Case: SANDOZ PRIVATE LIMITED Vs. UNION OF INDIA &amp; OTHERS

amount in the CENVAT credit account of the DTA supplier, if the DTA supplier had utilized CENVAT credit account in respect of goods supplied to EOU; and if it had paid the amount in cash, the DTA supplier would be entitled for refund of cash with simple interest at the rate of 6% per annum as provided in para 8.5.1 of the applicable FTP on delay in refund of duty drawback and TED under deemed exports scheme. 40. Reverting to the case of EOU considered by the Bombay High Court in the impugned judgment, we hold that EOU is entitled only for ab initio exemption from payment of central excise duty in terms of para 6.11(c)(ii) of the FTP; and obliged to import the goods from DTA supplier without payment of duty in terms of para 6.2(b) of the FTP. The arrangement provided in para 6.11(a) is, however, in the nature of benefit given to EOU in the event it had paid the amount towards TED in relation to goods procured by it to DTA supplier. In that case, EOU will be eligible only for obtaining entitlements of DTA supplier as specified in Chapter 8 of the FTP upon obtaining a suitable disclaimer from DTA supplier. Accordingly, in addition to ab initio exemption, the EOU is additionally eligible to receive entitlements of DTA supplier as specified in Chapter 8 of the FTP subject to complying with necessary requirements and formalities. In other words, EOU is not entitled for refund of TED on its own accord, but can avail of the entitlements of DTA supplier on complying essential procedure. As mentioned earlier, the interest on the refundable amount, if paid in cash ought to be refunded with simple interest at the rate of 6% per annum as provided in para 8.5.1 of the applicable FTP, even in the case of application for refund by EOU. 41. The next question is: the refund claim should be set up before which Authority? As noted earlier, since the entitlement of exemption and refund of TED flows from the provisions of 1992 Act and FTP framed thereunder by the Central Government, which is an independent dispensation than the one provided in the 1944 Act and the rules framed thereunder, with the avowed purpose of promoting export and earning foreign exchange, it is the obligation of Authority responsible to implement the subject FTP, to deal with refund claim of the concerned entities. For, it is not a case of refund under the 1944 Act or 2002 Rules or 2004 Rules as such, but under the applicable FTP. 42. In conclusion, we hold that the EOU entities, who had procured and imported specified goods from DTA supplier, are entitled to do so without payment of duty [as in para 6.2(b)] having been ab initio exempted from such liability under para 6.11(c)(ii) of the FTP, being deemed exports. Besides this, there is no other entitlement of EOU under the applicable FTP. Indeed, under para 6.11(a) of the FTP, EOU is additionally eligible merely to avail of entitlements of DTA supplier as specified in Chapter 8 of the FTP upon production of a suitable disclaimer from the DTA supplier and subject to compliance of necessary formalities and stipulations. It would not be a case of entitlement of EOU, but only a benefit passed on to EOU for having paid such amount to the DTA supplier, which was otherwise ab initio exempted in terms of para 6.11(c)(ii) of the FTP coupled with the obligation to import the same without payment of duty under para 6.2(b). 43. Besides, if the DTA supplier as well as EOU had utilized its CENVAT credit for importing goods in question, the refund would be in the form of reversal of commensurate amount of CENVAT credit to the account of the concerned entity. However, if TED has been paid in cash by the EOU, the EOU may get refund of that amount from Authority implementing the applicable FTP in cash with simple interest at the rate of 6% per annum for the delayed refund of duty (para 8.5.1) on condition that it would not pass on that benefit to the DTA supplier owing to such refund/rebate. 44. As regards DTA supplier of goods to EOU, it is entitled to receive the refund of TED in terms of para 8.3(c) read with paras 8.4.2 and 8.5 of the applicable FTP subject to complying necessary formalities and stipulations provided therein, being a case of deemed exports. Even, in the case of DTA supplier of goods to EOU, if TED has been paid by utilizing CENVAT credit, the refund would be in the form of reversal of commensurate amount in its CENVAT credit account. And if the amount towards TED has been paid in cash by the DTA supplier to the Authorities under the 1944 Act, the refund of TED amount would be made by the Authority implementing the applicable FTP in cash with simple interest at the rate of 6% per annum for the delay in refund of TED as per para 8.5.1. 45. In both cases, as aforesaid, responsibility of refund of TED in reference to applicable FTP would be that of the Authority responsible to implement the FTP under the 1992 Act, which has had consciously accorded such entitlements/benefits for promoting export and earning foreign exchange. Further, 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, as may be applicable being mutually exclusive remedies. It is so because it is well settled that the assessee is free to take benefit of more beneficial regime. 46. Learned counsel for the parties had referred to other decisions, which in our opinion need not be dealt with as the same are not directly dealing with the issue(s) answered in these cases, in particular dispensation provided under the applicable FTP.