Union Of INDIA & Ors vs. M/S Motherson Sumi Electric Wires

Held

The Court held that the issue was concluded by the Supreme Court's judgment in Sandoz Private Limited. The Court found that the entitlement to exemption and refund of TED flows from the Foreign Trade (Development & Regulation) Act, 1992, and the FTP, which is an independent dispensation from the Central Excise Act, 1944. Therefore, the authority responsible for implementing the FTP should deal with the refund claim. The Court affirmed that EOUs are entitled to procure goods from DTA suppliers without payment of duty as they are exempted. Additionally, under para 6.11(a) of the FTP, EOUs are eligible to avail of entitlements of DTA suppliers upon production of a disclaimer and compliance with formalities. The Court clarified that if TED was paid in cash by the EOU, it could get a refund from the authority implementing the FTP with simple interest at 6% per annum, provided the benefit is not passed on to the DTA supplier. Similarly, DTA suppliers are entitled to a refund of TED under para 8.3(c) read with paras 8.4.2 and 8.5 of the FTP. The Court noted that with the introduction of GST, refunds are to be paid in cash as per Section 142(3) of the CGST Act, 2017. The respondent/petitioner is entitled to a refund in accordance with the law.

Facts

M/s Deepak Enterprises, a manufacturer of Motor Vehicle Parts, supplied back plates to two 100% Export Oriented Units (EOUs) between January 2012 and April 2013. These goods were excisable and cleared on payment of excise duty by the EOUs, who did not provide CT-3 certificates. The petitioner claimed a refund of Terminal Excise Duty (TED) amounting to Rs. 67,18,748/-. The Joint Director General of Foreign Trade rejected the claim on June 5, 2013, citing a policy circular dated March 15, 2013, stating TED was not admissible for supplies to 100% EOUs. A notification on April 18, 2013, amended the Foreign Trade Policy (FTP). The petitioner resubmitted the claim, relying on a Delhi High Court judgment in Kandoi Metal Powders Mfg. Co. Pvt. Ltd. v. Union of India & Ors. This subsequent claim was also rejected on August 28, 2014. Aggrieved, the petitioner filed a writ petition, which was allowed by the learned Single Judge on January 19, 2018.

Key Issues

1. Whether the petitioner was entitled to a refund of Terminal Excise Duty (TED) on supplies made to 100% Export Oriented Units (EOUs) during the period January 2012 to April 2013, despite the policy circular dated March 15, 2013, and the subsequent amendment to the Foreign Trade Policy (FTP) on April 18, 2013? (Question of law and mixed fact and law, turning on the interpretation of the Foreign Trade (Development & Regulation) Act, 1992, and the FTP). Petitioner's arguments: The petitioner contended that the Cenvat regime operates independently of import-export policies and that the refund of TED is permissible under the existing policy. They relied on the Delhi High Court's decision in Kandoi Metal Powders Mfg. Co. Pvt. Ltd. v. Union of India & Ors. and the Calcutta High Court's decision in Joint Director General of Foreign Trade v. IFGL Refractories Ltd. Revenue's arguments: The revenue argued that the policy circular dated March 15, 2013, disallowed TED refunds for supplies to 100% EOUs. They also referred to the Bombay High Court's decision in Sandoz Private Limited and Lupin Limited v. Union of India, which they contended distinguished the Kandoi Metal Powders case.