2022 INSC 0010
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3358 OF 2020
SANDOZ PRIVATE LIMITED   ..…APPELLANT
VERSUS
UNION OF INDIA & OTHERS  …..RESPONDENT(S)
with
CIVIL APPEAL NO. 3359 OF 2020
CIVIL APPEAL NO. 3360 OF 2020
CIVIL APPEAL NO. 3705 OF 2020
J U D G M E N T
A.M. Khanwilkar, J.
1. From amongst these four appeals, first two appeals 1
  emanate
from   the   common   judgment   and   order   dated   01.08.2016 2
  passed
by   the   High   Court   of   Judicature   at   Bombay 3
  in   Writ   Petition
1   Civil Appeal Nos. 3358 and 3359 of 2020
2   2016 (341) ELT 22 (Bom.)
3  f or short, “Bombay High Court”

2
No.2927 of 2015 and Writ Petition No.2926 of 2015, whereas, third
appeal 4
  arises   from   the   judgment   and   order   dated   08.10.2018 5
passed by the High Court of Delhi at New Delhi in Writ Petition (C)
No.10526 of 2017 and the fourth appeal 6
 assails the judgment and
order dated 09.12.2019 7
 passed by the High Court of Karnataka at
Bengaluru in Writ Appeal No.286 of 2019 (T­TAR).
CIVIL APPEAL NO. 3358 OF 2020
2a . The   appellant   in   Civil   Appeal   No.3358   of   2020   claims   to   be
hundred   per   cent   Export   Oriented   Unit 8
  engaged   in   the
manufacture of goods falling under Chapter 30 of the Schedule to
the   Central   Excise   Tariff   Act,   1985   and   for   that   purpose,   the
appellant   has   a   factory,   inter   alia ,   at   Plot   No.8A/2,   8B/2,   8­
8A/1/1, Kalwe, MIDC, Dighe, Navi Mumbai – 400708.  Besides, the
appellant   has   another   factory   situated   at   Plot   No.   L­1,   MIDC,
Mahad,   Raigad,   within   the   Domestic   Tariff   Area   Unit 9
.     The
appellant   had   applied   for   refund   of   Terminal   Excise   Duty 10
  in
4  Civil Appeal No.3360 of 2020
5  2020 (373) ELT 217 (Del.)
6   Civil  Appeal No.3705 of 2020
7  
2020 (371) ELT 658 (Kar.)
8  for short, “EOU”
9  
for short, “DTA Unit”
10   for short, “TED”

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respect of excisable goods procured from its unit in DTA, as it did
in   the   past   and   was   granted   refund   from   time   to   time   between
2006 and 2012.   The instant refund application, however, came to
be disallowed, which decision is the subject matter of appeal before
this   Court.     It   had   been   asserted   that   TED   was   paid   by   the   DTA
Unit   from   where   the   goods   in   question   were   procured   or   supplied
to   the   appellant   for   its   EOU   during   the   relevant   period.     The
application   for   refund   dated   20.04.2012   was   accompanied   by   a
declaration given by the appellant that the appellant’s DTA Unit did
not   claim   benefit   of   TED   refund   supported   by   the   disclaimer
certificate given by DTA Unit in that regard.  The refund application
was   required   to   be   decided   within   30   days   of   receipt   of   complete
application.   As it was not so disposed of, the appellant requested
the   Development   Commissioner   to   intervene   and   do   the   needful.
The refund claim for the period between July 2012 and September
2012 was around Rs.1,90,47,437/­ (Rupees One Crore Ninety Lakh
Forty­Seven   Thousand   Four   Hundred   and   Thirty­Seven   only)   and
for   the   period   between   October   2012   and   December   2012,   it   was
Rs.1,36,04,814/­   (Rupees   One   Crore   Thirty­Six   Lakh   Four
Thousand Eight Hundred and Fourteen only).  

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2b . In  the  meantime,  a  circular   purported  to  be  a  policy  circular
bearing   No.16   (RE­2012/2009­14)   dated   15.03.2013 11
  came   to   be
issued by the Director General of Foreign Trade 12
  to clarify that no
refund   of   TED   should   be   provided   by   the   Office   of
DGFT/Development Commissioners, as supplies made by DTA Unit
to   EOU   are   ab   initio   exempted   from   payment   of   excise   duty.     The
Development   Commissioner   eventually   rejected   the   refund   claim
set forth by the appellant and informed the appellant in that regard
vide letter dated 01.04.2013.  
2c . Resultantly, the appellant filed Writ Petition No.9312 of 2013
before the Bombay High Court challenging the legality and validity
of   the   stated   policy   circular   issued   by   DGFT   and   two
communications   of   the   Development   Commissioner   rejecting   the
refund application submitted by the appellant.
2d . In the meantime, a notification bearing No.4(RE­2013)/2009­
2014   came   to   be   issued   by   DGFT   on   18.04.2013 13
,   notifying   the
amendments   made   by   the   Central   Government   in   Foreign   Trade
11  f or short, “impugned circular”
12   for short, “DGFT”
13    for short, “said notification”

