(Prayer: These Writ Petitions are filed under Articles 226 and 227 of the Constitution of India, praying to issue a writ of certiorari or other appropriate writ, direction or order in the nature of a writ, calling for the records leading to the issuance of the Impugned Circular No.1 of 2014 issued by Respondent No.3 (Annexure F) and Circular dated 03.09.2014 issued by Respondent No.2 (Annexure H) and the Office Memorandum dated 22.06.2015 issued by Respondent No.1 (Annexure L) and the consequential letters dated 16.07.2015 (Annexure M), 27.01.2016 (Annexure O) and 19.05.2016 (Annexure R), and after examining their proprietary and correctness, quash them as being legally and constitutionally invalid; being ultra vires the provisions of the Paragraph 6.11 of the Foreign Trade Policy & etc.,)
1. The controversy involved in these petitions lies in a narrow compass and is no longer res integra and is covered by three Division Bench decisions of different High Courts - Madras, Gujarat and Allahabad rendered in recent past and there is no contrary view of any other High Court available on the issue and therefore these petitions, after hearing the learned counsels, are being disposed of by this short order, quoting the relevant extracts from the other judgments rendered by the other High Courts.
2. Mr.N. Venkatraman, Senior Counsel for Mr. Tushar Jarwal, Mr.C.K. Nandakumar and Mr. Raghuram Cadambi, learned counsels for the petitioner urged that the controversy in brief is that the petitioner - M/s. Wipro GE Healthcare Private Limited ('Company' for short) claimed reimbursement of Central Sales Tax (CST) paid by it on the purchases of Medical Equipments from other suppliers in the course of inter-state Trade and Commerce, in terms of the provisions made in the relevant Foreign Trade Policy for the year 2009-2014.
3. The petitioner - Company purchases these goods from two sources, (i) from the Industries situated in Domestic Tariff Area (DTA) and (ii) from the EOU Units situated in EOUs/SEZs/EHTP/STPI specified Zones or areas. While in the said Foreign Trade Policy, the reimbursement of CST was allowed to the petitioner - Company, in so far as the goods purchased from Domestic Tariff Area (DTA) Units (other than specified SEZs/EOUs/EHTP/STPI areas), the said benefit of reimbursement was denied by the Respondent - Authorities, if such goods were purchased from EOU/SEZ Units.
4. The said distinction about the source of purchase from two types of Units was done away with by the Respondent Union of India itself in the next Foreign Trade Policy for the year 2015-2020, but for the period in question, covered by the Foreign Trade Policy for the year 2009-2014, the same was denied by the Respondent - Authorities under various impugned Circulars and communications which are challenged in the present petitions.
5. The petitioner - Company, therefore, approached this Court by way of present writ petitions with the following prayers:
"(A) Issue a writ of certiorari or other appropriate writ, direction or order in the nature of a writ, calling for the records leading to the issuance of the Impugned Circular No.1 of 2014 issued by Respondent No.2 (Annexure F) dt.25.4.2014 and Circular dated 03.09.2014 issued by Respondent No.3 (Annexure H) and the office Memorandum dated 22.06.2015 issued by Respondent No.5 (Annexure L) and the consequential letters dated 16.07.2015, issued by R1 (Annexure M), 27.01.2016 (Annexure O) issued by R3 and 19.05.2016 (Annexure R) issued by R3 and after examining their proprietary and correctness, quash them as being legally and constitutionally invalid; being ultra vires the provisions of the paragraph 6.11 of the Foreign Trade Policy;
(B) Issue a writ of Mandmus or other appropriate writ, direction or order in the nature of a Mandamus directing the Respondents to forthwith allow the pending claims amounting to Rs.20 crores approximately of the petitioner along with appropriate interest under the respective FTPs with respect to Reimbursement of the CST paid on the goods procured from other EOU Units/SEZs as per para.6.12/6.11 of the relevant Export-Import Policy/Foreign Trade Policy as applicable; and
(C) Grant such other relief as reliefs as this Hon'ble Court may deem fit and proper in the circumstances of the case."
