Allowed

Agarwalla Timbers Pvt. Ltd. v. Union of India

Gujarat HC12 Oct 2022SCA/15296/2013

Case brief

AI extract

What is this about?

The High Court of Gujarat held that the respondent authorities could not impose additional time limits for utilizing re-credited DEPB scrips via public notice and circulars. Such circulars were declared ultra vires the Customs Act as they attempted to amend statutory exemption notifications. The court directed the refund of the SAC amount to the petitioners via RTGS within 12 weeks with interest,

What did the court decide?

Directed respondents to refund the amount to petitioners via RTGS within 12 weeks with interest at 6% per annum.

Agarwalla Timbers Pvt. Ltd. Vs Union of India — Banking and Recovery | Gujarat HC (2022)

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C/SCA/15296/2013 JUDGMENT DATED: 12/10/2022

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 15296 of 2013

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With

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R/SPECIAL CIVIL APPLICATION NO. 3286 of 2014

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FOR APPROVAL AND SIGNATURE:

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HONOURABLE MR. JUSTICE N.V.ANJARIA

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and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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1 Whether Reporters of Local Papers may be allowed to see the judgment ?

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2 To be referred to the Reporter or not ?

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3 Whether their Lordships wish to see the fair copy of the judgment ?

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4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

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AGARWALLA TIMBERS PVT LTD

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Versus

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UNION OF INDIA & 7 other(s)

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Appearance:

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MR HARDIK P MODH(5344) for the Petitioner(s) No. 1 MR DEVANG VYAS(2794) for the Respondent(s) No. 1 MR IH SYED(2321) for the Respondent(s) No. 3 MR UTKARSH R SHARMA(6157) for the Respondent(s) No. 2,4,5,7 MR. PARTH H BHATT(6381) for the Respondent(s) No. 1 MS TRUSHA K PATEL(2434) for the Respondent(s) No. 1 RULE SERVED for the Respondent(s) No. 6,8

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CORAM: HONOURABLE MR. JUSTICE N.V.ANJARIA

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and

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HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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Page 1 of 62

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C/SCA/15296/2013 JUDGMENT DATED: 12/10/2022

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Date : 12/10/2022

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ORAL JUDGMENT

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(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

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1.Heard learned advocate Mr. Hardik Modh for

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the petitioners, learned advocate Mr.Utkarsh Sharma for the respondent nos. 2 to 7 and learned Additional Solicitor General Mr. Devang Vyas for respondent no.1 - Union of India.

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2.Having regard to the controversy involved in these petitions which is in a narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for final hearing and would be disposed of by this common judgment.

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3.By these petitions, the petitioners have challenged the public notice

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No.6(RE-2013)/2009-14 dated 18.04.2013 issued

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by respondent no.3 - Director General of Foreign Trade (for short “DGFT”) and Circular No.18/2013-Cus dated 29.04.2013 issued by respondent no.2-Central Board of Excise and Customs, Ministry of Finance(for short “CBEC”) and letter dated 23.08.2013 issued by respondent no.4 - the Assistant Commissioner

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of Customs for denial of transfer of recredited DEPB (Duty Entitlement Passbook) scrips and/or Reward Scheme scrips and has also prayed for consequential reliefs. In Special Civil Application No.3286/2014, Order-in-Appeal dated 10.04.2014 passed by the Commissioner Appeals is also under challenge.

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4.In order to consider the reliefs prayed for by the petitioners, it would be necessary to consider the scheme of Foreign Trade Development and Regulation Act, 1992 (For short “FTDR Act”), the provisions of Foreign

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Trade Policy (For short “FTP”)under which the DEPB benefits are available to the importers and and various policy circulars in relation to re-credit of SAD as under :

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: FTDR Act :

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I) The FTDR Act was enacted to provide for development and regulation of Foreign Trade by facilitating imports into and augmenting exports from India.

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II) Under Section 3 of the FTDR Act, respondent no.1-Union of India is empowered to publish in the Official Gazette to make provision for the development and regulation and of foreign trade. Under sub-section (2) of Section 3, the Central Government may by order, publish in the Official Gazette, prohibit, restrict or otherwise regulate import/export of goods subject to such

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exceptions as it may deem fit.

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III) Under Section 5, the Central

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Government is empowered to formulate and announce by notification in the Official Gazette, the Exim Policy which may be amended from time to time and FTP is also issued which is generally formulated for 5 years and the same is revised/amended by means of Annual Supplement each year.

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: FTP :

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IV) Under Para 2.3 of the FTP, the Director General Of Foreign Trade (DGFT) is empowered to interpret the policy and in case of any doubt or question which emerges thereof or in the matter of classification of any item in the ITC(HS) or in the Handbook, the decision of DGFT shall be final and binding.

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V) Chapter 4 of the FTP deals with Duty

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Exemption and Remission Schemes. Para. 4.1 of the FTP deals with Duty Entitlement Passbook (DEPB) Scheme which enables duty free import of inputs required for export production. Duty Exemption Schemes consist of (a) Advance Authorisation scheme and (b) Duty Free Import Authorisation (DFIA) scheme. A Duty Remission

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Scheme enables post export

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replenishment/remission of duty on inputs used in export product. Duty Remission Schemes consist of (a) DEPB Scheme and (b) Duty Drawback (DBK) Scheme.

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VI) Para. 4.3.4 of the FTP provides that DEPB and/or items imported against it are freely transferable, however, transfer of DEPB shall be for import at specified port,

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which shall be the port from where the exports have been made. Imports from a port

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other than the port of export shall be allowed under TRA facility as per terms and

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conditions of Department of Revenue (DoR) notification.

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VII) Para. 4.3.5 of the FTP provides that

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additional customs duty/drawback Excise Duty and Special Additional Duty (SAD) paid in cash or through debit under DEPB may also be adjusted as CENVAT Credit or Duty Drawback as per DoR rules.

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: Notification/ Circulars :

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VIII) Respondent no.2 issued a Notification No. 102/2007-Cus dated 14.09.2007 which provides that the goods

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falling under the Tariff Act having been imported into India by subsequent sale are exempted from the whole of SAD levied under Section 3(5) of the Tariff Act on the condition mentioned thereunder, including the condition that importer shall pay proper Sales Tax or VAT on sale of goods, as the

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case may be and produce documents evidencing such payment on sale of such imported goods.

