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TMI Blog2019 (8) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, time barred and therefore illegal with consequential relief to petitioner company herein. B. Your Lordships be pleased to hold that CST refunds granted to petitioner company's EOU (1) in respect of inputs procured from other EOUs and (2) in respect of inputs used in production of final products cleared into DTA are in order and in accordance with Exim Policy 2004-09. C. Your Lordships be pleased to hold that Public Notice No.81(RE2008)/20042009 dated 16.09.2008 amending Appendix 141 of Handbook of Procedures is only clarificatory as it only accords with them existing paragraph 6.11 (c) of Exim Policy 20042009. D. Pending hearing and final disposal of this Special Civil Application, ad-interim order staying the operation of the impugned order at Annexure-A with a direction to respondent No.3 Development Commissioner and officers under him not to initiate any recovery proceedings against the petitioner may kindly be granted. E. As exparte ad interim relief in terms of prayer (D) above may kindly be granted; and F. Such other and further or incidental reliefs as may be deemed just and proper in the fats and circumstances of the present case may kindly be granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n should reach this office within 21 days, from the date of issue of this Show Cause Notice failing which the case will be decided exparte on merits without any further reference to them. If they want to be heard in person to explain their case, the proprietor or duly authorized representative of the firm may appear for personal bearing before the Jt. Development Commissioner (Mr. Krishan Kumar) in this office on 7th August,2015 at 1530 hrs. This show cause notice is without prejudice to any other action which may be taken against them under the Foreign Trade (Development & Regulation) Act, 1992 and Rules, cancellation / suspension of IEC and imposition of penalty. Sd/- (Krishan Kumar) Joint Development Commissioner Kandla Special Economic Zone." 5 In response to the above referred show cause notice, the EOU filed its reply dated 19th August 2015 addressed to the Joint Development Commissioner, Kandla Special Economic Zone, Ministry of Commerce and Industries, Kandla, Kutch. In the reply, the EOU invited the attention of the Commissioner to paragraph 6.11 of the Foreign Trade Policy 200409. The attention of the Commissioner was drawn, more particularly, to clause - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Appendix 14-I-I of HBP Vol.I contains the procedure to be followed for reimbursement of the CST on supplies made to EOU. Para2 of the said appendix before Public Notice No.81(RE2008) dated 16.09.08 clearly states that an EOU is entitled to reimbursement to CST paid on only those purchases made from DTA which are used for production on goods meant for export and/or utilised for exports/services. The supplied in the present case pertains to the period before issuance of the said public notice. (iv) Vide Public Notice No. 81 dated 16.9.2008, the word 'meant for 'export' was deleted from 2 of Appendix 14II of HBP Vol. I Which was applicable from the date of issuance of the said public notice. Hence, with the issuance of the said public notice, the reimbursement of CST on supply of goods by EQU into DTA/EOU made available w. e. f. 16.9.2008. (v) It is true that even though provision contained in para 6.11(c)(i) of the Policy permits for DTA sale of goods but it does not ipso facto implies that reimbursement of CST shall also be available on such goods supplied into DTA Public Notice No. 81 (RE2008) dated 16.09.08 had only prospective effect. (vi) It is correct to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance was inadmissible. He would submit that the issue with regard to the goods supplied by EOUs to EOUs is concerned, is no longer res integra in view of the decision of this Court in the case of Asahi Songwan Colors Ltd and Ors vs. Union of India and Ors reported in 2017 (356) ELT 532 (Guj). 9 Mr. Iyer submitted that so far as the second issue with regard to the grant of the CST refund on the DTA clearance is concerned, the authority committed a serious error in placing reliance on the condition in appendix 14 II of the Handbook of Procedures 2004-09 as it existed until 16th September 2008. He would submit that in fact, no such reliance could have been placed by the CRA audit. He submitted that such condition would not override the Foreign Trade Policy, more particularly, the clause 6.I-I which provides for the entitlement for supplies from the DTA. Mr. Iyer invited the attention of this Court to paragraph 6.I-I (c)(i), which provides that the EOU units shall be entitled to the reimbursement of the CST on goods manufactured in India. He submitted that this aspect also has been impliedly taken care of by this Court in the case of Asahi Songwon (supra). 10 In the last, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 6.11(c) (i) of an the Policy permits for DTA sale of goods but it does not ipso facto imply that reimbursement of CST shall also be available on such goods supplied into DTA. Public Notice No.81 (RE2008) dated 16.09.08 had only prospective effect. Vide Public Notice No.81 dated 16.09.2008, the word "meant for export was deleted from para 2 of Appendix 14II of HBP Vol.I which was applicable from the date of issuance of the said public Notice. Hence, with issuance of the said public notice, the reimbursement of CST on supply of goods by EOU into DTA/EOU made available w.e.f. 16.09.2008. Appendix 14II of Hand Book of Procedures clearly states that EOU is entitled to reimbursement of CST paid on only those purchases made from DTA which are used for production of goods actually exported. Para2 of the said appendix before Public Notice No.81(RE2008) dated 16.09.08 clearly states that an EOU is entitled to reimbursement to CST paid on only those purchases made from DTA which are used for production on goods meant for export and/or utilized for exports/services. The supplies in the present case pertains to the period before issuance of the said public notice. EOUs were eligible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made in Ground 14(A), it is stated that the Order-in-Original No.5/1617 passed by the Development Commissioner, KASEZ, Gandhidham was upheld by the DGFT, Appellate Authority is correct and as per provisions of FTP/HBP of the relevant period. The Order-in-Appeal passed by the DGFT is as per the provisions of FTP/HBP of the relevant period. 