# SANDOZ PRIVATE LIMITED v. UNION OF INDIA & OTHERS

- **Citation:** [2022] 2 S.C.R. 601
- **Court:** Supreme Court of India
- **Decided:** 2022-01-04
- **Case number:** Civil Appeal No. 3358 of 2020
- **Bench:** A. M. Khanwilkar, Dinesh Maheshwari, Krishna Murari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sandoz-private-limited-v-union-of-india-others-35992
- **Pages:** 46

## Headnote

Foreign Trade (Development and Regulation) Act, 1992: FTP
2009-2014 - Chapter 6 and 8 - Claim for refund of TED paid by
DTA unit on goods supplied by DTA unit to EOU unit for
manufacturing goods cleared for export - Held: 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 - 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 - Central Excise Act, 1944 -
s.5A - Central Excise Rules, 2002 - Central Excise Rules, 2004.
Foreign Trade (Development and Regulation) Act, 1992: FTP
2009-2014 - The EOU entities, who had procured and imported
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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 - 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).
Words and phrases: Benefit and entitlement - Distinction
between - Held: "Benefit", by its very nature, is an advantage,
help or aid, while "entitlement" is right to have something.
Disposing of the appeals, the Court
HELD: 1. Section 5A of the Central Excise Act, 1944
empowers the Central Government to grant exemption from duty
of excise in respect of specified excisable goods. The exercise
of power to exempt is a beneficial power - which enables the
Central Government to reduce or waive duty on specified goods
on such conditions as may be prescribed. The exemption
notification has statutory force. However, the manufacturers
(including DTA Unit) of specified goods are free to disregard,
the benefit of exemption so provided when it is laced with
fulfilment of pre-conditions by third party (EOU). However, subsection (1A) of Section 5A came to be inserted by way of an
amendment w.e.f. 13.05.2005. It was for removal of doubts. It
declared that where an exemption under sub-section (1) in respect
of any excisable good from the whole of the duty of excise leviable
thereon has been granted absolutely, the manufacturer of such
excisable goods "shall not pay the duty of excise on such goods".
This stipulation ordains that the excise duty is not payable on the
specified

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[2022] 2 S.C.R. 601
601
SANDOZ PRIVATE LIMITED
v.
UNION OF INDIA & OTHERS
(Civil Appeal No. 3358 of 2020)
JANUARY 4, 2022
[A. M. KHANWILKAR, DINESH MAHESHWARI AND
KRISHNA MURARI , JJ.]
Foreign Trade (Development and Regulation) Act, 1992: FTP
2009-2014 - Chapter 6 and 8 - Claim for refund of TED paid by
DTA unit on goods supplied by DTA unit to EOU unit for
manufacturing goods cleared for export - Held: 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 - 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 - Central Excise Act, 1944 -
s.5A - Central Excise Rules, 2002 - Central Excise Rules, 2004.
Foreign Trade (Development and Regulation) Act, 1992: FTP
2009-2014 - The EOU entities, who had procured and imported
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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 - 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).
Words and phrases: Benefit and entitlement - Distinction
between - Held: "Benefit", by its very nature, is an advantage,
help or aid, while "entitlement" is right to have something.
Disposing of the appeals, the Court
HELD: 1. Section 5A of the Central Excise Act, 1944
empowers the Central Government to grant exemption from duty
of excise in respect of specified excisable goods. The exercise
of power to exempt is a beneficial power - which enables the
Central Government to reduce or waive duty on specified goods
on such conditions as may be prescribed. The exemption
notification has statutory force. However, the manufacturers
(including DTA Unit) of specified goods are free to disregard,
the benefit of exemption so provided when it is laced with
fulfilment of pre-conditions by third party (EOU). However, subsection (1A) of Section 5A came to be inserted by way of an
amendment w.e.f. 13.05.2005. It was for removal of doubts. It
declared that where an exemption under sub-section (1) in respect
of any excisable good from the whole of the duty of excise leviable
thereon has been granted absolutely, the manufacturer of such
excisable goods "shall not pay the duty of excise on such goods".