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Policy, 2009­2014 14
  in exercise of powers conferred by Section 5 of
the Foreign Trade (Development and Regulation) Act, 1992 15
.  
2e . The stated writ petition preferred by the appellant came to be
disposed of on 23.09.2014 whilst directing the competent authority
to   consider   the   refund   claim   of   the   appellant   afresh   after   taking
into  account  all  aspects  of  the   matter  and  give  fair   opportunity  to
the appellant. 
2f . Pursuant   to   the   remand   order,   the   Development
Commissioner   granted   personal   hearing,   but   eventually   rejected
the   TED   refund   claim   of   the   appellant   vide   order   bearing   No.
SEEPZ­SEZ/W.P./TED/SANDOZ/314/2013­14 dated 06.01.2015.
2g . Feeling   aggrieved   by   this   decision,   the   appellant   filed   fresh
Writ   Petition   No.2927   of   2015   before   the   Bombay   High   Court
assailing   the   policy   circular   dated   15.03.2013   and   order   dated
06.01.2015   passed   by   the   Development   Commissioner.     The
Bombay   High   Court   negatived   the   challenge   to   the   stated   policy
circular   as   well   as   the   order   passed   by   the   Development
Commissioner and thus, dismissed the writ petition vide impugned
14    for short, “FTP”
15  f or short, “1992 Act”

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judgment   and   order   dated   01.08.2016.     This   judgment   is   subject
matter of challenge in Civil Appeal No.3358 of 2020.   By the same
judgment, the Bombay High Court dismissed the writ petition filed
by the appellant in Civil Appeal No.3359 of 2020 involving the self­
same issue.  
CIVIL APPEAL NO. 3359 OF 2020
3a . Reverting   to   the   factual   matrix   in   Civil   Appeal   No.3359   of
2020,   the   appellant   claims   to   be   identically   placed   as   in   the
companion   appeal   being   hundred   per   cent   EOU   engaged   in
manufacturing   of   goods   falling   under   Chapter   30   of   the   Schedule
to   the   Central   Excise   Tariff   Act,   1985   and   for   that   purpose,   the
appellant has a factory  at B­15, Phase 1­A, Verna, Salcette, Goa ­
403772.     The   appellant’s   DTA   Unit   has   been   supplying   goods   on
payment of CENVAT duty under claim for rebate to the appellant’s
EOU.  The appellant’s EOU uses the said goods in the manufacture
of   goods   cleared   for   export.     The   appellant   asserted   that   its   DTA
Unit did not claim benefit of TED refund and produced disclaimer
certificate in that regard to enable the appellant’s EOU to claim the

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refund of TED on the goods procured by it or  supplied by its DTA
Unit.     The   appellant   asserts   that   even   in   the   past   it   had   claimed
refund   of   TED   paid   by   its   DTA   Unit   on   the   goods   supplied   to   the
appellant’s   EOU   and   was   so   granted   by   the   Development
Commissioner.     However,   on   this   occasion,   a   different   view   had
been   taken   in   respect   of   subject   application   dated   08.08.2012
submitted   by   the   appellant   for   TED   refund   for   the   month   of
November   2011  being  Rs.6,87,89,737/­  (Rupees  Six   Crore Eighty­
Seven   Lakh   Eighty­Nine   Thousand   Seven   Hundred   and   Thirty­
Seven   only).     The   claim   came   to   be   rejected   in   light   of   the   policy
(impugned)   circular   issued   by   DGFT,   without   giving   any
opportunity to the appellant.  
3b . Feeling aggrieved, the appellant filed Writ Petition No.9607 of
2013   before   the   Bombay   High   Court   challenging   the   legality   and
validity of the policy circular dated 15.03.2013.   That petition was
disposed of by directing the competent authority to pass a speaking
order   on   the   refund   application   submitted   by   the   appellant.
Pursuant   to   the   remand   order,   the   competent   authority   gave
personal hearing to the appellant and once again rejected the TED
refund   claim   vide   order   dated   12.01.2015   on   the   ground   that   the