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IX) Circular No. 6/2008-Cus dated 28^th

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April, 2008 was issued for clarification on filing of refund of 4% additional duty of customs in pursuance of Notification dated

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14.09.2007. Para nos. 4.3 and 7.3 of the Circular dated 28.04.2008 clarified the

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earlier circular dated 14.09.2007 as under:

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“4.3 With the extension of time limit and the requirement to file claims on a monthly basis, Board feels that the number of refund claims should be manageable for disposal within the normal period of three months. Further, in the absence of specific provision for payment of interest being made applicable under the said notification, the payment of interest does not arise for these claims. However, Board directs that the field formations shall ensure disposal of all such refund claims under the said notification within the normal period not exceeding three months from the date of receipt.

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xxxx

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7.3 On the issue that in case of 4% CVD having been paid through DEPB

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Scrip, whether refund could be paid by cash, it is clarified that instead of refunding the duty in cash, the amount eligible for refund should be recredited on the relevant DEPB Scrip.”

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X) Thereafter a Policy Circular No. 22/2009-14 dated 3^rd February, 2010 was issued

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on the representation received from the Trade

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seeking clarification regarding procedure for

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re-credit of 4% SAD in pursuance of Notification dated 14.09.2007, wherein it was clarified that after consultation with the Department of Revenue, the re-credit of scrips would be in terms of the guidelines stated therein. Guidelines (iii) and (iv) of

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the said Policy Circular read as under:

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“(iii) RA shall endorse the Bills of entry Nos and dates and the credit amount on the scrip along with the name and address of the consolidated certificate (credit note) issuing authority, as per the consolidated certificate (credit note) issued by the customs authority.

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(iv) All such applications shall be filed by the applicant within 3 months of

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issuance of the consolidated certificate (credit note) by the Customs authority. These applications shall be filed schemewise and port-wise to the RA concerned who had issued the original duty credit scrip.”

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XI) Thereafter, respondent no.3-DGFT on

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representation received from the trade vide

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Policy Circular No. 2/2009-14 dated 8^th October, 2010 clarified in relation to

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revalidation of scrips as under:

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"2. Representations have been received from Trade and Industry that re-credit and revalidation of the scrips is not being allowed in cases where validity of the scrips submitted for such re-credit may have expired on or before the date of submission of the request to the Regional Authority.

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Intention of the aforesaid provision for revalidation is to allow the utilization of the recredited amount. Hence, it is clarified that the validity of the re-credited scrips shall be six months from the date of endorsement by Regional Authorities or the original validity of the duty credit scrip, whichever is later. This revalidation shall be irrespective of the fact as to whether the scrip

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has expired on or before the date of submission of the scrip to the Regional Authority. All the Regional Authorities shall take appropriate action accordingly.”

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5.Now, reverting to the facts of the case, as

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the controversy arising in both these petitions are similar they have been heard together and for the sake of convenience, facts are recorded from Special Civil Application No.15296/2013 treating it as a lead matter.

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6.The petitioner of Special Civil Application No.15296/2013 is a private limited company incorporated under the Companies Act, 1956 and is engaged in trading of timber and is the owner of Saw Mills.

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6.1) It is the case of the petitioner that in the normal course of business, it imports timbers of various description and clears the same from the port on payment of

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customs duty including additional duty of customs leviable under section 3(5) of the Customs Tariff Act, 1975 (For short “the Tariff Act”).

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6.2) The additional duty levied under section 3(5) of the Tariff Act is popularly referred as Special Additional Duty (For short “SAD”) which is levied from importers

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in lieu of Sales Tax/VAT because the importers who import the goods for their own consumption or use, inspite of procuring the

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same for domestic or indigenous market, do not pay sales tax vis-a-vis the other actual users who procure the goods from the local

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and indigenous market and pays Sales Tax/VAT. Accordingly, to create a level playing field, SAD is levied under Section 3(5) of the Tariff Act.

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6.3) Subsequently, importers who sell of

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imported goods by paying Sales Tax/VAT are

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entitled to get refund in terms of Notification No. 102/2007-Cus dated

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14.09.2007 which provides that goods falling under the Tariff Act having been imported into India by subsequent sales are exempted from the whole of SAD levied under Section

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3(5) of Tariff Act on the conditions mentioned therein, including the condition that importer shall pay proper Sales Tax or VAT on sale of goods, as the goods may be and produce documents evidencing such payment on sale of such imported goods.

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6.4) As per the notification dated 14.09.2007, refund application can be filed only after the entire quantity of goods imported under a particular Bill of Entry is sold after the payment of Sales Tax/VAT by annexing requisite documents along with the

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refund claim which normally takes 4 to 6

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months from the date of import for sale of timber and filing an application for refund of SAD.

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Customs Authorities claiming refund of SAD paid by them and after verification of the documents submitted, such refunds are granted. It is the case of the petitioner that as and when the SAD is paid in cash, refund of the same is granted in cash, however when the same is paid by making debit in DEPB scrips and/or Reward Scheme scrips, the same is refunded back by way of re-credit in respective DEPB licenses under which the original debit was made.

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6.6) After the receipt of the refund order, if the refund is granted to the

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importer by way of re-credit, the importer approaches the Regional DGFT for re-credit of the said SAD amount granted to them by the jurisdictional Customs Officer as per Policy Circular No. 22/2009-14 dated 03.02.2010 and once the license is recredited by DGFT, the importer is entitled to utilize the same by importing goods by debiting SAD amount in the said re-credit DEPB scrips and/or Reward Scheme scrips.

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6.7) As the difficulties were being faced by trade and industry in relation to recredit of DEPB licenses, respondent no.2CBEC issued a Circular No. 27/2010-Cus., dated 13-8-2010 clarifying as under:

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"5. The matter has been examined in the Board. Board has considered the difficulties associated with change in EDI System to allow re-credit of scrips in case of 4% CVD refund and also the view of DGFT that modification in software at the end of DGFT for the purpose of re-credit of 4% CVD through Electronic Message

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System and its transmission to the Customs is not feasible at present.