This stipulation ordains that the excise duty is not payable on the
specified goods. However, this stipulation will be attracted if the
excise duty is exempted ab initio (without any pre-condition). Be
that as it may, the governing FTP regime ought to prevail being a
special dispensation under the 1992 Act. [Para 13][622-D; 623A-D]
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2. 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 counterproductive and whittle down the intent behind formulation of a
liberal FTP for promoting exports. [Para 14][623-D-F]
3. Under the subject FTP, Chapter 6 deals with EOUs,
Electronics Hardware Technology Parks (EHTPs), Software
Technology Parks (STPs) and Bio-Technology Parks (BTPs). Para
6.1 provides for the eligibility criterion. It envisages that units
undertaking to export their entire production of goods and
services (except permissible sales in DTA) may be set up under
the EOU Scheme. Para 6.2 of the FTP specifies the stipulations
for the EOU to conduct its activities such as export and import of
goods. From the opening part of Para 6.2 (b) itself, it is amply
clear that it governs specified entities/units, who are engaged in
import and/or procurement of goods from DTA or bonded
warehouses etc., and that they must do so without payment of
duty. Besides, the specified entities are obliged to utilise the
goods imported with actual user condition and to be used or
utilised for export production. This twin condition must be
complied by the specified entities without any exception for
deriving benefit or availing of entitlements under FTP. Chapter
6 of the FTP postulates that supply of goods from DTA Units to
EOU must be regarded as deemed exports, as is evident from
para 6.11 of the FTP. [Paras 15, 16][623-G; 624-C, G-H; 625-A]
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4. The opening part of clause (a) concerns the supplier as
it refers to supplies from DTA Unit to EOU to be regarded as
deemed exports. Further, as a consequence of deemed exports,
DTA supplier becomes eligible for entitlements specified under
Chapter 8 of the FTP. To put it differently, in the same Chapter 6,
the entitlement of DTA supplier under Chapter 8 of FTP has also
been adverted to. This provision also deals with the manner of
availing the entitlements specified under Chapter 8 of FTP -
either by the DTA Unit itself or the EOU, the recipient of the
goods and services. For, in terms of this stipulation even the
EOU can set up a refund claim in respect of stated transaction, in
lieu of the entitlement of DTA Unit after obtaining suitable
disclaimer from DTA supplier. In other words, clause 6.11 [clause
(a) thereof in particular] deals with entitlement of DTA supplier,
which can be availed by the DTA supplier itself or by the EOU to
whom the goods were supplied by it upon giving suitable
disclaimer in that regard. [Para 16][626-A-D]
5. Clause (c) of para 6.11 is a provision which spells out the
entitlement of EOU. It includes reimbursement of Central Sales
Tax (CST) on goods manufactured in India; exemption from
payment of Central Excise Duty on goods produced from DTA
on goods manufactured in India; reimbursement of duty paid on
fuel procured from domestic oil companies/depots of domestic
oil public sector undertakings as per drawback rate notified by
DGFT from time to time; and lastly, CENVAT Credit on service
tax paid. As regards the Central Excise Duty, para 6.11(c)(ii)
postulates exemption from payment of Central Excise Duty on
goods procured by the EOU from DTA on goods manufactured in
India. This is in consonance with the stipulation in para 6.2(b),
which predicates that the EOU may import goods from DTA
without payment of duty. [Para 17][626-E-G]
6. There is marked distinction between the expression
"benefit" and "entitlement". "Benefit", by its very nature, is an
advantage, help or aid, while "entitlement" is right to have
something. Under Chapter 6, the EOU is entitled to import
specified goods from DTA without payment of duty, subject to
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fulfilling other requirements including of actual user condition
and to be utilised for export production, being a case of ab initio
exemption qua EOU. The provision in the form of para 6.11(a)
merely enables EOU to set up a claim "in respect of" entitlements
of DTA supplier under Chapter 8 of FTP. There is no separate
entitlement for EOU under Chapter 8 of FTP. To put it differently,
although the heading of para 6.11 is "Entitlement for supplies
from the DTA" and clause (a) thereof envisages that EOU shall
on production of a suitable disclaimer from DTA supplier be
eligible for obtaining entitlements specified in Chapter 8 of FTP,
it does not follow that it is the entitlement of EOU. It is, however,
only a case of benefit transferred to EOU concerning the
entitlement of DTA supplier under Chapter 8 of FTP. [Para
19][627-A-D]
7. The heading of Chapter 8 is "Deemed Exports". The
original para 8.1 specified that deemed exports refer to those
transactions in which goods supplied do not leave country and
payment for such supplies is received either in Indian rupees or
in free foreign exchange. By way of amendment, it further
provided that the supply of specified goods (noted in para 8.2)
shall be regarded as deemed exports provided goods are
manufactured in India. Para 8.2 of Chapter 8 specifies the
categories of supplies which can be regarded as deemed exports.
