SHARE

| Jan-24-2022

EOU not entitled to claim refund of TED on its own, may avail of the entitlements of DTA supplier specified in FTP

The Supreme Court of India in the matter of Sandoz Private Limited v. Union of India [Civil Appeal No. 3358 of 2020 dated January 4, 2020] upheld the decision of the Bombay High Court that Export Oriented Unit (“EOU”) is not entitled to claim refund of Terminal Excise Duty (“TED”) on its own, however, adds a caveat that EOU may avail of the entitlements of Domestic Tariff Area (“DTA”) supplier specified in Chapter 8 of Foreign Trade Policy (“FTP”) on condition that it will not pass on that benefit back to DTA supplier later on.

Facts:

M/s Sandoz Private Limited (“the Appellant”) claims to be hundred   per   cent   EOU engaged   in   the manufacture of goods falling under Chapter 30 of the Schedule to the   Central   Excise   Tariff   Act, 1985.

The Appellant had applied for refund from TED in respect of excisable goods procured from its unit in DTA, as it did in the past and was granted refund from time to time between 2006 and 2012. The instant refund application was disallowed, which decision is the subject matter of appeal in the present case. It is known that TED was paid by the DTA Unit from where the goods in question were procured or supplied to the Appellant for its EOU during the relevant period.

Circular bearing No.16 (RE­2012/2009­14) dated March 15, 2013 ("the Circular”), was issued by the Director General of Foreign Trade ("DGFT”) to clarify that no refund of TED should be provided by the Office of DGFT/Development Commissioners, as supplies made by DTA Unit to EOU are ab initio exempted from payment of excise duty. The Development Commissioner eventually rejected the refund claim set forth by the Appellant and informed the Appellant in that regard vide letter dated April 1, 2013.

The Appellant challenged the legality and validity of the Circular issued by DGFT and the rejection of the refund application.

Issue:

Challenged the legality and validity of the Circular issued by DGFT and the rejection of the refund application.

Held:

The Supreme Court in Civil Appeal No. 3358 of 2020 dated January 4, 2020, held as under:

  • Agreed with the conclusion reached by Bombay High Court that EOU is not entitled to claim refund of TED on its own, however, adds a caveat that “EOU may avail of the entitlements of DTA supplier specified in Chapter 8 of FTP on condition that it will not pass on that benefit back to DTA supplier later on”
  • Clarified that refund claim needs to be processed by keeping in mind the procedure underlying the refund of CENVAT credit/rebate of excise duty obligations i.e., if CENVAT credit utilised by DTA supplier or EOU, cannot be encashed, there is no question of refunding the amount in cash and in that case, equal amount must be reversed to CENVAT credit account of concerned entity instead of paying cash.
  • The Circular was held to be clarificatory of the obvious position in law in nature.
  • On the question as to which appropriate authority is to be approached for refund claim, answers that since the refund claim is founded on the FTP and not in reference to the provisions of the 1944 Act or the rules framed thereunder, it is the obligation of authority responsible to implement the subject FTP (which has had consciously accorded such entitlements/benefits for promoting export and earning foreign exchange) to deal with refund claim of concerned entities. Going by FTP scheme as applicable at the relevant period, elucidates that “it is crystal clear that EOUs were entitled to ab initio exemption from payment of Central Excise duty on goods procured from DTA. That, however, did not preclude the EOU from availing of the entitlement of DTA supplier under Chapter 8 upon obtaining a suitable disclaimer from DTA supplier.
  • Remarked that “scheme of FTP is explicit and not ambiguous nor silent in respect of benefits and entitlements of the concerned entities. It needs no elaboration. Thus, an argument having potential of defeating the intent of the applicable FTP, in any manner, ought to be negated”; Asserts that “the fact that the concerned entity had unsuccessfully applied for refund to the Authorities under the 1944 Act and the rules made thereunder, that would not denude it of its entitlement to get refund of TED under the FTP, … It is so because it is well settled that the assessee is free to take benefit of more beneficial regime”

(Author can be reached at info@a2ztaxcorp.com)

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

Similar reads

Adoption of ICT and integration of LIMBS with CESTAT, ITAT and other Tribunals to reduce delay in litigation management

The Hon’ble Supreme Court of India in C.C.E. AND S.T., Surat I v. Bilfinder Neo Structo Construction Ltd. Civil Appeal No(s).674/2021 dated November 29, 2021] issued directives for the adoption

Jan-24-2022

Read More

Where two reasonable constructions of a taxing provision are possible then the construction which favours the assessee must be adopted

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Bangalore (“CESTAT”) in the matter of John’s Cashew Company v. Commissioner of Customs, Cochin [Final Order 20792 /2021 dated October

Jan-24-2022

Read More

Registration is not a requirement for filling refund claim

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Mumbai (“CESTAT”) in the matter of M/s Blue River Capital India Advisory Services LLP v. Commissioner of CGST & Central Excise, Mumbai

Jan-24-2022

Read More

Penalty demand and proposal of confiscation cannot be separated from Customs duty demand

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Bangalore (“CESTAT”) in the matter of M/s. Dhiren Enterprise v. Commissioner of Customs (Adjudication), Mumbai [Final Order

Jan-24-2022

Read More

No violation of procedure under Foreign Trade Policy if goods imported for personal use against Bill of Entry without having IEC

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Mumbai (“CESTAT”) in the matter of Mr. Subodh Menon v. Commissioner of Customs, ACC Mumbai [Final Order No. A/87045/2021 dated November

Jan-24-2022

Read More