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appellant  had  received  supplies of  the  concerned goods from  their
DTA Unit to EOU, which were   ab initio   exempted from payment of
duty   under   para   6.11(c)(ii)   of   Foreign   Trade   Policy,   2009­2014.
Thus, refund was not admissible to the appellant.  
3c . This   decision   was   challenged   by   the   appellant   before   the
Bombay High Court by way of fresh Writ Petition No.2926 of 2015
wherein the policy circular dated 15.03.2013 issued by DGFT was
also   challenged.     This   writ   petition   was   heard   and   decided   by   the
Bombay   High   Court,   along   with   another   writ   petition   (which   is
subject   matter   in   the   companion   appeal   filed   by   Sandoz   Private
Limited)   vide   common   judgment   and   order   dated   01.08.2016,
rejecting   the   assail   to   the   policy   circular   and   order   passed   by   the
competent   authority   referred   to   above.     This   judgment   is   subject
matter of challenge in Civil Appeal No. 3359 of 2020.
4. As   the   factual   matrix   in   both   the   writ   petitions   was   similar,
the   High   Court   vide   common   impugned   judgment   dated
01.08.2016 considered the grounds of challenge to the decision of
the Development Commissioner; and eventually opined that in light
of paras 6.2(b) and 6.11(c)(ii) of the FTP, no refund of TED could be

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given   by   the   regional   authority   of   DGFT   or   the   Office   of   the
Development   Commissioners   because   procurement   of   excisable
goods   by   the   appellants–EOUs   was   ab   initio   exempted   from
payment   of   excise   duty.     It   went   on   to   observe   that   there   was   a
clear   stipulation   in   the   FTP   itself   in   that   regard.     The   High   Court
noted that the purport of the impugned circular was only to clarify
the   obvious  position.    There  was  no  obligation  on  the  EOU  to  pay
duty   at   the   time   of   procurement   of   excisable   goods.     For,   FTP
plainly   predicates   that   the   procurement   of   excisable   goods   should
be   done   by   EOU   without   payment   of   excise   duty.     As   there   is
reverse   obligation   on   EOU   to   procure   excisable   goods   without
payment of duty, there is no question of claiming refund.   Thus, it
held   that   the   conclusion   reached   by   the   Development
Commissioner was in conformity with the dispensation provided in
the   FTP   and   is   not   in   any   manner   contrary   thereto   or   to   the
mandate   of   Section   5   of   the   1992   Act.     Further,   the   impugned
circular  was  only   to  place on  record  the  correct  perspective  of  the
dispensation   provided   in   the   FTP.     The   argument   that   the
impugned   circular   can   have   prospective   effect   only,   cannot   be
countenanced  in   law.    In  that,   the   circular   was   only  to  clarify   the

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purport of paras 6.2(b), 6.11(c)(ii) and 8.3(c) of the FTP; and if these
provisions   were   read   harmoniously   and   conjointly,   leave   no
manner   of   doubt   that   refund   request   before   DGFT   under   para
8.3(c) in relation to excisable goods, even though procured by EOU
upon payment of duty, would be inadmissible in law.
5. The Bombay High Court also noted that although in the past
the   regional   authority   had   accepted   refund   request   of   EOUs,   that
cannot   bestow   any   right   much   less   vested   right   in   EOUs   so   as   to
issue   mandamus   to   the   concerned   statutory   authorities   to   act
contrary to the provisions of the FTP.  As a matter of fact, to dispel
the doubt entertained by EOUs if any, the position was restated by
the   Government   vide   notification   dated   18.04.2013   issued   in
exercise   of   power   conferred   under   Section   5   of   the   1992   Act.     In
substance,   the   Bombay   High   Court   observed   that   the   impugned
circular  was  only   to  restate  and   clarify  that  the  regional  authority
of   DGFT   was   not   competent   to   entertain   the   refund   application;
and  if EOU  or  the  supplier  so  desired,  were free  to  pursue refund
claim   before   the   competent   excise   authorities   where   amount
towards duty had been deposited or paid.

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CIVIL APPEAL NO.3360 OF 2020
6a. This   appeal   by   the   Union   of   India   assails   the   judgment   and
order  dated  08.10.2018  passed by   the  Division  Bench  of  the  High
Court of Delhi in Writ Petition (C) No.10526 of 2017.   By that writ
petition,   the   respondent   claiming   to   be   a   “supplier”   of   excisable
goods   to   various   EOUs,   who   in   turn   exported   their   final   product
outside India, sought direction against DGFT to grant TED refund
in   the   sum   of   Rs.46,54,295   (Rupees   Forty­Six   Lakh   Fifty­Four
Thousand   Two   Hundred   and   Ninety­Five   only),   towards   deemed
exports   made   to   EOUs   (Vimal   Agro   Products   Pvt.   Ltd.   and   TATA
Coffee Ltd.).  These supplies were made between January 2012 and
March 2013 and admittedly, before issue of the impugned circular.
6b. The   respondent­Company   (DTA   Unit)   had   filed   refund
application   before   the   Joint   Director   General   of   Foreign   Trade,
which   was   returned   to   it   in   light   of   the   impugned   circular.     The
appellant   then   pursued   the   refund   application   on   11.03.2014   to
the   Deputy   Commissioner   of   Central   Excise   Department,   which
came   to   be   rejected   on   29.05.2015.     Against   this   decision,   the
matter was carried in appeal up to the Customs Excise and Service

