise Act, 1944, which besides others, envisages levy of excise duty on manufacture by a hundred per cent export unit undertaking which goods are brought to any other place in India. In other words, on the goods manufactured in an EOU, excise duty would be leviable, only when such goods are brought to any other place in India. We would have certainly considered this angle further, but for the fact that in the later year, the Government of India itself has recognised the benefit of CST reimbursement on the purchases made by the EOU from another EOU. It was for this purpose that we had referred to and noted relevant portion of the Foreign Trade Policy 2015-2020 and the procedure for claiming the CST reimbursement. We may recall that insofar as base policy is concerned for grant of such CST reimbursement, no change has been brought about in the Foreign Trade Policy 2015-2020 as compar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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