6. The learned counsels for the petitioners have drawn the attention of the Court towards the recent decisions rendered by the three High Courts which are extracted below to the relevant extent, which not only contain the arguments raised before this Court also similarly raised before these respective High Courts and the reasons for negativing such contentions raised on behalf of the Respondent Authorities and holding that reimbursement of CST for the period covered by the Foreign Trade Policy for the year 2009-2014 also cannot be denied to the petitioner - Company.
7. The Division Bench of Madras High Court in Writ Appeal Nos.1516 & 1517 of 2016 (The Development Commissioner, MEPZ, Special Economic Zone & HEQUs and others Vs. M/s Hospira Health Care India Pvt.Ltd.) vide its judgment rendered on 14/06/2017 held as under:
"11.8.A holistic reading of the Scheme of Chapter 6 is, indicative of the fact that, there are several entitlements available to an EOU unit, none of which seems to suggest that it is either prohibited from purchasing goods from a DTA unit or from making a domestic sale, subject to it fulfilling the threshold NFE, fixed qua the concerned unit.
12. We must, however, confess that the heading/marginal note to paragraph 6.11 is indicative of the fact that the entitlements, provided therein may, perhaps, be restricted only qua supplies received by an EOU from a DTA unit. That being said, as discussed above, the Scheme of Chapter 6 is not suggestive of the fact that there is any impediment on the EOU Unit receiving supplies from DTA or an EOU unit, making supplies to a DTA unit, as was sought to be contended by Mr.Rajagopalan. The heading or a marginal note, in our view, cannot be used to control or override the plain meaning, which emerges on a perusal of the provisions contained in sub-clause (i) of clause (c) to paragraph 6.11 of the 2009 FTP. It is only in exceptional circumstances, and that too for guidance, if, necessary, that heading or marginal notes may be used as an aid to interpretation. (see Montila & Ors., REGINA v,  1 All ER 113; Karnataka Rare Earth and another V. The Senior Geologist, Department of Mines and Geology and another, AIR 2004 SC 2915 and Commissioner of Income Tax, Bombay V. Ahmedbhai Umarbhai & Co., Bombay, AIR 1950 SC 134.)
12.1. Pertinently, clause (c) of paragraph 6.11 opens with the words "in addition". Therefore, the entitlement in clause (c), which is, inter alia, given to an EOU, is not to be linked with the supplies received or purchases made from a DTA unit. Furthermore, sub-clause (i) of clause (c) to paragraph 6.11 simply states that reimbursement of CST would be available on "goods manufactured in India".
13. Mr.Rajagopalan had argued that since, goods manufactured by an EOU were not treated as goods manufactured in India, they were not amenable to excise duty. Based on this, it was contended that sub- clause (i) of clause (c) of paragraph 6.11 would not enable an EOU to seek reimbursement of CST qua supplies received or purchases made from a unit other than a DTA unit.
14. According to us, both contentions are fallicious, for the following reasons.
(i) An EOU is nothing, but a unit, which undertakes to export its entire production of goods and services under the relevant EOU Scheme. Therefore, clearly, these are goods, which are manufactured in India. The production of such goods is, however, incentivised, under the relevant EOU Scheme only to promote exports, in order to enable generation of foreign exchange for the Country.
(ii) As correctly argued by Mr.Venkataraman, the Central Excise Duty will be payable by an EOU unit qua domestic sales. The only exception in this behalf (which is provided in Section 3 of the 1944 Act), are goods produced and/or manufactured in SEZs. Furthermore, in so far as the 100% EOUs are concerned, excise duty is levied and collected on any excisable goods which are produced or manufactured by it and brought to any other place in India. The excise duty so levied and collected is required to be equivalent to an aggregate of duties of customs, which would be leviable under the Customs Act, 1962 or any other law, for the time being in force, on like goods produced or manufactured outside India, if, they were to be imported into India and where the said duties of customs are chargeable, by reference to their value, the value of such excisable goods is required to be determined under the provisions of Customs Act, 1962 and the Customs Tariff Act, 1975. This aspect of the matter clearly emerges, upon a bare perusal of Section 3 of the 1944 Act.