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]9. From the factual matrix delineated above in the respective appeals, it is obvious that Civil Appeal Nos.3358 and 3359 of 2020 pertain to EOUs, who had procured goods from its unit in Domestic Tariff Area (DTA), which transactions were in the nature of deemed export by the DTA Unit to EOU within the meaning of the applicable FTP. On the other hand, the appeals against the decision of the High Court of Delhi and the High Court of Karnataka pertain to the refund claim set up by the DTA Unit — suppliers of goods to concerned EOU, also in reference to self- same Foreign Trade Policy (FTP).12. At the outset, it needs to be borne in mind that the entities in all these cases are claiming refund founded on the FTP and not in reference to the provisions of the 1944 Act or the rules framed thereunder, in particular, the Central Excise Rules, 2002 (for short, 2002 Rules) and the CENVAT Credit Rules, 2004 (for short, 2004 Rules).14. The authorities propounding the FTP were obviously conscious of the purport of the provisions of the 1944 Act and the rules framed thereunder. Despite that, the subject policy had been propounded with the sole objective of promoting exports and earning foreign exchange. At the relevant time, the goal set forth by the policy makers was to achieve the target of at least one per cent of the global trade by promoting exports. It is thus clear that the concessions or so to say, benefits and entitlements provided under the FTP cannot be constricted by the provisions of the taxing statute of 1944 and the rules framed thereunder. To put it tersely, the dispensation provided under the 1992 Act and the FTP must operate independently and is thus mutually exclusive in this regard. Taking any other view would be counter-productive and whittle down the intent behind formulation of a liberal FTP for promoting exports.18. From the scheme of Chapter 6 of FTP, it is thus clear that the EOU can import goods from DTA supplier, which transaction de jure is treated as deemed export; and it can do so without payment of duty, as it has been exempted vide para 6.11(c)(ii) of the FTP. On its own, the EOU is not eligible for any other entitlement.25. Going by the scheme of FTP applicable at the relevant period, it is crystal clear that EOUs were entitled to ab initio exemption from payment of Central Excise duty on goods procured from DTA on goods manufactured in India, as the import of such goods was to be made without payment of duty. No more and no less. 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, as provided in para 6.11(a). That availment by EOU had been linked to entitlement of DTA supplier, as specified in Chapter 8. The DTA supplier could (entitled to) take refund of TED in respect of goods supplied by it to EOU being exempted from TED, in light of para 8.3(c). The eligibility for refund of TED, however, has been circumscribed by formalities and requirements to be adhered to, including as noted in para 8.5. In that, recipient of goods (EOU) does not avail CENVAT credit or rebate. Similarly, DTA supplier would be eligible for deemed export drawback in terms of para 8.3(b) of FTP on Central Excise paid on inputs/components, provided CENVAT credit facility/rebate has not been availed.26. Upon conjoint reading of the relevant para and its clauses, it leaves no manner of doubt that the intent of the subject FTP was to encourage DTA suppliers by providing refund of TED in terms of para 8.3(c), subject to fulfilment of formalities and stipulations in Chapter 8 of FTP. This was also to generate foreign exchange as a consequence of goods supplied as inputs or otherwise, were finally exported by the EOU. The EOU, on the other hand, could only avail of the entitlement of the DTA supplier if the DTA supplier had not taken rebate or CENVAT credit facility (as per para 8.5) treating it as deemed export. This dispensation was uniformly followed until the issue of policy circular dated 15.3.2013.27. As regards the claim for refund of TED by EOU, therefore, need to be governed by the dispensation provided in para 6.11(a) read with entitlement of DTA supplier under Chapter 8 of FTP. However, it may have to be processed by the authorities under the FTP keeping in mind the principle underlying the refund of CENVAT credit granted under Rule 5 of the 2004 Rules and in the manner provided therefor, though not covered by Rule 5. That is because in law it is a case of deemed export by virtue of applicable FTP.28. If the refund claim is by the EOU, the same needs to be processed by the authorities under the FTP by reckoning the entitlement of DTA supplier specified in Chapter 8 of the FTP concerning the goods supplied to it, being a case of deemed exports. The EOU on its own, however, is not entitled for refund of TED, as the mandate to EOU is to procure or import goods from DTA supplier, without payment of duty in view of the express ab initio exemption provided in terms of para 6.2(b) read with para 6.11(c)(ii). However, despite such express obligation on the EOU, if the EOU has had imported goods from DTA supplier by paying TED, it can only claim the benefit of refund provided to DTA supplier under para 8.4.2 read with paras 8.3(c) and 8.5 subject to obtaining disclaimer from DTA supplier in that regard and complying with other formalities and requirements.29. We thus agree with the conclusion reached by the Bombay High Court that the EOU is not entitled to claim refund of TED on its own. However, we add 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. In