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Tax   Appellate   Tribunal 16
  unsuccessfully.     After   exhausting   that
remedy and allowing decision of the statutory authorities under the
Central Excise Act, 1944 17
 as final, the respondent­Company chose
to file writ petition before the High Court of Delhi seeking direction
against   DGFT   to   consider   the   refund   application   regarding   TED
amount under FTP.  It was urged that the primary responsibility to
refund   TED   amount   paid   by   the   respondent­Company   (DTA   Unit)
being  supplier  of excisable goods to  EOU, was  that of DGFT.   The
High   Court   of   Delhi   vide   impugned   judgment   dated   08.10.2018
allowed the writ petition and issued directions to DGFT to consider
the   refund   application   filed   by   the   respondent­Company   and   if
found   in   order,   directed   refund   of   TED   amount   to   the   respondent
with   interest   at   the   rate   of   9   %   per   annum.     The   High   Court   of
Delhi   essentially   relied   upon   its   earlier   decision   in   Kandoi   Metal
Powders Manufacturing Company Private Limited vs. Union of
India 18
  which in turn had adverted to the decision of the Calcutta
High   Court   in   the   case   of   Joint   Director   General   of   Foreign
Trade   vs.   IFGL   Refractories   Limited 19
,   to   reinforce   the   view
16  for short, “the CESTAT” 
17    for short, “1944 Act”
18  (2014) 302 ELT 209 (Del.)
19  2002 (143) ELT 294 (Cal.)

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taken by it that the impugned circular invoked by the Department
had   prospective   effect   only.     It   also   noted   that   Kandoi   Metal
Powders   Manufacturing   Company   Private   Limited 20
  was
concerned with the clarification issued by the Policy Interpretation
Committee   vide   its   decision   dated   04.12.2012   to   the   effect   that
refund   of   CENVAT   credit   provisions   were   available   under   the
Central   Excise   Act   and   the   Rules   framed   thereunder.     The   same
should be availed instead of claiming refund.   It was held that the
view taken by DGFT that the respondent could avail of the refund
under   the   provisions   of   the   1944   Act   and   the   Rules   framed
thereunder, was untenable in law.  On facts, it noted that since the
supply of excisable goods was prior to 15.03.2013, the question of
invoking   circular   against   the   respondent­Company   did   not   arise.
Instead, the High Court held that refund application ought to have
been processed by the DGFT in terms of para 8.3(c) of the FTP, as
it   stood   prior   to   15.03.2013.     Accordingly,   while   allowing   the   writ
petition,   the   High   Court   of   Delhi   issued   direction   to   the   appellant
(DGFT)   to   consider   the   respondent’s   refund   application   and   to
refund the due amount with interest at the rate of 9 % per annum.
20  supra at Footnote No.18

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CIVIL APPEAL NO.3705 OF 2020
7. This   appeal   by   Union   of   India   is   against   the   decision   dated
09.12.2019   of   the   Division   Bench   of   the   High   Court   of   Karnataka
in Writ Appeal No.286 of 2019 (T­TAR).  The stated appeal was filed
by   the   appellant­Union   of   India   by   way   of   intra­court   appeal
against the decision dated 20.3.2018 21
  of the learned Single Judge
of the same High Court in  Acer India Pvt. Ltd. vs. Union of India
[ Writ  Petition  No.64539  of  2016  (T­TAR)]  whereby   the  respondent­
Company — claiming to be engaged in the business of manufacture
and sale of computer systems and supply of goods to hundred per
cent   EOUs   on   payment   of   TED,   had   sought   a   declaration   that   it
was eligible for refund of TED amount in respect of goods supplied
to   EOUs   during   the   period   from   June   2009   to   October   2009   in
terms   of   para   8.3   of   the   FTP.     Learned   Single   Judge   of   the   High
Court   of   Karnataka   adverted   to   the   decision   of   the   learned   Single
Judge   of   the   Calcutta   High   Court   in   IFGL   Refractories   Limited
vs. Joint Director General of Foreign Trade 22
 (later confirmed by
the   Division   Bench   of   the   same   High   Court   in   Joint   Director
21   2018 (361) ELT 44 (Kar.)
22  2001 (132) ELT 545 (Cal.)