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6.Considering the large scale pendency of such refund claims and in order to address the difficulties in getting 4% CVD refund by recrediting scrips, it has been decided by the Board that registration of re-credited duty scrips issued by DGFT on the basis of consolidated certificate furnished by Customs should be allowed on manual basis. The facility of manual filing of Bill of Entry for utilizing the amount of re-credited CVD refund for payment of duty is also allowed. This facility has been extended up to 3012-2010 as a one-time measure with a view to liquidate all such pendencies by that time."

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6.8) Thereafter Circular No. 11/2011 dated 24^th February, 2011 was issued by the

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respondent No. 2 clarifying that the time limit to use the re-credited DEPB scrips and/or Reward Scheme scrips for payment of 4% SAD was extended upto 30.06.2011. After the issuance of the said Circular, the Circular No. 30/2011-CUS was issued on 19^th

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July, 2011 clarifying that the time limit to

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use the re-credited DEPB scrips and/or Reward Scheme scrips was extended to 15^th September, 2011. which was further extended upto 31.03.2012 as per Circular No. 2/2012 dated 16.01.2012. Thereafter, time limit was further extended upto 30.06.2012 by Circular No. 10/2012-cus dated 29.03.2012.

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6.9) Respondent No.3 – DGFT by Public Notice No. 6(RE-2013)/2009-14 dated 18.04.2013 amended Para 2.13.2A of the Hand Book of Procedures (Vol.I) 2009-14 by substituting the contents therein and restricted the period upto 30.09.2013 for utilization of re-credited DEPB Scrips and/or Reward Scheme Scrips of 4% of SAD as

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under :

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"(i) Only for the purpose of utilization of re-credit of 4% Special Additional Duty (SAD) of customs, the freely transferable duty credit scrips (including DEPB) shall be deemed to have been revalidated till 30.09.2013. No

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further endorsement by the respective RA on such scrips shall be required.

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(ii) If the consolidated certificate (credit Note) has already been issued by Customs or gets issued by 30.06.2013, then the amount (4% SAD) indicated in the consolidated certificate by customs shall be deemed to have been re-credited in the scrips in such cases, without any further reference to any RA of DGFT.

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This is the last and final extension to use the re- credited scrips. No further extension shall be considered by the Government under any circumstances. Importers desirous of such refund in future must make the payment of SAD in cash.”

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6.10) Consequently, respondent No.2 – CBEC

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issued Circular No. 18/2013-Cus dated 29.04.2013 for utilization of re-credited

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DEPB scrips and/or Reward Scheme scrips in case of 4% SAD upto 30.09.2013. Respondent No.4 - the Assistant Commissioner of Customs

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and respondent no.5 – the Deputy Commissioner of Customs did not adjudicate

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the refund application within the time limit as prescribed and initiated action against the petitioner for denial of the refund on the ground that identity of the imported goods did not remain the same and therefore, the petitioner was not entitled for refund of 4% amount of SAD.

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6.11) It is the case of the petitioners that the petitioners were never issued fresh DEPB scrips and/or Reward Scheme scrips in terms of FTP as the petitioners were never into the business of export. The petitioners purchased DEPB scrips and/or Reward Scheme scrips from the open market in terms of Para 4.3.4 of FTP by paying consideration.

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6.12) The petitioners imported various consignments of Round- Logs/Sawn Timber

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prior to March 2012 and cleared the same on

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payment of applicable duties of customs including SAD which was paid by them either in cash or by debiting the DEPB Scrips and/or Reward Scheme scrips purchased by them from the market.

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6.13) The petitioners thereafter filed refund claim of SAD paid before the jurisdictional Customs Officer. However, the

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show cause notices was issued for denial of refund of SAD claimed by the petitioners on the premise that conditions set out under

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the impugned Notification has not been fulfilled as the identity of the imported goods on which SAD was paid and then subsequently sold under various tax invoices

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on payment of Sales Tax/VAT, was not corelated.

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6.14) The Adjudicating Authority

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adjudicated Show Cause Notice against the petitioners which was challenged before the

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Commissioner (Appeals) who upheld the order

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passed by the adjudicating authority rejecting refund claim on the premise that the goods imported by the petitioners were round logs and sold by them were Sawn Timbers and therefore, identity of the imported goods did not remain the same.

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6.15) The petitioners challenged the said order before the Customs, Excise and Service Tax Appellate Tribunal (For short “CESTAT”) which by order dated 19.08.2010/24.09.2010 allowed appeals filed by the petitioners. The Department challenged the order of CESTAT before this Court by way of filing Tax Appeals. This court by judgment and order dated 07.07.2011 dismissed the Tax Appeal and held that identity of the goods did not undergo any fundamental change so as

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to conclude that what was imported was different from what was ultimately sold in

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the local market.

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6.16) The Customs Department being aggrieved by the order dated 07.07.2011 passed by this Court, filed SLP bearing Nos. 10258 to 10296 of 2011 before the Hon'ble Supreme Court.

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6.17) The Hon'ble Supreme Court vide order dated 24.11.2011 passed an interim order directing the respondents to grant 100% refund on furnishing bank guarantee of 50% of the amount of SAD to be refunded within a period of 30 days.

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6.18) The petitioners accordingly filed 23 refund claims of SAD before the respondent No.4 – Assistant Commissioner of Customs at Kandla and 11 refund claims of SAD before respondent No.5 – The Deputy Commissioner of Customs at Mundra. Out of total 34 claims, 16 refund claims were related to 4% SAD paid through DEPB scrips and/or Reward Scheme

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scrips. Various refund claims filed by the petitioners were not adjudicated till the order passed by the Hon'ble Supreme Court. The petitioners, therefore, requested respondent no.4 for sanctioning the refund in cash/or re-crediting DEPB scrips and/or Reward Scheme scrips as per the order passed by Hon’ble Supreme Court.

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6.19) The petitioners by letter dated 18.06.2013 requested respondent Nos. 4 and 5

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to dispose of the refund claims at the earliest as per Circular No. 18/2013-Cus dated 29.09.2013 issued by respondent No. 2 restricting the time limit upto 30.06.2013 for disposal of applications for refund of 4% SAD paid through DEPB.

