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High Court Of Calcutta
Kalyan Jyoti Sengupta
IFGL REFRACTORIES LTD. - Appellant
Versus
JOINT DIRECTOR GENERAL OF FOREIGN TRADE - Respondent
Writ Petition 410 Of 2000
Decided On : 05/16/2001
IMPORT POLICY - ADVANCE INTERMEDIATE LICENCE - REFUND OF TERMINAL EXCISE DUTY - ENTITLEMENT - PROCEDURE - INTERPRETATION OF EXIM POLICY AND HANDBOOK OF PROCEDURES.
Fact of the Case:
The petitioner, a manufacturer of refractory items, supplied such items to Vishakhapatnam Steel Plant (VSP), an exporter, under the Duty Exemption Scheme of the Import Policy. VSP, being an exporter, held an Advance Licence issued by the Director General of Foreign Trade (DGFT), which allowed it to import various items, including refractory items, free of Customs Duty. Instead of importing the items, VSP procured them from the petitioner, who held an Advance Intermediate Licence under the Import Policy. The petitioner paid Central Excise Duty on the items supplied to VSP. The petitioner applied for a refund of terminal Excise Duty from the DGFT but was refused on the ground that the petitioner was entitled to ab initio exemption of Excise Duty under Rule 13 of the Central Excise Rules, 1944 read with Notification No. 49/94 dated 22nd September, 1994. The petitioner challenged the DGFT's order.
Finding of the Court:
The Court held that the petitioner was entitled to a refund of terminal Excise Duty under the Export and Import Policy, 1992-97. The Court found that the petitioner was a holder of an Advance Intermediate Licence and was entitled to the benefit of deemed exports under the Policy. The Court held that the Handbook of Procedures, which was meant to implement the Policy, could not override the substantive right conferred by the Policy. The Court also held that the petitioner was not entitled to interest at the rate of 24% per annum, but was entitled to interest at the rate of 12% per annum from the date of the impugned order.
Issues: 1. Whether the petitioner was entitled to a refund of terminal Excise Duty under the Export and Import Policy, 1992-97? 2. Whether the Handbook of Procedures could override the substantive right conferred by the Policy?
Ratio Decidendi: 1. The Court held that the petitioner was entitled to a refund of terminal Excise Duty under the Export and Import Policy, 1992-97 because: a. The petitioner was a holder of an Advance Intermediate Licence and was entitled to the benefit of deemed exports under the Policy. b. The Handbook of Procedures, which was meant to implement the Policy, could not override the substantive right conferred by the Policy. c. The petitioner had paid Central Excise Duty on the items supplied to VSP. 2. The Court held that the Handbook of Procedures could not override the substantive right conferred by the Policy because: a. The Handbook of Procedures was meant to implement the Policy and could not take away the right conferred by the Policy. b. The provision of the procedural law and rule cannot be overridden or whittle down the substantive law.
Final Decision: The Court set aside the impugned order of the DGFT and directed the DGFT to pay the petitioner a sum of Rs. 84,91,806/- as a refund of terminal Excise Duty, along with interest at the rate of 12% per annum from the date of the impugned order.
( 1 ) IN this writ petition the petitioner has challenged the order dated 4th October, 1999 and also prayed for refund of terminal Excise Duty in accordance with the relevant provisions of the Import Policy and the Hand Book and to refund a sum of Rs. 84,91,806/- together with interest @ 24% per annum of the date of filing the claim. The order, which is under challenge, was passed by the Director General of Foreign Trade pursuant to previous order passed by this Court in the Writ Petition being No. 1576 of 1999.
( 2 ) THE short fact of the case which led to the order being passed by this Court previously is as follows :-The petitioner manufactures various items such as Tundish Nozzle, Tundish Shroud etc. , which are refractory items used by the Vishakhapatnam Steel Plant (in short VSP) in the manufacture of steel products, which thereafter are exported abroad. VSP being an exporter is the holder of Advance Licence issued by the Director General of Foreign Trade (hereinafter referred to as DGFT) on the strength of which it can import various specified items including refractory items from abroad free of Customs Duty. Instead of importing such items from abroad it has chosen to procure such items from the petitioner who is the holder of an Advance Intermediate Licence under the Import Policy. The items manufactured by the petitioners are in the normal course subject to Central Excise Duty under the Excise Law. However, since the supply of the said items by the petitioner to VSP constitutes "deemed Export" within the meaning of the Import Policy the petitioner is entitled to certain benefits under the Policy. One of such benefits is refund of terminal Excise Duty under the Policy. So the petitioner duly applied for such refund of terminal Excise Duty from the DGFT being the respondent No. 2 herein and previously got refund for the quarters ending March 1994, June 1994 and September 1994. However, this time the DGFT refused to entertain demand of refund for the succeeding quarters. The DGFT is of the view that the petitioner was entitled to ab initio exemption of Excise Duty under Rule 13 of the Central Excise Rules, 1944 read with Notification No. 49/94 dated 22nd September, 1994. The supplies by the petitioner to VSP had commenced prior to the issue of the said Notification No. 44/94. At that point of time Rule 191bb and Notification No. 33/90 dated April 5,1990, the provisions or which were substantially same as Rule 13 and Notification No. 44/94 were in force. In fact the petitioner had initially applied for exemption of Excise Duty under the earlier Rule and Notification but the Central Excise Authorities rejected the same on the ground that the goods in question were not intermediate products nor raw materials for export and thereafter the Excise authorities directed the petitioner to effect clearance to VSP on payment of Central Excise Duty. The petitioner though preferred an appeal against the order of the Excise authorities but withdrew the same as the same became infructuous because of payment of Excise duty by the petitioner. The petitioner made repeated demands and request for refund from the Excise authorities; however, the aforesaid authorities have declined to entertain such demand contending that such claim lay with the DGFT.
( 3 ) MR. Banerjee, learned Senior Advocate appearing in support of the writ petition contends that admittedly the writ petitioner is the holder of Advance Intermediate Licence within the meaning of paragraph 55 of the Export and Import Policy. The petitioners supplied the refractory materials to the VSP under the Duty Exemption Scheme as provided in paragraph 47 of the aforesaid policy. The items supplied by the petitioner to VSP being the ultimate exporter fall in the category of consumables and consequently are "inputs" in terms of paragraphs 47 and 55 and both of which fall within Chapter VII under the Heading "duly Exemption Scheme".
( 4 ) HE further contends
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