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General   of   Foreign   Trade 23
)   and   of   the   High   Court   of   Delhi   in
Kandoi   Metal   Powders   Manufacturing   Company   Private
Limited 24
  wherein  it had  been held  that  once  the  supply  of  goods
fall   within   the   category   of   deemed   exports,   the   unit   would   be
entitled   to   refund   of   TED.     Learned   Single   Judge   also   adverted   to
the decision of the Madras High Court in   Lenovo (India) Pvt. Ltd.
vs. Union of India 25
  and to the decision of the Bombay High Court
in   case   of   Sandoz   Private   Limited   which   is   impugned   in   the
cognate appeals referred to above.  Learned Single Judge, however,
noted   that   the   decision   of   the   Bombay   High   Court   has   been
distinguished   by   the   Madras   High   Court,   but   then   went   on   to
observe   that   it   did   not   agree   with   the   view   taken   by   the   Bombay
High Court in view of the amendment to the FTP.  Instead, learned
Single  Judge   opined  that   the  policy   circular   dated  15.03.2013,  by
no   standard,   was   clarificatory   in   nature.     Resultantly,   learned
Single Judge allowed the writ petition and was pleased to set aside
the   communication   dated   31.03.2016   issued   by   the   Deputy
Director   of   Foreign   Trade,   disallowing   the   refund   claim   of   the
23  s upra at Footnote No.19
24  supra at Footnote No.18
25  (2017) 346 ELT 12 (Mad.)

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respondent­Company   (DTA   Unit).     Learned   Single   Judge   while
setting   aside   that   order   relegated   the   respondent­Company   before
the   competent   authority   under   the   FTP   to   consider   the   refund
claim   of   the   respondent­Company   in   accordance   with   the   policy.
The   Division   Bench   whilst   dealing   with   the   appeal   filed   by   the
Department,   vide   impugned   judgment   noted   that   the   respondent­
Company   had   supplied   computer   systems   to   EOU   on   payment   of
TED from June 2009 till October 2009, which in terms of the FTP,
in   particular   para   8.2(b),   was   deemed   export   —   entitling   the
respondent­Company   to   claim   refund   of   TED   from   the   regional
authority of DGFT in terms of para 8.3(c) of the FTP.   The Division
Bench   of   the   High   Court   of   Karnataka   opined   that   there   was   no
infirmity in the view taken by the learned Single Judge holding that
the appellant cannot be heard to retain the amount which was not
payable   by   way   of   tax   being   a   case   of   deemed   export.     As   the
amount of Rs.1,04,36,945 (Rupees One Crore Four Lakh Thirty­Six
Thousand Nine Hundred and Forty­Five only) was wrongly paid by
the   respondent­Company,   the   same   needed   to   be   refunded   and,
therefore,   learned   Single   Judge   was   justified   in   relegating   the

17
respondent­Company   before   the   competent   authority   under   the
FTP to consider the refund claim.
8. We   have   heard   Shri   Arvind   Datar,   Shri   Jay   Savla,   learned
senior counsel and Shri Prakash Shah, learned counsel appearing
for   the   appellants   in   the   appeals   by   the   Assessee,   Shri   Balbir
Singh,   learned   Additional   Solicitor   General   of   India   for   the
Department; and Shri G. Shivadass, learned senior counsel for the
respondent­Assessee   (writ   petitioner),   in   the   appeals   by   the
Department.
CONSIDERATION
9. From   the   factual   matrix   delineated   above   in   the   respective
appeals, it is obvious that Civil Appeal Nos.3358 and 3359 of 2020
pertain   to   EOUs,   who   had   “procured”   goods   from   its   unit   in
Domestic Tariff Area (DTA), which transactions were in the nature
of   deemed   export   by   the   DTA   Unit   to   EOU   within   the   meaning   of
the   applicable   FTP.     On   the   other   hand,   the   appeals   against   the
decision   of   the   High   Court   of   Delhi   and   the   High   Court   of
Karnataka   pertain   to   the   refund   claim   set   up   by   the   DTA   Unit   —

18
“suppliers”   of   goods   to   concerned   EOU,   also   in   reference   to   self­
same Foreign Trade Policy (FTP).
10. The moot question is: whether the entities herein are entitled
to   refund   of   amount   purportedly   towards   TED   in   respect   of
specified   goods   procured   or   supplied,   as   the   case   may   be,   being
deemed exports and from which authority, either under applicable
Foreign   Trade   Policy   (FTP)   or   the   1944   Act?     Further,   whether
Circular   No.16   (RE­2012/2009­14)   dated   15.03.2013   is   merely
clarificatory  regarding  TED refund and exemption and the efficacy
thereof?
11. The claim for refund of TED amount of the concerned entities
being   the   recipient   or   the   supplier   of   specified   goods,   as   the   case
may   be,   needs   to   be   understood   and   analysed   in   two   broad   silos
and in the context of nature of transaction and the applicability of
the   provisions   of   the   concerned   laws,   namely,   FTP   propounded
under the 1992 Act and the 1944 Act.  We will dilate on this aspect
at   appropriate   place.     Be   it   noted   that   the   refund   claim   in   the
respective appeals varies between June 2009 and March 2013 (i.e.,
Civil   Appeal   No.3358   of   2020   —   July   2012   and   December   2012;