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6.20) Respondent Nos. 4 and 5 thereafter passed orders related to refund of SAD paid through DEPB by Orders-In-Original dated 26^th June, 2013, 28^th June, 2013 and 29^th June

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2013 in terms of the interim Order passed by

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the Hon'ble Supreme Court. Respondent No. 4 simultaneously issued the show cause notice for recovery of erroneous refund in terms of Section 28 of the Customs Act, 1962.

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6.21) A consolidated certificate dated

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28.06.2013 was issued on manual basis

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granting refund to the petitioners. As the petitioners were not in a position to utilise the entire amount of re-credited DEPB scrips and/or Reward Scheme scrips before 30.09.2013 as provided in the

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impugned public notice and circular, the petitioner approached respondent for

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allowing them to transfer DEPB scrips and/or

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Reward Scheme scrips to other importers so as to utilise re-credited DEPB scrips and/or Reward Scheme scrips. Respondent No.3

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declined the request of the petitioners by

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letter dated 27.07.2013. The petitioners

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also by letter dated 27.07.2013 requested

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the Chief Commissioner of Customs for

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transfer of Duty Credit Scrips. The petitioners again by reminders dated 14.08.2013 and 22.08.2013 reiterated the

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prayer to transfer the Duty Credit Scrips.

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6.22) The petitioners thereafter,

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requested respondent Nos. 2 and 3 to extend

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the validate period of utilization of credit facility upto 31.03.2014 as the petitioners

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were not in a position to use re-credit certificate because such certificates were not issued to the petitioners in time. It was pointed out by the petitioners that credit upto maximum around Rs.50 lakh of DEPB credit could be utilised as per average turnover in last two years.

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6.23) Respondent no.3 by letter dated 23.08.2013 informed the petitioners that

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there is no provision in the FTP for

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transfer of accrued credit. The petitioners could utilize an amount of Rs.1,42,52,626/approximately till 25^th August, 2013 and Rs.25 lakh approximately from 26^th August till date of filing of the petition out of total amount of credit of Rs.4,27,58,423/issued against 41 scrips in the months of May and June, 2013.

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6.24) The petitioners have therefore,

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approached this Court with the aforesaid prayers.

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7.Learned advocate Mr. Hardik Modh for the petitioners submitted that there was no fault on part of the petitioners for not issuing the DEPB scrips and/or Reward Scheme scrips in time limit inasmuch as the petitioners have filed the refund claims of SAD paid through DEPB scrips and/or Reward Scheme

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scrips within the time limit. It was

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submitted that due to the disputes raised by

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the respondents in respect of non compliance of the conditions of the notification, the petitioners were not sanctioned refund claim within the time limit. Lastly, in June, 2013 respondent Nos. 4 and 5 sanctioned the refund claim of SAD paid through DEPB scrips and/or Reward Scheme scrips i.e. after 17 months from the date of the order passed by the Hon'ble Supreme Court and therefore, the petitioners could not utilise the entire credit upto 30.09.2013 as per the impugned Public Notice dated 18.04.2013 and Circular dated 29.04.2013.

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7.1) It was submitted that the issue of extending time limit for utilising the credit of SAD in DEPB scrips and/or Reward Scheme scrips came up for consideration before the Delhi High Court in case of Allen

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Diesels India Pvt. Ltd. v. Union of India reported in 2016 (334) ELT 624(Del) in which

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the Delhi High Court held that by way of

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public notice and notification, respondent nos. 2 and 3 could not have imposed additional restriction for availing the exemption in terms of Notification No.102/2007-Cus issued under section 25(1) of the Customs Act, 1962. It was also held

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that an amendment to notification issued in exercise of powers under section 25(1) of the Customs Act, 1962 has to be brought about only by issuing another notification under that provision and impugned public notice and circular which seeks to impose additional restriction for grant of refund

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are held to be ultra vires of the Act and legally not sustainable.

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7.2) It was therefore, submitted that the impugned public notice and the circular are

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without jurisdiction, ultra vires the FTDR Act and the FTP.

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7.3) Learned advocate Mr. Modh further

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submitted that in terms of section 5 of the FTDR Act read with Para 1.3 of the FTP, amendments to the FTP can only be made by way of a notification by the Central Government under Section 5 of the Act and the power of amending the FTP cannot be delegated in terms of Section 6 of the Act and therefore, respondent No. 2 cannot take away the benefits which were available on a plain reading of the FTP by issuing circular.

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7.4) It was submitted that respondent no.2 cannot amend the policy by issuing the circular inasmuch as by the impugned circular, the provisions of FTP have been amended which is completely beyond the jurisdiction of respondent no.2- CBEC and respondent no.3-DGFT. It was submitted that

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the department cannot be permitted to take advantage of their own wrong inasmuch as non utilisation of re-credited DEPB scrips and/ or Reward Scheme scrips was not due to any

¶240

fault or lapse on the part of the petitioners and it was only because the department initiated the action for denial of refund of SAD on the premise of change of identity of the imported goods, the refund claim filed by the petitioners were not adjudicated within the time limit causing delay in issuing the consolidated

¶241

certificate for re-credited DEPB scrips and/or Reward Scheme scrips.

¶242

7.5) It was submitted that by not

¶243

allowing to utilise the re-credit of

¶244

DEPB/other scrips, the petitioners are

¶245

saddled with double duty inasmuch as SAD was

¶246

levied at the time of import and further VAT/Sales Tax was paid by the petitioners

¶247

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¶249

when the petitioners sold the imported goods

¶250

in the domestic market. Therefore, right for refund of SAD through DEPB/other Reward Scrips was accrued and the petitioner was entitled to utilise the same and such right could not have been taken away by putting restriction on time limit as done by the impugned Public Notice and the circular.

¶251

7.6) It was submitted that the

¶252

contention of the respondent that there is no provision under the FTP for allowing transfer of DEPB credit/ Reward Scrips is

¶253

not tenable inasmuch as the petitioners

¶254

purchased DEPB from the market as permissible under the law and DEPB credit would not have been transferred to the

¶255

petitioners and therefore, in the same

¶256

manner petitioners ought to have been

¶257

granted permission to transfer re-credit of DEPB/other scrips by transferring the same

¶258

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¶260

to the other traders for utilisation as the petitioners were not able to utilise the recredit of DEPB within the stipulated time

¶261

as per the impugned public notice and circular.