Clause (b) thereof is applicable to the present appeals. In other
words, only the specified categories of supplies are regarded as
deemed exports. In that, import of goods, as specified in para
8.2(b) from DTA supplier to the EOU is regarded as deemed
exports. To put it differently, the supply of goods by DTA Unit to
EOU with actual user condition and utilised for export production,
are regarded as deemed exports. To such transactions, certain
benefits have been extended, as provided in para 8.3 of the FTP
applicable at the relevant time. [Para 20][627-D-E; 628-B, F-G]
8. In terms of para 6.11(a), the EOU can also avail of those
entitlements of DTA as specified in Chapter 8 of FTP, as had
been earmarked for DTA supplier. That does not mean that EOU
is eligible for those entitlements, on its own accord as, amongst
other, it is obliged to obtain disclaimer from DTA supplier as a
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precondition. Para 8.2 lists the categories of supply of goods which
are regarded as deemed exports including supply of goods to
EOU [para 8.2 (b)]. The specified transactions are provided certain
benefits mentioned in para 8.3, subject to terms and conditions
in the handbook procedures, volume I, published under FTP.
Para 8.3(c), inter alia, envisages that exemption from TED is
available for supplies made against International Competitive
Bidding and also to Advance Authorisation Holder to a
manufacturer holding another advance authorisation if such
manufacturer supplies the products to an ultimate exporter. In
other cases, (would include other DTA suppliers of goods to
EOU), however, refund of TED will be given. Further, the
expression "will" is to be construed as a mandate to give refund
to such DTA suppliers, being its entitlement under FTP. This
does not whittle down the ab initio exemption of payment of duty
given to EOU in respect of supply from DTA. [Paras 20, 21][632E-H; 633-A]
9. Para 8.3(c) of FTP does not provide in-built eligibility
"category" unlike specified in sub-paras (a) and (b) for ICB and
Advance Authorisation Holder. The expression "in other cases"
in sub-para (c) needs to be understood in proper perspective.
Concededly, paras 8.4.1 to 8.4.7 provide for benefits to the
supplier of goods to EOU as being deemed export. It is essentially
an entitlement of DTA supplier - as listed in para 8.3(a), (b) and
(c) of FTP, as may be applicable. It is seen that para 8.4.2 was
substituted by the revised FTP of 2012, wherein a table was
inserted. As per that table, benefits available under para 8.2 to
specified categories of supplies including supply to EOU in para
8.2(b) had been extended benefits under para 8.3, as applicable.