19
Civil   Appeal   No.3359   of   2020   —   November   2011;   Civil   Appeal
No.3360   of   2020   —   January   2012   and   March   2013;   and   Civil
Appeal No.3705 of 2020 — June 2009 and October 2009).
12. At the outset, it needs to be borne in mind that the entities in
all these cases are claiming refund founded on the FTP and not in
reference   to   the   provisions   of   the   1944   Act   or   the   rules   framed
thereunder, in particular, the Central Excise Rules, 2002 26
 and the
CENVAT Credit Rules, 2004 27
.  
13. Had it been a claim for refund of duty under the 1944 Act, the
same would be governed by the regime predicated in Section 11B of
that   Act.     The   expression   “duty”   has   been   defined   in   Rule   2(e)   of
the   2002   Rules   to   mean   the   duty   payable   under   Section   3   of   the
1944 Act.   Section 3   of the 1944 Act   envisages that there shall be
levied and collected in such manner as may be prescribed a duty of
excise as may be called the Central Value Added Tax (CENVAT) on
all  excisable  goods  (excluding   goods  produced  or   manufactured  in
special   economic   zones)   which   are   produced   or   manufactured   in
India as, and at the rates, set forth in the Fourth Schedule.  It may
26  f or short, “2002 Rules”
27  f or short, “2004 Rules”

20
be   apposite   to   refer   to   Section   5A 28
  of   the   1944   Act.     It   empowers
the Central Government to grant exemption from duty of excise in
respect   of   specified   excisable   goods.     The   exercise   of   power   to
exempt   is   a   beneficial   power   —   which   enables   the   Central
Government   to   reduce   or   waive   duty   on   specified   goods   on   such
conditions   as   may   be   prescribed.     The   exemption   notification   has
statutory force.   However, the manufacturers (including DTA Unit)
of specified goods are free to disregard, the benefit of exemption so
provided when it is laced with fulfilment of pre­conditions by third
party   (EOU).     However,   sub­section   (1A)   of   Section   5A   came   to   be
28   5A. Power to grant exemption from duty of excise .— (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 removal) as may be specified in the notification , excisable goods
of   any   specified   description   from   the   whole   or   any   part   of   the   duty   of   excise   leviable
thereon :
Provided   that,   unless   specifically   provided   in   such   notification,   no   exemption   therein
shall apply to excisable goods which are produced or manufactured—
( i )   in   a   free   trade   zone   or   a   special   economic   zone   and   brought   to   any   other
place in India; or
( ii )   by   a   hundred   per   cent.   export­oriented   undertaking   and   brought   to   any
other place in India.
Explanation . —In this proviso, “free trade zone”, “special economic zone”   and “hundred
per cent. export­oriented undertaking” shall have the same meanings as in Explanation 2 to
sub­section (1) of Section 3.
(1­A)   For   the   removal   of   doubts,   it   is   hereby   declared   that   where   an   exemption
under   sub­section   (1)   in   respect   of   any   excisable   goods   from   the   whole   of   the   duty   of
excise leviable thereon has been granted absolutely, the manufacturer of such excisable
goods shall not pay the duty of excise on such goods.
…..
(emphasis supplied)

21
inserted   by   way   of   an   amendment   w.e.f.   13.05.2005.     It   was   for
removal   of   doubts.     It   declared   that   where   an   exemption   under
sub­section   (1)   in   respect   of   any   excisable   good   from   the   whole   of
the duty of excise leviable thereon has been granted absolutely, the
manufacturer   of   such   excisable   goods   “shall   not   pay   the   duty   of
excise   on   such   goods”.     This   stipulation   ordains   that   the   excise
duty   is   not   payable   on   the   specified   goods.     However,   this
stipulation will be attracted if the excise duty is exempted   ab initio
(without any pre­condition).   Be that as it may, the governing FTP
regime   ought   to   prevail   being   a   special   dispensation   under   the
1992 Act.
14. The   authorities   propounding   the   FTP   were   obviously
conscious of the purport of the provisions of the 1944 Act and the
rules framed thereunder.  Despite that, the subject policy had been
propounded   with   the   sole   objective   of   promoting   exports   and
earning   foreign   exchange.     At   the   relevant   time,   the   goal   set   forth
by   the   policy   makers  was  to  achieve   the  target  of   at  least   one   per
cent of the global trade by promoting exports.   It is thus clear that
the   concessions   or   so   to   say,   benefits   and   entitlements   provided