¶262

7.7) Learned advocate Mr. Modh in the

¶263

alternative and without prejudice to the other contentions submitted that Para 4.3.4 allows the exporters to transfer DEPB credit as per terms and conditions of notification and there is no provision under the FTP

¶264

debarring the assessee from transferring the credit and therefore, respondent no.3 could not have denied the transfer as per letter dated 23.08.2013.

¶265

the petitioner paid SAD through cash, then the petitioners would have been allowed cash

¶266

refund but as the petitioners paid SAD

¶267

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¶268

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¶269

through using DEPB and/or other Reward

¶270

scrips, the petitioners could not have been denied to utilise such credit by putting restriction on time limit and further could not have denied the petitioners to transfer such scrips to other traders through DEPB and other scrips.

¶271

there is a discriminatory policy adopted by the respondents for refund through cash and refund through DEPB and/or other scrips.

¶272

7.10) It was submitted that inspite of the fact that Circular No. 6/2008-Cus dated 28.04.2008 casts responsibility upon the respondent authority to dispose of refund claims within the normal period of 3 months from the date of receipt, the respondent authority decided to sanction the refund

¶273

only in the month of May/June 2013 for 13

¶274

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¶276

refund claims filed by the petitioners from January 2010 onwards. It was therefore, submitted that it was a fit case for granting the extension of time limit for utilization of re-credited DEPB and/or other Reward Scrip of 4% SAD by the respondent authority.

¶277

7.11) Learned advocate Mr. Modh submitted

¶278

that as there is delay in sanctioning the refund claim, the petitioners are also entitled to refund with interest under the provisions of Customs Act,1962. In support of such submission reliance is placed on the decision of Apex Court in case of Ranbaxy Laboratories Ltd. v. Union of India reported in 2011(273) ELT 3 (SC), more particularly, paragraph no.9 thereof which reads as under :

¶279

“9. It is manifest from the aforeextracted provisions that Section 11BB of the Act comes into play only after an order for refund has been made under

¶280

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¶282

Section 11B of the Act. Section 11BB of the Act lays down that in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted under sub-section (1) of Section 11B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. The Explanation appearing below Proviso to Section 11BB introduces a deeming fiction that where the order for refund of duty is not made by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise but by an Appellate Authority or the Court, then for the purpose of this Section the order made by such higher Appellate Authority or by the Court shall be deemed to be an order made under sub-section (2) of Section 11B of the Act. It is clear that the Explanation has nothing to do with the postponement of the date from which interest becomes payable under Section 11BB of the Act. Manifestly, interest under Section 11BB of the Act becomes payable, if on an expiry of a period of three months from the date of receipt of the application for refund, the amount claimed is still not refunded. Thus, the only interpretation of Section 11BB that can be arrived at is that interest under the said Section becomes payable on the expiry of a period of three months from the date of receipt of the application under Subsection (1) of Section 11B of the Act and that the said Explanation does not have any bearing or connection with the date from which interest under Section

¶283

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¶285

11BB of the Act becomes payable.”

¶286

7.12) It was further submitted that DEPB is no longer valid and therefore, the amount cannot be re-credited in such scrips and the department cannot be permitted to pay it by a mode which is not in existence today and therefore, an appropriate order be passed directing the respondents to pay through RTGS. In support of such submission he relied upon the decision of CESTAT, Principal Bench, New Delhi in case of Commissioner of Customs and Excise Pratapganj v Artex Textile Private Limited

¶287

reported in 2020 (374) ELT 122(Tri-Del).

¶288

reliance was also placed on the following decisions:

¶289

In case of Eicher Motors Ltd. v. Union of

¶290

India reported in 1999(106)ELT 3(SC).

¶291

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¶292

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¶293

In case of Commissioner of C. Ex.,

¶294

Ahmedabad-II v. Omkar Textile Mills Pvt.

¶295

Ltd . reported in 2010(262) ELT 115(Guj).

¶296

In case of Ratnamani Metals and Tubes v.

¶297

Union of India reported in 2016 (339) ELT 509 (Guj.).

¶298

In case of Inter Continental (India) v.

¶299

Union of India reported in 2003(154) ELT 37 (Guj).

¶300

In case of Union of India v. Inter

¶301

Continental (India) reported in 2008 (226) ELT 16 (SC).

¶302

In case of Enterprises International

¶303

Ltd. v. Assitt. C.C. (Exports), Chennai

¶304

reported in 2016 (342) (ELT)57 (Mad).

¶305

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¶306

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¶307

In case of Commissioner of Customs v.

¶308

Variety Lumbers Pvt. Ltd reported in

¶309

2018(360) ELT 790 (SC).

¶310

8.On the other hand, learned advocate Mr. Utkarsh Sharma for the respondent nos. 2 to 7 submitted that by the impugned public notice and circular, it was made clear that no further extension shall be issued by the Government. The respondent on receipt of number of representations from some exporters for extension of scheme as they could not utilise the re-credited scrips within prescribed time limit on account of delay in re-credit by Customs or after re-credit, sufficient time was not allowed, respondent no.3 had again taken up the issue vide letters dated 17.09.2013 and 14.11.2013 requesting Department of Revenue/CBEC for remedial measures for resolving the issue.

¶311

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¶313

8.1) It was further submitted that refund

¶314

applications were kept in abeyance as the matter of allowing refund to the eligible claimants was sub-judice and when the issue was decided by the Hon’ble Supreme Court directing the Customs department to process

¶315

the refund applications, the department immediately started scrutinising of refund applications and refund was sanctioned on

¶316

receipt of bank guarantee from the petitioners as directed by the Hon’ble Supreme Court and there was no delay on part of the department but in fact the petitioners took time to submit bank guarantee which had delayed the sanctioning of the refund. It was submitted that the petitioners were well aware about the time limit for utilisation of re-credited DEPB scrips and/or Reward Scheme scrips on or before 30.09.2013 and the inability of the

¶317

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¶319

petitioners to utilise the re-credited DEPB scrips and/or Reward Scheme scrips cannot be a ground for extending the scheme for an indefinite period.

¶320

request of the petitioners to transfer credit accrued on account of refund of SAD, cannot be granted contrary to FTP as there is no provision in FTP to permit such transfer.