[Para 22][633-B-C; 634-A]
10. The eligibility for refund of TED/drawback in terms of
para 8.3(c) of FTP is made dependent on the non-availment of
CENVAT credit/rebate on such goods by the recipient thereof,
as is envisaged in original para 8.5. Similarly, benefit under para
8.3(b) of FTP regarding deemed export drawback can be availed,
provided CENVAT credit/rebate has not been availed by DTA
supplier and subject to complying other formalities. Para 8.4.2 as
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originally stood, is indicative of option given only to supplier
(DTA) in connection with supply of goods to EOU, as specified in
para 8.3 (a), (b) and (c) of FTP. That has remained intact despite
the amendment of 2012, until March 2013. Be it noted that the
purport of para 8.5 states that supply of goods will be eligible for
TED refund only if CENVAT credit/rebate has not been availed
on such goods. These stipulations demonstrate that the scheme
of FTP is explicit and not ambiguous nor silent in respect of
benefits and entitlements of the concerned entities. Thus, an
argument having potential of defeating the intent of the applicable
FTP, in any manner, ought to be negated. [Paras 23, 24][634-AB; 635-C-E]
11. 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. 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. [Para 17][635F-H; 636-A-B]
12. 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
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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. This circular proceeds on the assumption that the
goods supplied by DTA Unit to EOU being a case of deemed
exports, it predicates ab initio exemption from payment of excise
duties. It is true that the subject FTP stipulates that EOU may
import specified goods from DTA or bonded warehouses in DTA
or international exhibition held in India, without payment of duty.
But it is hatched with condition that the goods so imported shall
be with actual user condition and shall be utilised for export
production and further, an exemption of TED can be availed only
if the DTA supplier had not taken rebate or utilised CENVAT
credit facility as provided in para 8.5. It is on that understanding,
the department had been entertaining refund requests by the
DTA supplier for refund of TED made by it in the past until the
issue of stated policy circular. In that sense, it was not an ab initio
exemption at least for the DTA supplier. The circular, therefore,
introduces a new dimension qua the DTA suppliers. Such a change
for DTA suppliers cannot be introduced by issuing a policy circular
under the signatures of the Joint Director of Foreign Trade. For,
the FTP is formulated by the Central Government in exercise of
powers conferred by Section 5 of the 1992 Act (as applicable at
the relevant time) read with Para 1.2 of the FTP, which had come
into force with effect from 27.9.2009. [Para 26][636-B-D; 637-EH; 638-A-B]
13. The dispensation, as it obtained prior to March, 2013
including the notification issued by the Central Government on
18.4.2013 amending the relevant provisions of the existing FTP
being paras 8.3(c) and 8.4, was materially different qua DTA
suppliers. For, it was not ab initio exemption for them, unlike in
the case of EOU by virtue of para 6.2(b) read with para 6.11(c)(ii).
Accordingly, it became necessary to make it amply clear by
amending paras 8.3(c) and 8.4 vide notification dated 18.04.2013,
that henceforth it would be regarded as ab initio exemption even
for DTA supplier. This, indeed, is a change or amendment effected
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in the FTP. Such a change needs to be given only prospective
effect, being introduced by delegated legislation. The policy
circular cannot be the basis to deny the vested right of the DTA
suppliers under the applicable FTP. [Para 26][638-B-D; 639-A]
14. 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. 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. Thus,
the EOU is not entitled to claim refund of TED on its own.
However, the Court 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. 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. If, the
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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. [Paras 27, 28,
29, 30][639-A-B; 640-A-D; 641-A-D]
15. As regards the refund claim of DTA supplier, 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. [Para 31][641-D-F]
Raja Crowns and Cans Pvt. Limited v. Union of India
2015 (317) ELT 40; Lenovo (India) Pvt. Ltd. v. Union
of India (2017) 346 ELT 12 (Mad.); Manali
Petrochemical Limited v. Additional Director General
of Foreign Trade, New Delhi & Anr. W.P.No. 23194 of
2009, decided on 16.9.2019; Union of India v. Alstom
India Limited 2015 (325) ELT 72 (Del.); Commissioner
of Central Excise, Delhi II v. Welspring Universal 2018
(359) ELT 635 (Del.); Deepak Enterprises v. Union of
India 2018 (360) ELT 905 (Del.); Alstom Transport
India Ltd. v. Union of India 2018 (363) ELT 69 (Del.);
Motherson Sumi Electric Wires v. Union of India 2018
(364) ELT 91 (Del.); Multitex Filtration Engineers
Limited v. Union of India 2020 (373) ELT 68 (Del.);
Hindustan Tin Works Limited v. Union of India 2020
(373) ELT 217 (Del.); Acer India Pvt. Ltd. v. Union of
India 2018 (361) ELT 44 (Kar.) 22 2001 - approved.