any case, the refund claim needs to be processed by keeping in mind the procedure underlying the refund of CENVAT credit/rebate of excise duty obligations. If CENVAT credit utilised by DTA supplier or EOU, as the case may be, cannot be encashed, there is no question of refunding the amount in cash. In that case, the commensurate amount must be reversed to the CENVAT credit account of the concerned entity instead of paying cash.30. If, the claim for refund by DTA supplier under the scheme of FTP is allowed, it can be in cash if TED had been paid in cash. Else, it can be in the form of reversal of commensurate CENVAT credit amount to the concerned account of DTA supplier.31. As regards the refund claim of DTA supplier, as noted earlier, it needs to be processed by the authorities under the FTP keeping in mind the purport of stipulations spelt out in Chapter 8 of subject FTP, such as the goods imported or supplied to EOU shall be with actual user condition and shall be utilised for export production and that the EOU did not avail CENVAT credit or rebate in relation to the goods supplied to EOU. Similarly, if the DTA supplier has utilised the CENVAT credit, commensurate amount needs to be reversed to its CENVAT credit account, in which case, there is no question of refunding the amount in cash to the DTA supplier.33. The earliest decision is that of the learned Single Judge of the Calcutta High Court in IFGL Refractories Limited (supra at Footnote No.22). The High Court noted that the Export and Import Policy for the relevant years was adopted amongst other to promote export of Indian products to foreign countries aiming at to earn foreign exchange and to increase global market. The scheme was propounded to encourage indigenous supplier by providing certain benefits and entitlements, either by way of exemption from payment of excise duty or to get refund of excise duty, if already paid. The object of the scheme was to provide exporters duty--free input for production of export materials and for that reason, it exempted supplier from payment of any excise duty and, if paid, to provide for refund of TED. The High Court further noted that merely because such refund was not permissible to the DTA supplier under the 1944 Act and the rules framed thereunder, that would not deprive the DTA supplier to avail of the entitlements and benefits under the FTP. It held that it is open to the assessee to take advantage of any law, particularly which is more beneficial. Accordingly, learned Single Judge issued directions to pay the refundable amount along with interest at the rate of 12 % per annum. The appeal filed by the Department against the said decision was rejected by the Division Bench of the Calcutta High Court in Joint Director General of Foreign Trade (supra at Footnote No.19). The Division Bench, however, directed the DGFT to refund TED amount as it was the concerned Authority under the FTP, subject to assessee completing necessary formalities as provided for in the FTP. This decision was then affirmed by this Court consequent to dismissal of special leave petition being S.L.P. (C) No.5368 of 2002, on 7.10.2002.34. The next decision is of the High Court of Gujarat in the case of Commissioner of Central Excise and Customs vs. NBM Industries 2012 (276) ELT 9 (Guj.) . The Division Bench of the High Court considered the question whether DTA supplier of goods to EOU is entitled for refund of the CENVAT credit despite Rule 5 of the 2004 Rules, dealing with refund of CENVAT credit. The Authorities had held that not being a case of export of goods out of India, the assessee was not entitled for refund of CENVAT credit amount utilised in respect of subject goods supplied to EOU. The High Court relying on its earlier decision in Commissioner of Central Excise vs. Shilpa Copper Wire Industries 2011 (269) ELT 17 (Guj.) , negatived that stand of the Department. Instead, the High Court held that the claim for refund was in reference to the applicable FTP and not on the basis of the provisions of the 1944 Act and the rules framed thereunder. The entitlement of DTA supplier was specified in the applicable FTP being deemed exports which in law are regarded as physical exports for the purpose of entitling refund of unutilised CENVAT credit.35. Then came the decision of the High Court of Delhi in Kandoi Metal Powders Manufacturing Company Private Limited (supra at Footnote No.18). Even, this was a case of supplier manufacturing goods supplied to EOU in reference to the applicable FTP. The High Court not only relied on the decision of the Division Bench of the Calcutta High Court in Joint Director General of Foreign Trade (supra at Footnote No.19), but independently opined that DGFT having formulated the FTP, the claim of the assessee was governed by the entitlements specified therein in paras 8.2, 8.3, 8.4 and 8.5 as applicable at the relevant time. Accordingly, the High Court allowed the writ petition and relegated the writ petitioner before the Authority concerned for deciding the refund claim of the petitioner. This judgment has been followed in subsequent decisions, not only by the coordinate Benches of the High Court of Delhi, but also by other High Courts.39. The view taken in these decisions at the instance of the DTA supplier of specified goods to EOU is in consonance with the view taken by us in this judgment. To that extent, we affirm these decisions and hold that the DTA supplier of goods to EOU would be entitled for refund of TED on the basis of applicable para 