¶321

9.Having heard the learned advocates for the respective parties and considering the facts of the case, it appears that there is no fault on part of the petitioners to file the refund claims. It was only because of the delay on part of the respondent authority that the refund claims were sanctioned in the month of May/June 2013.

¶322

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¶324

With regard to the challenge to the

¶325

impugned public notice and circular on the ground that the Notification No. 102/2007-Cus dated 14.09.2007 could not have been amended,

¶326

it is required to be noted that the petitioners have satisfied all the conditions of the said notification and the issue with

¶327

regard to the sale of same imported goods is pending before the Apex Court and in view of the interim order passed by the Apex Court on furnishing bank guarantee by the petitioners, refund claim ought to have been granted to the petitioners, without there being any time limit to utilise such re-credited DEPB scrips and/or Reward Scheme scrips.

¶328

The stand of the respondent authorities that since the petitioners were put to notice to utilise the re-credited DEPB scrips and/or Reward Scheme scrips on or before 30.09.2013 and cannot be extended is also not tenable

¶329

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¶330

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¶331

because the question as to whether such

¶332

public notice and circular could have been issued restricting the entitlement of the

¶333

petitioners to refund in terms of Notification No. 102/2007-Cus without the said notification itself being amended, came up for consideration before Delhi High Court

¶334

in case of Allen Diesels India Pvt. Ltd. (supra), wherein it is held as under :

¶335

“15. At the outset, the Court notes that Section 151A of the Act is for a very limited purpose of issuing of instructions to officers of customs for the purpose of "uniformity in the classification of goods or with respect to the levy of duty thereon" or for the

¶336

implementation of any other provisions of this Act or of any other law for the time being in force, in so far as they relate to "any prohibition/restriction for import or export of goods." The above provision does not envisage any amendment being made to an exemption notification that may have been issued in exercise of powers under Section 25 (1) of the Act. An amendment through

¶337

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¶338

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¶339

notification can possibly be brought about only by again exercising the powers under Section 25(1) of the Act. In this very context, it may be noticed that one instance of such amendment is the issuance of Notification No.93/2008Customs, dated 1st August 2008 under Section 25(1) of the Act to bring about an amendment to Notification No. 102/2007Customs to introduce a time limit within which claims for refund of the SAD should be made by importers.

¶340

Although it is sought to be projected that the circulars which are subject matter of the challenge in the present petitions were issued to streamline the procedure and to remove ambiguities, in fact what the circulars seek to amend is Notification No. 102/2007Customs itself by introducing an additional condition for being entitled to refund, which condition does not find place in Notification No. 102/2007Customs. This condition is to the effect that if the payment of the SAD has in the first place not been made in cash, but by using a DEPB scrip, then the importers concerned would not be entitled to refund of SAD in cash. It is not in dispute that there is no such restriction in Notification No. 102/2007-

¶341

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¶342

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¶343

Customs even as on date.

¶344

The question whether the device of circulars could be adopted for modifying a notification has come up for consideration before the Court earlier. In Sandur Micro Circuits Ltd. v. Commissioner of Central Excise, 2008 (8) TMI 3- SC, it was inter alia held that:

¶345

"A Circular cannot take away the effect of Notifications statutorily issued. In fact in certain cases it has been held that the Circular cannot whittle down the Exemption Notification and restrict the scope of the Exemption Notification or hit it down. In other words it was held that by issuing a circular a new condition thereby restricting the scope of the exemption or restricting or whittling it down cannot be imposed".

¶346

In Modi Rubber Ltd. v. Union of India, 1978 (2) ELT (J127) (Del.), a similar issue was examined and this Court held as under:

¶347

"Further, it is quite open to the Government to grant an exemption subject to conditions. If the object of the Government in granting

¶348

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¶350

an exemption is to benefit the consumer by the reduction of the selling price of the goods, then the Government notification granting the exemption should itself say so. For instance, notification GSR 1089, dated 29th April, 1969 expressly stated that the benefit of the exemption was to be available only to those manufacturers who produce proof to the satisfaction of the Collector that such benefit has been passed on by them to whom they have sole the goods. Such a condition has to be a part of the exemption notification. For, the Notification is "law". But, after enacting the law, such a condition cannot be imposed by administrative directions, guidelines or press note. These administrative acts cannot go contrary to the statutory notification".

¶351

Recently in Pioneer India Electronics (P) Ltd. v. Union of India, 2014(301) ELT 59 (Del.) it was observed as under:

¶352

"The word "exemption" as used in sub-section (1) to Section 25 can and should include extension or increase in time but cannot

¶353

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¶355

be stretched and expounded to include power of the Government to, by a circular, reduce the statutory time for a claim of refund stipulated under the principal enactment, i.e., the Customs Act, 1962. That would make the circular ultra vires the statute and beyond the scope of the Act, Rules etc. Circulars might depart from the strict tenure of the statutory provision and might mitigate rigours of law thereby granting administrative relief beyond terms of the relevant provisions of the statute, but the Central Government is not empowered to withdraw benefits or impose harsher or stricter conditions than those postulated by the statute. In later cases, circulars can supplant the law but not supplement the law."

¶356

Therefore, the legal position as explained in the above decisions makes it clear that the Circular Nos. 6/2008, 10/2012 and 18/2013 issued by the CBEC could not have imposed an additional restriction for availing of the exemption in terms of the Notification No. 102/2007- Cus issued under Section 25(1) of the Act. An amendment to a notification issued in exercise of the powers

¶357

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¶359

under Section 25 (1) of the Act has to be brought about only by issuing another notification under that provision. Inasmuch as the circulars under challenge seek to impose an additional restriction for grant of refund of the SAD under Notification No. 102/2007-Customs, they are ultra vires of the Act and cannot be legally sustained. Consequently, it is declared that the Circular Nos. 6/2008, 10/2012 and 18/2013 issued by the CBEC, insofar as they seek to deny importers and exporters the refund of the SAD paid by using DEPB scrips, are invalid.”

