Case Note & Summary
The dispute involved appeals by Export Oriented Units (EOUs) challenging the refusal of refund claims for Terminal Excise Duty (TED) paid on excisable goods procured from their Domestic Tariff Area (DTA) Units. The appellants, engaged in manufacturing goods under Chapter 30 of the Central Excise Tariff Act, 1985, had historically received TED refunds between 2006 and 2012. However, their applications for refund periods in 2012 were rejected following a policy circular dated 15.03.2013 issued by the Director General of Foreign Trade (DGFT), which clarified that no TED refund should be provided as supplies from DTA Units to EOUs were ab initio exempt from excise duty. The Development Commissioner rejected the refund claims, leading to writ petitions before the Bombay High Court. The High Court dismissed the petitions, upholding the rejection based on paragraphs 6.2(b) and 6.11(c)(ii) of the Foreign Trade Policy (FTP), 2009-2014, which stipulated that EOUs must procure excisable goods without payment of duty. The core legal issue was whether EOUs were entitled to TED refund under the FTP. The appellants contended that the impugned circular could only have prospective effect and that past refund grants created a vested right. The respondents argued that the circular merely clarified existing FTP provisions. The Supreme Court analyzed the FTP provisions harmoniously, noting that paragraphs 6.2(b), 6.11(c)(ii), and 8.3(c) collectively indicated that refund requests for excisable goods procured by EOUs upon payment of duty were inadmissible. The court held that the circular was clarificatory, applying retrospectively to dispel doubts, and that no vested right arose from past practice. The court affirmed the High Court's decision, dismissing the appeals and upholding the rejection of TED refund claims, as the procurement was exempt from duty under the FTP.
Headnote
A) Customs and Excise Law - Terminal Excise Duty Refund - Export Oriented Units - Foreign Trade (Development and Regulation) Act, 1992, Section 5 - Foreign Trade Policy, 2009-2014, Paragraphs 6.2(b), 6.11(c)(ii), 8.3(c) - Appellants claimed refund of Terminal Excise Duty paid on goods procured from Domestic Tariff Area Units for use in Export Oriented Units - Court held that procurement by Export Oriented Units was ab initio exempt from excise duty under the Foreign Trade Policy, making refund inadmissible - The impugned circular merely clarified this existing legal position and did not create new law (Paras 4-10). B) Administrative Law - Policy Circulars - Clarificatory Nature - Foreign Trade (Development and Regulation) Act, 1992 - Foreign Trade Policy, 2009-2014 - Appellants challenged a policy circular dated 15.03.2013 that stated no refund of Terminal Excise Duty should be provided - Court held that the circular was clarificatory, restating the obvious position under the Foreign Trade Policy that Export Oriented Units must procure goods without payment of duty - Such clarificatory circulars apply retrospectively to dispel doubts about existing provisions (Paras 4-10). C) Constitutional Law - Vested Rights - Past Practice - Foreign Trade Policy, 2009-2014 - Appellants argued that past refund grants created a vested right to continued refund - Court rejected this, holding that past acceptance of refund requests by authorities does not create any vested right or entitle appellants to mandamus contrary to statutory provisions - The Foreign Trade Policy provisions clearly prohibited such refunds (Paras 4-10).
Issue of Consideration
Whether Export Oriented Units are entitled to refund of Terminal Excise Duty paid on excisable goods procured from Domestic Tariff Area Units under the Foreign Trade Policy, 2009-2014
Final Decision
Supreme Court dismissed the appeals, upholding the rejection of Terminal Excise Duty refund claims as Export Oriented Units' procurement was ab initio exempt from excise duty under the Foreign Trade Policy
Law Points
- Interpretation of Foreign Trade Policy provisions regarding exemption from excise duty for supplies to Export Oriented Units
- Clarificatory nature of policy circulars
- No vested right to refund based on past practice
- Harmonious construction of statutory provisions