15. Therefore, quite clearly, both in law and on facts, it cannot be contended by the appellants that goods manufactured by EOU units are not goods manufactured in India and, thus, do not fulfill the conditionality for reimbursement of CST, as contained in sub-clause (i) of clause (c) of paragraph 6.11 of the 2009 FTP.
16. The other argument of Mr.Rajagopalan that, if, the argument advanced on behalf of the respondent company/Writ Petitioner was to be accepted, then supplies made by one EOU unit to another EOU unit would also qualify for reimbursement of CST, which, in turn, would result in loss of Central Excise Duty to the exchequer, is obviously flawed. This argument, is, to our minds, as flawed as the earlier argument. The answer to this submission lies in our discussion above that goods produced and/or manufactured by an EOU are "goods manufactured in India" and, hence, would be liable to central excise duty qua domestic sales.
17. This apart, according to us, the 2009 FTP like any other FTP being an economic legislation, which seeks to, inter alia, promote exports by giving various incentives to the exporters, should, in case of any ambiguity, be construed liberally in favour of the exporter.
18. Therefore, the argument of Mr.Rajagopalan that sub-clause (i) of clause (c) on paragraph 6.11 of 2009 FTP should be construed strictly, that is, akin to a taxing statute does not appeal to us. Even in a taxing statute, where the purpose and object of the provision is to incentivise growth and development, the approach adopted by the Courts is that, the concerned provision should be liberally construed, so as to encourage economic activity."
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19. This brings us to other limb of the argument advanced by Mr.Rajagopalan, which is that, the provisions of Paragraph 6.11 (c)(i) should be read along with paragraph 2 of Appendix 14-I-I.
19.1. This argument proceeds on the basis that the 2009 FTP and the said Appendix is formulated by the same juridical entity, i.e., Central Government. This argument is not only factually erroneous, but also legally untenable. The reason for the same is that the FTP is formulated by the Central Government by issuing a notification under Section 5 of the FTDR Act. The DGFT is the implementing authority, as is clearly discernible on a plain reading of sub-section (2) of Section 6 of the very same Act. The amendments, if any, in the FTP can only be made by the Central Government; a position, which clearly emerges upon a reading of sub-section (3) of Section 6. The Central Government is entitled to delegate all powers to the Director General (DG) or an officer subordinate to him, except those contained in Sections 3,5,15,16 and 19. Clearly, the power of formulation of FTP, which is vested in the Central Government, by virtue of Section 5 cannot be delegated to the DG or an officer subordinate to him. Thus, the amendments to the FTP can only be brought about by the Central Government and not by the DGFT.
19.2. Therefore, to our minds, as correctly argued by Mr.Venkataraman, the provisions of clause (2) of Appendix 14-I-I cannot take away what has been conferred upon the respondent company/Writ Petitioner under the 2009 FTP.
19.3. The delegatee cannot be vested with powers, beyond that which is provided under the parent legislation. Clearly paragraph 2 of Appendix 14-I-I goes beyond what is provided for in the 2009 FTP, as it seeks to change the contours of the provision made in paragraph 6.11(c)(i) of the said policy. As a matter of fact, it appears that the appellant Nos.1 and 2 also understood the provisions of paragraph 6.11.(c)(i) of the 2009 FTP, in the manner, in which, it was understood by the respondent company/Writ Petitioner, as it granted reimbursement of CST for most part of 2010 and 2011, except for the first quarter of 2012 and the periods which followed thereafter.
20. The fact that Appendix 14-I-I went beyond the scope of 2009 FTP appears to have donned upon the Central Government, when, the 2015 FTP was formulated. Accordingly, Appendix 6H, annexed to the 2015 FTP provided that reimbursement of CST, would be available not only qua purchases made from DTAs, but also, inter alia, vis-a-vis purchases made from EOUs.