¶360

In view of above analysis made by Delhi High Court relying upon the judgment in case of Sandur Micro Circuits Ltd. v. Commissioner of Central Excise , reported in 2008 (8) TMI 3-SC, in case of Modi Rubber Ltd. v. Union of India , reported in 1978 (2) ELT (J127)( Del.) and in case of Pioneer India Electronics (P) Ltd. v. Union of India , reported in 2014(301) ELT 59 (Del.), impugned public notice and circular could not have imposed additional restriction for availing of the exemption in

¶361

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¶363

terms of Notification No. 102/2007-Cus issued under section 25(1) of the Customs Act, 1962 as notification has to be issued in exercise of powers under section 25(1) of the Act and any amendment could have been brought by another notification under that provision.

¶364

In case of Inter Continental (India) (supra) , the coordinate Bench of this Court

¶365

has held as under :

¶366

“8. The charge of Customs duty is provided under Section 12 of the Act, which declares that duties of customs shall be levied on all goods imported into or exported from "India." The taxable event occurs moment the goods enter the territorial waters of India and the Act does not envisage different taxable events for different purposes. The right to recover duty flows from Section 12 of the Act. As provided in Section 12 of the Act dues of customs are to be levied at such rates as may be specified under the Tariff Act. The law is well settled as regards distinction between chargeability and assessment or quantification of the amount payable by way of customs duty. Section 12 of the Act is the only charging section but when it comes

¶367

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¶369

to assessment or quantification of the amount of the duty payable Sections 14 and 15 of the Act come into play. While Section 14 deals with valuation of goods for the purpose of assessment. Section 15 prescribes the date for determination of rate of duty and tariff valuation of imported goods.

¶370

Section 25 of the Act which deals with power to grant exemption from duty is reproduced hereunder :

¶371

“25. Power to grant exemption from duty.-

¶372

(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon.

¶373

(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, for reasons to be stated in such order, any goods, of strategic or secret nature, or for charitable purpose on which duty is leviable.

¶374

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¶376

(3) An exemption under subsection(1) or sub-section(2) in respect of any goods from any part of the duty of customs leviable thereon (the duty of customs leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of customs chargeable on such goods shall in no case exceed the statutory duty.

¶377

Explanation :'Form or method`, in relation to a rate of duty of customs, means the basis, namely, valuation, weight, number, length, area, volume or other measure with reference to which the duty is leviable.

¶378

(4) Every notification issued under sub-section (1) shall -

¶379

(a) unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette;

¶380

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¶381

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¶382

(b) also be published and offered for sale on the date of its issue by the Directorate of Publicity and Public Relations of the Board, New Delhi.

¶383

(5) Notwithstanding anything contained in sub-section (4), where a notification comes into force on a date later than the date of its issue, the same shall be published and offered for sale by the said Directorate of Publicity and Public Relations on a date on or before the date on which the said notification comes into force".

¶384

Sub-section (1) of Section 25 of the Act specifically provides that Central Government may by public Notification in the Official Gazette, if it is necessary in the public interest, exempt generally either absolutely or subject to such condition in relation to specified goods either wholly or partly duty of customs. The condition which may be imposed in the Notification may be such as may require fulfillment before or after clearance. Subsection (2) deals with passing of a special order. Sub-section (3) provides for levy of a duty on specified goods at a rate expressed in a form or method different from form or method in which the statutory duty is leviable. Notification issued under subsection (1) shall come into force on the date of its issue by the Central

¶385

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¶386

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¶387

Government for publication in the official gazette unless otherwise provided. This is provided in subsection (4) of the Act. This publication in the official gazette assumes importance in light of provisions of Section 159 of the Act, whereby it is specifically provided that such Notification as may be issued under Section 25 of the Act shall be laid before each House of Parliament and the period for which it should be so laid and permitting modification by the House. The essential ingredient under the Section is that the Notification "shall be laid" before each House of Parliament. Hence, on a conjoint reading of Sections 25 and 159 of the Act it is clear that a Notification issued under Section 25 of the Act has the force of a statutory levy.

¶388

Section 151A of the Act provides for issuance of instructions to Officers of Customs. The section requires that if the Board considers it necessary or expedient to issue any orders, instructions and directions to officers of customs, it would be open to the Board to do so but the necessity or the expediency has to be for the purpose of uniformity in the classification of goods or with respect to the levy of duty on such goods. The said section further provides that all officers and other persons employed in execution of the Act shall observe and follow such orders,

¶389

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¶390

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¶391

instructions and directions of the Board. The Act and The Tariff Act are a composite legislation – for effectuating one resort to the other is a must. The charging provision has to be read with the computation provisions as constituting an integrated code.

¶392

This is broadly the Scheme of the Act on the basis of which the present controversy shall have to be resolved. There is no dispute between the parties as regards classification of goods. The question that falls for determination is , once the goods are classified and the taxable event has occurred, the rate of duty is fixed statutorily and some benefit of exemption is granted by way of Notification by exercising powers under Section 25(1) of the Act, is it possible to (i) postpone the taxable event, and/or (ii) to modify the levy by issuing circular in exercise of power under Section 151A of the Act.

¶393

As already seen, charge is leviable by operation of Section 12 of the Act and the said provision also prescribes taxable event. In the present case taxable event having occurred when the goods were imported by the petitioners, can the department then take a stand that though the taxable event has occurred collection of duty shall be made provisionally and final chargeability shall be ascertained

¶394

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¶395

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¶396

upon happening or not happening of a contingency. In our opinion, this course of action cannot be permitted as the statute does not so provide. Once the import of goods is complete the charge is fastened and only the assessment or quantification remains to be done but such assessment or quantification cannot depend upon a contingency which may happen or which may not happen in future. This cannot be the intention of the legislature and the provisions of the Act coupled with the Tariff Act cannot be read in such a manner.

¶397

Section 25(1) of the Act permits the Central Government to notify specified goods to be exempt generally either absolutely or subject to such condition which may be fulfilled before or after clearance and the exemption may be in relation to whole or in part of the duty of customs leviable on the notified goods. Hence, the legislature was aware and conscience of the fact that it may be necessary in a given set of circumstances to lay down the conditions which shall be fulfilled by an importer even after clearance if the importer wanted to claim benefit of exemption from duty of customs under a particular notification and such condition shall have to form part of the notification. In other words Section 25(1) of the Act provides for complete machinery which would enable the importer to know before importing and before claiming

¶398

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¶399

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¶400

exemption as to what are the conditions on fulfillment of which he was to become entitled to seek exemption under such a notification. The stand adopted by the revenue does not fit in with the scheme of the Act.