IFGL Refractories Limited v. Joint Director General of
Foreign Trade 2001 (132) ELT 545 (Cal.);
Commissioner of Central Excise and Customs v. NBM
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Industries 2012 (276) ELT 9 (Guj.); Commissioner of
Central Excise v. Shilpa Copper Wire Industries
2011(269) ELT 17(Guj.); Kandoi Metal Powders
Manufacturing Company Private Limited v. Union of
India (2014) 302 ELT 209 (Del.); Joint Director
General of Foreign Trade v. IFGL Refractories Limited
2002 (143) ELT 294 (Cal.) - referred to.
16. 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.
[Para 39][644-C-E]
17. The next question is: the refund claim should be set up
before which Authority? 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. 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
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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). 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. [Paras 41, 42, 43][645B-H]
18. 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. [Para 44][646-A-C]
19. In both cases, 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
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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. [Para 45][646-C-E]
CIVIL APPELLATE JURISDICTION: Civil Appeal No.3358 of
2020.
From the Judgment and Order dated 01.08.2016 of the High Court
of Judicature at Bombay in Writ Petition No.2927 of 2015.
With
Civil Appeal Nos.3359, 3360 and 3705 of 2020.
Balbir Singh, ASG, Arvind Datar, Jay Savla, G. Shivadass, Sr. Advs.,
Prakash Shah, Jasdeep Singh Dhillon, Jas Sanghavi, Rahul Gupta, Akshay
Sharma, Mohd. Akhil, Navanjay Mahapatra, Ms. Sunita Sharma, Mrs.
Anil Katiyar, B. K. Prasad, T. Sundar Ramanathan, M. P. Devnath, Abir
Roy, Vivek Sharma, Prashant Shivadass, Ishaan Chakrabarti, Vivek
Pandey, Rupesh Kumar, R. Krishnan, Rajeev Sharma, Ms. Neelam
Sharma, Ms. Pankhuri Shrivastava, Alekshendra Sharma, Pravesh
Bahuguna, Advs. for the appearing parties..
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
1. From amongst these four appeals, first two appeals1 emanate
from the common judgment and order dated 01.08.20162 passed by the
High Court of Judicature at Bombay3 in Writ Petition No.2927 of 2015
and Writ Petition No.2926 of 2015, whereas, third appeal4 arises from
the judgment and order dated 08.10.20185 passed by the High Court of
Delhi at New Delhi in Writ Petition (C) No.10526 of 2017 and the fourth
appeal6 assails the judgment and order dated 09.12.20197 passed by the
High Court of Karnataka at Bengaluru in Writ Appeal No.286 of 2019
(T-TAR).
1 Civil Appeal Nos. 3358 and 3359 of 2020
2 2016 (341) ELT 22 (Bom.)
3 for short, "Bombay High Court"
4 Civil Appeal No.3360 of 2020
5 2020 (373) ELT 217 (Del.)
6 Civil Appeal No.3705 of 2020
7 2020 (371) ELT 658 (Kar.)
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CIVIL APPEAL NO. 3358 OF 2020
2a. The appellant in Civil Appeal No.3358 of 2020 claims to be
hundred per cent Export Oriented Unit8 engaged in the manufacture of
goods falling under Chapter 30 of the Schedule to the Central Excise
Tariff Act, 1985 and for that purpose, the appellant has a factory, inter
alia, at Plot No.8A/2, 8B/2, 8-8A/1/1, Kalwe, MIDC, Dighe, Navi
Mumbai - 400708. Besides, the appellant has another factory situated
at Plot No. L-1, MIDC, Mahad, Raigad, within the Domestic Tariff Area
Unit9. The appellant had applied for refund of Terminal Excise Duty10 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, however, came to be disallowed, which
decision is the subject matter of appeal before this Court. It had been
asserted 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. The application for refund dated 20.04.2012 was
accompanied by a declaration given by the appellant that the appellant's
DTA Unit did not claim benefit of TED refund supported by the disclaimer
certificate given by DTA Unit in that regard. The refund application was
required to be decided within 30 days of receipt of complete application.
