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TMI Blog2017 (7) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... t) 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 Rs. 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 : "This is to inform you that recent Audit conducted by the CRA, Ahmedabad have pointed out that Central Sales Tax amount as per attached annexure is granted incorrectly. You are hereby therefore, directed to deposit the amount mentioned in annexure by Demand draft in favour of RPAO Mumbai pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery 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 exclusion of EOU, is ultra vires and contrary to the Export Foreign Trade Policy 2004-2009 and in particular, para. 6.11 thereof. 9. Relying on the Appendix 14II and the circular issued by the Government of India dated 11.4.2014, the Development Commissioner passed his orderinoriginal dated 22.8.2016 and demanded refund of the CST re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 stones and processed pearls from DTA to EOU shall be eligible for grant of Replenishment authorisations at rates and for items mentioned in HBP v1. (c) In addition, EOU/EHTP/STP/BTP units shall be entitled to the following: (i) Reimbursement of Central Sales Tax (CST) on goods manufactured in India. Interest on delay in refund of CST would be paid, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 DTA. Counsel further submitted that even otherwise any such interpretation would render the very policy discriminatory. The principal purpose of granting CST reimbursement is to make exports more viable in the international market and not to load the manufacturer with local taxes. That being the position, there would be no distinction between a purchase by EOU from a DTA unit or from an EOU unit, since in either case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal 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 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. 19. If this be the conclusion, the immediate question that would arise is, could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 is authorized to incorporate the duty drawback Rules by reference, it would amount to acceptance of the proposition that the Respondent No.2 is authorized to deal with under the FTDR Act, the similar matters relating to duty and tax refunds as provided under Section 75 of the Customs Act, Section 37 of the Central Excise Act and Section 93A read with Section 94 of the Finance Act, 1994 although not authorized under the FTDR Act. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 compared to the Foreign Trade Policy 2004-2009. Despite this, base policy being the same, the procedure for claiming reimbursement of CST on supplies made to EOU under the current policy now envisages such reimbursement on any sales made to a EOU not only from DTA but also from EOU, SEZ, etc. 23. Once again the contention of the Union of India was that the policy itself does not envisage grant of such reimbursement on procurement from an EOU, the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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