¶401

As can be seen from Notification No.17, the Government was conscious of the provision of Section 25(1) of the Act and has specifically prescribed condition in relation to some entries in column No.6 of the Table. It is not necessary for us to refer to various conditions specified in the Annexure to the Notification but by way of illustration entry at Sr.No.43 will be sufficient to show how provisions of Section 25(1) of the Act operate. In column 6 pertaining to conditions, condition No.6 has been prescribed for entry No.43, which deals with " wine, for use as sacramental wine" and the rate of concessional duty is 35%. Condition No.6 in the annexure reads;

¶402

"if the importer furnishes undertaking to the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, that the wine shall be used as sacramental wine".

¶403

Therefore, a condition pertaining to a stage after clearance has been imposed as provided in the section. Similarly, condition Nos. 12, 17, 18

¶404

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¶405

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¶406

and 40 are the instances of situations where end-use is stipulated as being pre-requisite for claiming exemption as part of the Notification No.17. In fact, in condition No.40, a period of two years is available from the date of importation or within such extended period as the officer may allow, in which the importer is required to produce necessary certificate.

¶407

xxx

¶408

The position in law is well settled. It is not permissible to read some additional words in a notification, much less any condition where none have been prescribed. The entire matter is governed wholly by language of the notification and in a case where the plain term of the exemption show that the tax payer falls within the same, benefit cannot be denied by relying upon supposed intention of the exempting authority. Furthermore, it is well established that in a taxing statute the meaning of a particular word as accepted by the trade and its popular meaning should be preferred and should commend to the authority because it is the condition of the article at the time of importing which is material for the purpose of classification as to under what head duty will be leviable and whether it would be exempt wholly or partly. In the case of Collector of Central Excise vs. Vipul Shipyard, (1997) 10

¶409

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¶410

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¶411

S.C.C.337 various notifications have been dealt with which grant exemption from excise duty to "Ocean-going vessels". The revenue had contended that end-use of the vessel was relevant and if the vessels were used within inland waters as barges they were liable to levy of duty. The Apex Court held that at the point of time when the vessels were built the liability to excise duty arose, and at that time vessels were "ocean-going vessels" and that subsequently if they were used in inland waters is of no consequence.

¶412

It is well established in law that the circulars issued by the Board may bind the officers of the department yet the position would be different with regard to an assessee who is always entitled to contest the validity or legality of such instructions.”

¶413

In case of Union of India v. Inter

¶414

Continental (India) (supra), the Supreme Court held as under :

¶415

“5. The High Court by the impugned order has accepted the writ petition by holding that the Central Board of Excise and Customs could not, by issuing a circular subsequent to the issuance of the notification, add a new condition thereby restricting the scope of the exemption notification. It was held that the

¶416

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¶417

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¶418

impugned circular No.40/2001-Cus. dated 13.7.2001 being contrary to the notification No.17/2001-Cus. dated 1st March, 2001 could not be sustained as it cannot override the said notification. In para 16, the High Court observed as under:

¶419

"In relation to entry at Sr.No.29 no condition is prescribed. Similarly no condition is prescribed in relation to entry at Sr.No.34 or even in entry No.28. If the Notification No.17 has not provided for any condition, in our opinion, subsequent circular cannot impose such a condition as the same would tantamount to rewriting Notification No.17 or in other words legislating by circular, which is not permissible in law. As can be seen from the relevant provisions with special reference to Section 25 read with Section 159 of the Act, a notification under Section 25 of the Act requires publication in the official gazette as well as requires tabling before both the Houses of Parliament and if that exercise has been carried out without any condition being imposed in the Notification No.17 it would not be permissible to permit revenue to impose such condition by way of circular. If the revenue is allowed to undertake such an exercise, the requirement of

¶420

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¶422

publication in official gazette and laying a notification before each House of the Parliament would become nugatory and such a course of action is not envisaged by the Act. It would give licence to the executive to bypass/override the legislature and cannot be countenanced."

¶423

We entirely agree with the view taken by the High Court that the department could not, by issuing a circular subsequent to the notification, add a new condition to the notification thereby either restricting the scope of the exemption notification or whittle it down.

¶424

A three Judge Bench of this Court in the case of Tata Teleservices Ltd. v. Commissioner of Customs reported in (2006) 1 SCC 746 has taken a similar view. In para 10, it was held as under:

¶425

"We are of the view that the reasoning of the Bombay Bench of the Tribunal as well as that of the Andhra Pradesh High Court must be affirmed and the decision of the Delhi Tribunal set aside insofar as it relates to the eligibility of LSP 340 to the benefit of the exemption notification. The Andhra Pradesh High Court was correct in coming to the conclusion that the Board

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had, in the impugned circular, predetermined the issue of common parlance that was a matter of evidence and should have been left to the Department to establish before the adjudicating authorities. The Bombay Bench was also correct in its conclusion that the circular sought to impose a limitation on the exemption notification which the exemption notification itself did not provide. It was not open to the Board to whittle down the exemption notification in such a manner."

¶429

Considering the relevant provisions of

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the Act, FTP, notifications and circulars as well as various judgements noted above, additional restriction for grant of refund as per Notification No. 102/2007-Cus by the impugned public notice and circular, is held to be ultra vires the Act and cannot be legally sustained.

¶431

Consequentially, it is declared that the impugned public notice dated 18.04.2013 and circular dated 29.04.2013 issued by DGFT and

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CBEC respectively insofar as they seek to deny the importers and exporters the refund of the SAD paid by using DEPB scrips and/or Reward Scheme scrips beyond 30.09.2013 are invalid.

¶435

petitioners are entitled to sanction refund of re-credited DEPB scrips and/or Reward Scheme scrips. However, if such scrips are not available today then the respondents are directed to refund the amount through RTGS in

¶436

the account of the petitioners within a period of 12 weeks from the date of receipt of this order.

¶437

With regard to the issue of interest raised by the petitioners is concerned, the refund amount shall carry interest at the rate of 6% as held by the Apex Court in case

¶438

of Ranbaxy Laboratories Ltd. (supra) from the

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date of receipt of the application for refund till the date of payment.

¶442