6.11(a) read with paras 8.3(c), 8.4.2 and 8.5 of the FTP under consideration. The modality of refund, however, ought to be in the form of reversal of commensurate amount in the CENVAT credit account of the DTA supplier, if the DTA supplier had utilized CENVAT credit account in respect of goods supplied to EOU; and if it had paid the amount in cash, the DTA supplier would be entitled for refund of cash with simple interest at the rate of 6% per annum as provided in para 8.5.1 of the applicable FTP on delay in refund of duty drawback and TED under deemed exports scheme.40. Reverting to the case of EOU considered by the Bombay High Court in the impugned judgment, we hold that EOU is entitled only for ab initio exemption from payment of central excise duty in terms of para 6.11(c)(ii) of the FTP; and obliged to import the goods from DTA supplier without payment of duty in terms of para 6.2(b) of the FTP. The arrangement provided in para 6.11(a) is, however, in the nature of benefit given to EOU in the event it had paid the amount towards TED in relation to goods procured by it to DTA supplier. In that case, EOU will be eligible only for obtaining entitlements of DTA supplier as specified in Chapter 8 of the FTP upon obtaining a suitable disclaimer from DTA supplier. Accordingly, in addition to ab initio exemption, the EOU is additionally eligible to receive entitlements of DTA supplier as specified in Chapter 8 of the FTP subject to complying with necessary requirements and formalities. In other words, EOU is not entitled for refund of TED on its own accord, but can avail of the entitlements of DTA supplier on complying essential procedure. As mentioned earlier, the interest on the refundable amount, if paid in cash ought to be refunded with simple interest at the rate of 6% per annum as provided in para 8.5.1 of the applicable FTP, even in the case of application for refund by EOU.As noted earlier, since the entitlement of exemption and refund of TED flows from the provisions of 1992 Act and FTP framed thereunder by the Central Government, which is an independent dispensation than the one provided in the 1944 Act and the rules framed thereunder, with the avowed purpose of promoting export and earning foreign exchange, it is the obligation of Authority responsible to implement the subject FTP, to deal with refund claim of the concerned entities. For, it is not a case of refund under the 1944 Act or 2002 Rules or 2004 Rules as such, but under the applicable FTP.42. In conclusion, we hold that the EOU entities, who had procured and imported specified goods from DTA supplier, are entitled to do so without payment of duty [as in para 6.2(b)] having been ab initio exempted from such liability under para 6.11(c)(ii) of the FTP, being deemed exports. Besides this, there is no other entitlement of EOU under the applicable FTP. Indeed, under para 6.11(a) of the FTP, EOU is additionally eligible merely to avail of entitlements of DTA supplier as specified in Chapter 8 of the FTP upon production of a suitable disclaimer from the DTA supplier and subject to compliance of necessary formalities and stipulations. It would not be a case of entitlement of EOU, but only a benefit passed on to EOU for having paid such amount to the DTA supplier, which was otherwise ab initio exempted in terms of para 6.11(c)(ii) of the FTP coupled with the obligation to import the same without payment of duty under para 6.2(b).43. Besides, if the DTA supplier as well as EOU had utilized its CENVAT credit for importing goods in question, the refund would be in the form of reversal of commensurate amount of CENVAT credit to the account of the concerned entity. However, if TED has been paid in cash by the EOU, the EOU may get refund of that amount from Authority implementing the applicable FTP in cash with simple interest at the rate of 6% per annum for the delayed refund of duty (para 8.5.1) on condition that it would not pass on that benefit to the DTA supplier owing to such refund/rebate.44. As regards DTA supplier of goods to EOU, it is entitled to receive the refund of TED in terms of para 8.3(c) read with paras 8.4.2 and 8.5 of the applicable FTP subject to complying necessary formalities and stipulations provided therein, being a case of deemed exports. Even, in the case of DTA supplier of goods to EOU, if TED has been paid by utilizing CENVAT credit, the refund would be in the form of reversal of commensurate amount in its CENVAT credit account. And if the amount towards TED has been paid in cash by the DTA supplier to the Authorities under the 1944 Act, the refund of TED amount would be made by the Authority implementing the applicable FTP in cash with simple interest at the rate of 6% per annum for the delay in refund of TED as per para 8.5.1.45. In both cases, as aforesaid, responsibility of refund of TED in reference to applicable FTP would be that of the Authority responsible to implement the FTP under the 1992 Act, which has had consciously accorded such entitlements/benefits for promoting export and earning foreign exchange. Further, 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, as may be applicable being mutually exclusive remedies. It is so because it is well settled that the assessee is free to take benefit of more beneficial regime.46. Learned counsel for the parties had referred to other decisions, which in our opinion need not be dealt with as the same are not directly dealing with the issue(s) answered in these cases, in particular dispensation provided under the applicable FTP.