21. The submission of Mr.Rajagopalan that the provision made in Appendix 6H of 2015 FTP, should be treated as prospective in nature in the given facts and circumstances of the case, cannot be accepted for more than one reason. Firstly, as discussed by us hereinabove, even without taking recourse to Appendix 6H of the 2015 FTP, we have come to the conclusion that the 2009 FTP did not disentitle the respondent company/Writ Petitioner from claiming reimbursement of CST. Secondly, the fact that the relevant provisions of the two FTPs have not undergone a change and, that, a change has singularly been effected only in the Appendix 6H in the Hand book of Procedures, which is, formulated by the DGFT would have us, hold, that it can only be clarificatory in nature and, therefore, ought to have retrospective effect. This is so as the introduction of Appendix 6H led to a course correction instead of a change in course contrary to what is sought to be contended on behalf of the appellants.
22. Thus, having regard to the scheme of Chapter 6, we are of the view that a plain reading of the provisions of paragraph 6.11 (c)(i), would have us hold that notwithstanding the fact that the respondent company/Writ Petitioner made purchases from an EOU as against DTA unit, it would be entitled to seek reimbursement of CST."
8. Following the aforesaid Madras High Court Division Bench decision, the Allahabad High Court Division Bench in Writ Tax No.991/2015 (M/s. Samsung India Electronics Pvt.Ltd. Vs. Union of India and three others) in its judgment delivered on 18/07/2017 held as under:
"The matter was taken up in appeal to the Division Bench. The Division Bench dismissed the appeal holding that having regard to scheme of chapter 6 of the FTP and the plain reading of provisions of paragraph 6.11(c)(i) makes it clear that even purchases of the goods from EOU as against DTA unit by an EOU would entitle it to seek reimbursement of CST.
In view of reasons recorded above and the Division Bench decision of the Madras High Court, we are also of the opinion that the petitioner is an EOU, who is purchasing goods as a raw material from another EOU or similar units other than DTA and therefore is entitled to reimbursement of CST in terms of paragraph 6.11(c)(i) of the FTP, 2009-14 and the respondents are not legally justified in withholding the same for the reason that the petitioner has not purchased raw material from DTA on the basis of the Circular dated 14.01.2015, which is not only in conflict with the provisions of the FTP but is illegal otherwise also which cannot override the FTP.
The second aspect of the matter involved in this petition is the authority responsible for the reimbursement of CST to the petitioner. The Hand Book of the Procedures under the FTP clearly lays down that the claims for reimbursement of CST shall be presented inter alia to the designated officer of the STP and that the disbursing authority of such claimed amount will inter alia be the designated officer of the STP, who will make payment to the units claiming reimbursement.
This is implicit from Clause (i) and (xi) of the procedure contained in Appendix 14-I-I of the Hand Book of the Procedures, which have been quoted above.
The aforesaid clause makes it implicit that the designated officer of the STP is entitled to receive the applications for claim for reimbursement of CST and that he alone is supposed to disburse it and to make payment thereof to the claimants.
In short, the liability is squarely cast upon the designated officer of the STPI to receive application for reimbursement and to make payment thereof if necessary.
In the light of the above, the argument that the claims have to be processed by the Ministry of Commerce and Industry, Government of India or some other higher authority and only on being sanction and the fund made available, the STPI is authorized to make payment is not acceptable. Even if for the sake of argument that is so, it is the responsibility of the STPI to get the claims processed and to procure the funds for the settlement of claims.
Accordingly, in view of the above discussion, we hold Circular No.STPN/CST/2015 dated 14.01.2015 illegal and issues a writ of mandamus directing the respondent no.1 to process reimbursement claim of CST of the petitioner in respect of goods purchased by it from non-DTA and to make payment thereof to the petitioner in terms of paragraph 6.11 (c)(i) forthwith.
The writ petitions are allowed."