As it was not so disposed of, the appellant requested the Development
Commissioner to intervene and do the needful. The refund claim for the
period between July 2012 and September 2012 was around
Rs.1,90,47,437/- (Rupees One Crore Ninety Lakh Forty-Seven Thousand
Four Hundred and Thirty-Seven only) and for the period between October
2012 and December 2012, it was Rs.1,36,04,814/- (Rupees One Crore
Thirty-Six Lakh Four Thousand Eight Hundred and Fourteen only).
2b. In the meantime, a circular purported to be a policy circular
bearing No.16 (RE-2012/2009-14) dated 15.03.201311 came to be issued
by the Director General of Foreign Trade12 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
8 for short, "EOU"
9 for short, "DTA Unit"
10 for short, "TED"
11 for short, "impugned circular"
12 for short, "DGFT"
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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 01.04.2013.
2c. Resultantly, the appellant filed Writ Petition No.9312 of 2013
before the Bombay High Court challenging the legality and validity of
the stated policy circular issued by DGFT and two communications of
the Development Commissioner rejecting the refund application submitted
by the appellant.
2d. In the meantime, a notification bearing No.4(RE-2013)/20092014 came to be issued by DGFT on 18.04.201313, notifying the
amendments made by the Central Government in Foreign Trade Policy,
2009-201414 in exercise of powers conferred by Section 5 of the Foreign
Trade (Development and Regulation) Act, 199215.
2e. The stated writ petition preferred by the appellant came to be
disposed of on 23.09.2014 whilst directing the competent authority to
consider the refund claim of the appellant afresh after taking into account
all aspects of the matter and give fair opportunity to the appellant.
2f. Pursuant to the remand order, the Development Commissioner
granted personal hearing, but eventually rejected the TED refund claim
of the appellant vide order bearing No. SEEPZ-SEZ/W.P./TED/
SANDOZ/314/2013-14 dated 06.01.2015.
2g. Feeling aggrieved by this decision, the appellant filed fresh
Writ Petition No.2927 of 2015 before the Bombay High Court assailing
the policy circular dated 15.03.2013 and order dated 06.01.2015 passed
by the Development Commissioner. The Bombay High Court negatived
the challenge to the stated policy circular as well as the order passed by
the Development Commissioner and thus, dismissed the writ petition
vide impugned judgment and order dated 01.08.2016. This judgment is
subject matter of challenge in Civil Appeal No.3358 of 2020. By the
same judgment, the Bombay High Court dismissed the writ petition filed
by the appellant in Civil Appeal No.3359 of 2020 involving the self-same
issue.
13 for short, "said notification"
14 for short, "FTP"
15 for short, "1992 Act"
SANDOZ PRIVATE LIMITED v. UNION OF INDIA & OTHERS
[A. M. KHANWILKAR, J.]
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CIVIL APPEAL NO. 3359 OF 2020
3a. Reverting to the factual matrix in Civil Appeal No.3359 of
2020, the appellant claims to be identically placed as in the companion
appeal being hundred per cent EOU engaged in manufacturing of goods
falling under Chapter 30 of the Schedule to the Central Excise Tariff
Act, 1985 and for that purpose, the appellant has a factory at B-15,
Phase 1-A, Verna, Salcette, Goa - 403772. The appellant's DTA Unit
has been supplying goods on payment of CENVAT duty under claim for
rebate to the appellant's EOU. The appellant's EOU uses the said goods
in the manufacture of goods cleared for export. The appellant asserted
that its DTA Unit did not claim benefit of TED refund and produced
disclaimer certificate in that regard to enable the appellant's EOU to
claim the refund of TED on the goods procured by it or supplied by its
DTA Unit. The appellant asserts that even in the past it had claimed
refund of TED paid by its DTA Unit on the goods supplied to the
appellant's EOU and was so granted by the Development Commissioner.