22
under the FTP cannot be constricted by the provisions of the taxing
statute of 1944 and the rules framed thereunder.  To put it tersely,
the   dispensation   provided   under   the   1992   Act   and   the   FTP   must
operate   independently   and   is   thus   mutually   exclusive   in   this
regard.     Taking   any   other   view   would   be   counter­productive   and
whittle   down   the   intent   behind   formulation   of   a   liberal   FTP   for
promoting exports.  
15. Under   the   subject   FTP,   Chapter   6   deals   with   EOUs,
Electronics   Hardware   Technology   Parks   (EHTPs),   Software
Technology   Parks   (STPs)   and   Bio­Technology   Parks   (BTPs).     Para
6.1   provides   for   the   eligibility   criterion.     It   envisages   that   units
undertaking to export their entire production of goods and services
(except   permissible   sales   in   DTA)   may   be   set   up   under   the   EOU
Scheme.   Similar provision is made regarding other Parks referred
to   therein.     It   is,   however,   made   clear   that   trading   units   are   not
covered under these schemes.  Para 6.1 (Eligibility) reads thus: ­
“ 6.1 Eligibility
Units   undertaking   to   export   their   entire   production   of
goods and services (except permissible sales in DTA), may
be set up under the Export Oriented Unit (EOU) Scheme,
Electronics   Hardware   Technology   Park   (EHTP)   Scheme,
Software   Technology   Park   (STP)   Scheme   or   Bio­

23
Technology Park (BTP) Scheme for manufacture of goods,
including   repair,   re­making,   reconditioning,   re­
engineering  and  rendering  of  services.     Trading  units are
not covered under these schemes.”
16. Para   6.2   of   the   FTP   specifies   the   stipulations  for   the   EOU   to
conduct its activities such as export and import of goods.  Amongst
others,   the   clause   relevant   for   considering   the   present   appeals   is
para 6.2(b), which reads thus: ­
“ 6.2 Export and Import of Goods
(a) …..
(b)   An   EOU /EHTP/STP/BTP   unit   may   import   and/or
procure ,   from   DTA   or   bonded   warehouses   in
DTA/international   exhibition   held   in   India,   without
payment of duty , all types of goods, including capital
goods, required for its activities, provided they are not
prohibited   items   of   import   in   the   ITC   (HS).   Any
permission   required   for   import   under   any   other   law
shall   be   applicable.   Units   shall   also   be   permitted   to
import   goods   including   capital   goods   required   for
approved   activity,   free   of   cost   or   on   loan/lease   from
clients.   Import   of   capital   goods   will   be   on   a   self­
certification basis.  Goods imported by a unit shall be
with actual user condition and shall be utilized for
export production .
…..”
(emphasis supplied)
From the opening part of this provision itself, it is amply clear that
it   governs   specified   entities/units,   who   are   engaged   in   import
and/or procurement of goods from DTA or bonded warehouses etc.,
and   that   they   must   do   so   without   payment   of   duty.     Besides,   the
specified   entities   are   obliged   to   utilise   the   goods   imported   with

24
actual   user   condition   and   to   be   used   or   utilised   for   export
production.  This twin condition must be complied by the specified
entities   without   any   exception   for   deriving   benefit   or   availing   of
entitlements   under   FTP.     Chapter   6   of   the   FTP   postulates   that
supply   of   goods   from   DTA   Units   to   EOU   must   be   regarded   as
deemed exports, as is evident from para 6.11 of the FTP.  The same
reads thus: ­
“ 6.11 Entitlement for supplies from the DTA
(a) Supplies   from   DTA   to
EOU /EHTP/STP/BTP   units   will   be   regarded   as
“ deemed   exports ”   and   DTA   supplier   shall   be
eligible   for   relevant   entitlements   under
chapter   8   of   FTP ,   besides   discharge   of   export
obligation,   if   any,   on   the   supplier.
Notwithstanding   the   above,   EOU /EHTP/STP/
BTP   units   shall,   on   production   of   a   suitable
disclaimer   from   DTA   supplier,   be   eligible   for
obtaining entitlements specified in chapter 8
of   FTP .   For   claiming   deemed   export   duty
drawback, they shall get brand rates fixed by DC
wherever All Industry Rates of Drawback are not
available.
(b) Suppliers   of   precious   and   semi­precious
stones,   synthetic   stones   and   processed   pearls
from   DTA   to   EOU   shall   be   eligible   for   grant   of
Replenishment   Authorisations   at   rates   and   for
items mentioned in HBP v1.
(c)  In   addition,   EOU /EHTP/STP/BTP   units
shall be entitled to following :­
(i)   Reimbursement of Central Sales Tax
(CST) on goods manufactured in India. 

