2022 Supreme(SC) 87

SUPREME COURT OF INDIA
(From the High Court of Karnataka at Bengaluru)
A.M. KHANWILKAR, DINESH MAHESHWARI, KRISHNA MURARI, JJ.
Sandoz Private Limited – Appellant
Versus
Union of India and Others – Respondents
Civil Appeal Nos. 3358, 3359, 3360, 3705 of 2020
Decided On : 04-01-2022

Headnote:

The Court held that the EOUs are entitled to 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.

Fact of the Case:

The appeals by the Assessee, Shri Arvind Datar, Shri Jay Savla, learned senior counsel and Shri Prakash Shah, learned counsel appearing for the appellants in the appeals by the Assessee, Shri Balbir Singh, learned Additional Solicitor General of India for the Department; and Shri G. Shivadass, learned senior counsel for the respondent-Assessee (writ petitioner), in the appeals by the Department.

Finding of the Court:

The Court held that the EOUs are entitled to 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.

Issues: Whether the entities herein are entitled to refund of amount purportedly towards TED in respect of specified goods procured or supplied, as the case may be, being deemed exports and from which authority, either under applicable Foreign Trade Policy (FTP) or the 1944 Act? Further, whether Circular No. 16 (RE-2012/2009-2014) dated 15.03.2013 is merely clarificatory regarding TED refund and exemption and the efficacy thereof?

Ratio Decidendi: The Court held that the EOUs are entitled to 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.

Final Decision: The appeals filed by the assessee (EOU) against the decision of the Bombay High Court partly succeed in the above terms; and the appeals filed by the Department against the decision of the High Court of Delhi and High Court of Karnataka are also partly allowed in the aforementioned terms. There shall be no order as to costs. Pending applications, if any, are disposed of accordingly.