However, on this occasion, a different view had been taken in respect of
subject application dated 08.08.2012 submitted by the appellant for TED
refund for the month of November 2011 being Rs.6,87,89,737/- (Rupees
Six Crore Eighty-Seven Lakh Eighty-Nine Thousand Seven Hundred
and Thirty-Seven only). The claim came to be rejected in light of the
policy (impugned) circular issued by DGFT, without giving any opportunity
to the appellant.
3b. Feeling aggrieved, the appellant filed Writ Petition No.9607 of
2013 before the Bombay High Court challenging the legality and validity
of the policy circular dated 15.03.2013. That petition was disposed of by
directing the competent authority to pass a speaking order on the refund
application submitted by the appellant. Pursuant to the remand order, the
competent authority gave personal hearing to the appellant and once
again rejected the TED refund claim vide order dated 12.01.2015 on the
ground that the appellant had received supplies of the concerned goods
from their DTA Unit to EOU, which were ab initio exempted from
payment of duty under para 6.11(c)(ii) of Foreign Trade Policy, 20092014. Thus, refund was not admissible to the appellant.
3c. This decision was challenged by the appellant before the
Bombay High Court by way of fresh Writ Petition No.2926 of 2015
wherein the policy circular dated 15.03.2013 issued by DGFT was also
challenged. This writ petition was heard and decided by the Bombay High
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Court, along with another writ petition (which is subject matter in the
companion appeal filed by Sandoz Private Limited) vide common judgment
and order dated 01.08.2016, rejecting the assail to the policy circular and
order passed by the competent authority referred to above. This judgment
is subject matter of challenge in Civil Appeal No. 3359 of 2020.
4. As the factual matrix in both the writ petitions was similar, the
High Court vide common impugned judgment dated 01.08.2016
considered the grounds of challenge to the decision of the Development
Commissioner; and eventually opined that in light of paras 6.2(b) and
6.11(c)(ii) of the FTP, no refund of TED could be given by the regional
authority of DGFT or the Office of the Development Commissioners
because procurement of excisable goods by the appellants-EOUs was
ab initio exempted from payment of excise duty. It went on to observe
that there was a clear stipulation in the FTP itself in that regard. The
High Court noted that the purport of the impugned circular was only to
clarify the obvious position. There was no obligation on the EOU to pay
duty at the time of procurement of excisable goods. For, FTP plainly
predicates that the procurement of excisable goods should be done by
EOU without payment of excise duty. As there is reverse obligation on
EOU to procure excisable goods without payment of duty, there is no
question of claiming refund. Thus, it held that the conclusion reached by
the Development Commissioner was in conformity with the dispensation
provided in the FTP and is not in any manner contrary thereto or to the
mandate of Section 5 of the 1992 Act. Further, the impugned circular
was only to place on record the correct perspective of the dispensation
provided in the FTP. The argument that the impugned circular can have
prospective effect only, cannot be countenanced in law. In that, the circular
was only to clarify the purport of paras 6.2(b), 6.11(c)(ii) and 8.3(c) of
the FTP; and if these provisions were read harmoniously and conjointly,
leave no manner of doubt that refund request before DGFT under para
8.3(c) in relation to excisable goods, even though procured by EOU
upon payment of duty, would be inadmissible in law.
5. The Bombay High Court also noted that although in the past
the regional authority had accepted refund request of EOUs, that cannot
bestow any right much less vested right in EOUs so as to issue mandamus
to the concerned statutory authorities to act contrary to the provisions of
the FTP. As a matter of fact, to dispel the doubt entertained by EOUs if
any, the position was restated by the Government vide notification dated
18.04.2013 issued in exercise of power conferred under Section 5 of the
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1992 Act. In substance, the Bombay High Court observed that the
impugned circular was only to restate and clarify that the regional
authority of DGFT was not competent to entertain the refund application;
and if EOU or the supplier so desired, were free to pursue refund claim
before the competent excise authorities where amount towards duty
had been deposited or paid.
CIVIL APPEAL NO.3360 OF 2020
6a. This appeal by the Union of India assails the judgment and
order dated 08.10.2018 passed by the Division Bench of the High Court
of Delhi in Writ Petition (C) No.10526 of 2017.