10 With respect to the submissions made in Ground 14(B) to (G), it is stated that even though provision contained in Para 6.11(c) (I) of the Policy permits for DTA sale of goods but it does not ipso facto imply that reimbursement of CST shall also be available on such goods supplied into DTA. Public Notice No.81 (RE2008) dated 16.09.08 had only prospective effect. Vide Public Notice No.81 dated 16.09.2008, the word "meant for export was deleted from para 2 of Appendix 14II of HBP Vol. I which was applicable from the date of issuance of the said public Notice. Hence, with issuance of the said public notice, the reimbursement of CST on supply of goods by EOU into DTA/EOU made available w.e.f. 16.09.2008. Vide Public Notice No.81 dated 16.09.2008, the word "meant for export" was deleted from para 2 of Appendix 14 II of HBP Vol. I which was ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at CAG review for the period 2007-08 to 2010-11 was done during the period May-June 2012 and demand notices were issued during the period October 2013. The Development Commissioner's office has been in the process of recovery proceedings since October/November 2013 and there are large number of units involved in the audit conducted by the CAG. Since there are large number of units involved, naturally, it will take considerable time/long time to complete recovery proceedings. It may be noted that CAG review was conducted by the Comptroller and Audit Genera1(C&AG) which is supreme audit institution of India for the claims belonging to the period 2007 i.e. after five years. They had completed the Audit and was also fully aware of the time factor. CAG has delayed in conducting CAG review for the period 2007-08 to 2010-11. However, main intention of audit was that inadmissible Government revenue would be recovered. It is also noted that noticee firm has given undertaking and declaration in all the claims, as mentioned in the Appendix14II, that in case excess CST/DBK amount is paid, the same will be refunded after receipt of demand notice from the Development Commissioner. 13 With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, 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. We may refer to the Division Bench judgment of this Court in case of Alstom India Ltd. v. Union of India reported in 2014 (301) E.L.T. 446 (Guj.), in which it was observed as under : "28. We find that the Respondent No.2, namely, DGFT, through Para 8.3.6 of the HOP has incorporated by reference the provisions of Duty Drawback Rules mutatis mutandis to the FTP and HOP. We find substance in the contention of Mr Ghosh that the HOP is nothing but an administrative guideline as would appear from a combined reading of Para 2.4 of the FTP and Section 6 of the FTDR Act. We have already pointed out that Section 3 of the FTDR Act grants power to the Respondent No.1 to make provisions relating to imports and exports and the Respondent No.1 under Section 5 of the FTDR Act can formulate and announce the foreign trade policy. It further appears from Section 6(3) of the FTDR Act that of the powers conferred upon the Respondent No.1 under the FTDR Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Our attention was also drawn to the decision of learned Single Judge of Madras High Court in case of Hospira Health Care India Pvt. Ltd v. Development Commissioner, MEPZ Special Economic Zone & Heous and ors. reported in (2016) 4 MLJ 179, in which similar issue had come up for consideration and it was held that the demand for refund of the reimbursement benefits were in conflict with para. 6.11 of the Foreign Trade Policy. 21 Even otherwise, the Hand Book of Procedures and in particular Appendix14II contained therein nowhere aims to lay down any policy but prescribes the procedure to be followed for reimbursement of CST. It is undoubtedly true that para.2 of this Appendix restricts the CST reimbursement on purchases made by an EOU from a DTA unit. However, this restriction in our opinion would run counter to the terms of FTP itself and ultra vires the powers of the Director General of Foreign Trade. The title of the Appendix itself provides that it is a procedure to be followed for reimbursement of Central Sales Tax. Para.1 further clarifies that the procedure given in the said annexure shall be applicable for reimbursement of CST. There is little doubt therefore, that Appendix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OU." 15 Thus, this Court ruled that the Foreign Trade Policy 20042009 did not limit the benefit of CST reimbursement to an EOU on the purchases made only from a DTA unit. Prima facie, it appears that this decision has been overlooked by the appellate authority. The decision of this Court in Asahi Songwon (supra) is dated 6th July 2017. When the show cause notice was issued, the orderinoriginal was passed, this judgement was not pronounced. When the appeal was being heard, this judgement was already pronounced. As observed by us, prima facie, it appears that the appellate authority has overlooked the position of law, as explained by this Court. We also take notice of the fact that the contention of Mr. Iyer with regard to the delay and recovery after a period of almost eight years is also taken care of by this Court in the case of Asahi Songwon (supra). In the said decision, in para 24, the following has been observed: "There is yet another angle why we would not permit the respondents to make recoveries. As noted, the claim pertained to period between 2006 and 2008. They were made at the relevant time and granted by the respondents without any dispute. Such reimbursements are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on supplies made to EOUs in respect of reimbursement/refunds that have become due on or after 01.04.2007 but which have not been settled within 30 days of its final approval for payment by the Office of Development Commissioner, SEZ. (ii) Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India (iii) Deleted (iv) Reimbursement of Duty paid on fuels procured from domestic oil companies as per Drawback rate notified by the DGFT from time to time. (V) Cenvat Credit on service tax paid." 18 On the other hand, we may also look into the appendix 14 I-I Of the Handbook of Procedures on which reliance is sought to be placed by the respondent : "Condition in appendix 14 II of the Handbook of Procedures 200409 as it existed until 16.09.2008 and relied upon by the CRA audit 2....... ******************** (a) The supplies from DTA to EOU/EHTP/STP unit! Must be utilised by them for production of goods meant for export and/or utilised for export of services and may include raw material, components, consumables, packing materials, capital goods, spares, material handling equipment etc. on which CST has been actually paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Asahi Songwon (supra). 20 At the cost of repetition, we once again reproduce the observations made in para 18 of Asahi Songwon (supra). The same reads as under: "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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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