9. The Division Bench of Gujarat High Court in Asahi Songwon Colors Ltd. Vs. Union of India [2017 (0) AIJ-GJ 237880) in a decision rendered in Special Civil Application No.16301/2016 decided on 06/07/2017, also similarly held that such benefit of CST reimbursement cannot be denied to the Companies/Industries under the Foreign Trade Policy for the year 2009-14. The relevant extract from para graphs 18 and 21 of the said judgment are also quoted below:
"18. A minute scrutiny of these provisions contained in para. 6.11 would reveal that the language used in clauses (a), (b) and (c), in general, was not made limited to the supplies from a DTA unit. As noted, clauses(a) and (b) both confined their application to the supplies made by the DTA unit. Clause(c) itself contained two situations. In sub-clause (i) what was envisaged was reimbursement of CST on goods manufactured in India. Sub-clause (ii) envisaged exemption from payment of CST on goods purchased from DTA on goods manufactured in India. Thus the policy wherever intended to limit the benefit of an EOU on procurement made from a DTA unit, it was so specifically provided. When therefore, sub-clause(i) of clause (c) of para 6.11 did not make any such reference to the procurement from a DTA unit but used the expression "goods manufactured in India", it must be understood that this clause would govern the goods purchased by EOU unit from any unit as long as the condition of goods being manufactured in India is satisfied. In plain terms, therefore, the Foreign Trade Policy 2004-2009 did not limit the benefit of CST reimbursement to a EOU on purchases made only from a DTA unit.
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21. Even otherwise, the Hand Book of Procedures and in particular Appendix 1411 contained therein nowhere aims to lay down any policy but prescribes the procedure to be followed for reimbursement of CST. It is undoubtedly true that para.2 of this Appendix restricts the CST reimbursement on purchases made by an EOU from a DTA unit. However, this restriction in our opinion would run counter to the terms of FTP itself and ultra vires the powers of the Director General of Foreign Trade. The title of the Appendix itself provides that it is a procedure to be followed for reimbursement of Central Sales Tax. Para.1 further clarifies that the procedure given in the said annexure shall be applicable for reimbursement of CST. There is little doubt therefore, that Appendix 14II aimed to lay down the procedure for claiming the benefit. In any case, such procedure could not have restricted the benefit by excluding the purchases from certain source which exclusion did not flow from the Foreign Trade policy itself.
10. The learned Assistant Solicitor General of India appearing for the Respondent - Union of India, Mr. Krishna S. Dixit, could not raise
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any other additional or different point to persuade this Court to take a different view of the matter than the one taken by the aforesaid three High Courts and no contrary view of any other High Court has also been brought to the notice of the Court. 11. This Court is also of the opinion that there is no justifiable reason for the Respondent - Authority to deny such benefit of CST reimbursement to the petitioner - Company merely because the goods in question are purchased from a Unit situated in EOUs/SEZs/EHTP/STPI specified Zones or areas and deny the said benefit merely because the Units are located in EOU/SEZ area. Irrespective of the location of the Manufacturing Units selling such products to the petitioner - Company in the course of inter-state Trade and charging CST, the goods continue to be the "Goods manufactured in India" which is the requirement in the said Foreign Trade Policy for entitling the petitioner - Company to claim such reimbursement of CST paid under the Central Sales Tax Act, 1956. 12. Moreover, the specific amendment in the said Foreign Trade Policy for the year 2015-2020 removed the said anomaly and discrimination as to the source of Units from which the petitioner may purchase such goods in the course of inter-state trade and commerce and the said amendment can be treated only as a clarificatory one and can be applied to the previous period also as held by the aforesaid Division Bench decisions by the three different High Courts. 13. Therefore, respectfully agreeing with the same, the present petitions also deserve to be allowed and the same are accordingly allowed and quashing the impugned Circulars and communications as indicated in the prayers of these petitions quoted above, the Writ Petitions are allowed with no order as to costs and the Respondents are directed to give the CST reimbursement/refund to the petitioner - Company in respect of the inter-state purchases made by it from the Units located in EOUs/SEZs/EHTP/STPI specified Zones or areas for the period in question, covered by Foreign Trade Policy of 2009-2014. 14. The said refund claim of the petitioner-Company may be processed expeditiously and refund may be given to the petitioner - Company within a period of three months from today. No order as to costs.