25
Simple   interest   @   6%   per   annum   will   be
payable   on   delay   in   refund   of   CST,   if   the
case   is   not   settled   within   30   days   of
receipt   of   complete   application   (as   in
paragraph 9.10.1 of HBP v1).
(ii)  Exemption   from   payment   of
Central   Excise   Duty   on   goods   procured
from   DTA   on   goods   manufactured   in
India.
(iii)  Reimbursement of duty paid on fuel
procured   from   domestic   oil
companies/Depots   of   domestic   oil   Public
Sector Undertakings as per drawback rate
notified   by   DGFT   from   time   to   time.
Reimbursement   of   additional   duty   of
excise   levied   on   fuel   under   the   Finance
Acts would also be admissible.
(iv)  CENVAT Credit on service tax paid.”
(emphasis supplied)
The opening part of clause (a) concerns the supplier as it refers to
supplies from DTA Unit to EOU to be regarded as deemed exports.
Further,   as   a   consequence   of   deemed   exports,   DTA   supplier
becomes   eligible   for   entitlements   specified   under   Chapter   8   of   the
FTP.  To put it differently, in the same Chapter 6, the entitlement of
DTA   supplier   under   Chapter   8   of   FTP   has   also   been   adverted   to.
This   provision   also   deals   with   the   manner   of   availing   the
entitlements specified under Chapter 8 of FTP — either by the DTA
Unit itself or the EOU, the recipient of the goods and services.  For,
in terms of this stipulation even the EOU can set up a refund claim
in   respect   of   stated   transaction,   in   lieu   of   the   entitlement   of   DTA

26
Unit   after   obtaining   suitable   disclaimer   from   DTA   supplier.     In
other words, clause 6.11 [clause (a) thereof in particular] deals with
entitlement   of   DTA   supplier,   which   can   be   availed   by   the   DTA
supplier itself or by the EOU to whom the goods were supplied by it
upon giving suitable disclaimer in that regard.  The entitlements of
the   DTA   supplier   have   been   delineated   in   Chapter   8   of   FTP,   to
which   we   will   advert   to   a   little   later.     Clause   (a)   of   Chapter   6.11
also provides that DTA supplier and EOU may claim deemed export
duty   drawback   as   well,   as   per   the   rates   fixed   by   DC   wherever   All
Industry Rates of Drawback are not available.
17. Clause   (c)   of   para   6.11   is   a   provision   which   spells   out   the
entitlement   of   EOU.     It   includes   reimbursement   of   Central   Sales
Tax   (CST)   on   goods   manufactured   in   India;   exemption   from
payment   of   Central   Excise   Duty   on   goods   produced   from   DTA   on
goods  manufactured  in  India;  reimbursement   of  duty  paid  on   fuel
procured   from   domestic   oil   companies/depots   of   domestic   oil
public sector undertakings as per drawback rate notified by DGFT
from   time   to  time;   and   lastly,   CENVAT   Credit   on   service   tax   paid.
As   regards   the   Central   Excise   Duty,   para   6.11(c)(ii)   postulates
exemption from payment of Central Excise Duty on goods procured

27
by the EOU from DTA on goods manufactured in India.   This is in
consonance   with   the   stipulation   in   para   6.2(b),   which   predicates
that   the   EOU   may   import   goods   from   DTA   without   payment   of
duty.
18. From the scheme of Chapter 6 of FTP, it is thus clear that the
EOU   can   import   goods   from   DTA   supplier,   which   transaction   de
jure  is treated as deemed export; and it can do so without payment
of   duty,   as   it   has   been   exempted   vide   para   6.11(c)(ii)   of   the   FTP.
On its own, the EOU is not eligible for any other entitlement.
19. Needless to observe that there is marked distinction  between
the expression “benefit” 29
 and “entitlement” 30
.  “Benefit”, by its very
nature, is an advantage, help or aid, while “entitlement” is right to
have   something.     Under   Chapter   6,   the   EOU   is   entitled   to   import
specified   goods   from   DTA   without   payment   of   duty,   subject   to
fulfilling other requirements including of actual user condition and
to   be   utilised   for   export   production,   being   a   case   of   ab   initio
29   In   Black’s   Law   Dictionary   (11 th
  Edition):   benefit,   n.   (14c)   1.   The   advantage   or   privilege
something gives; the helpful or useful effect something has <the benefit of owning a car>.   2.
Profit or gain; esp., the consideration that moves to the promise <a benefit received from the
sale>. — Also termed  legal benefit; legal value.
30   In   Black’s   Law   Dictionary   (11 th
  Edition):   entitlement.   (19c)   An   absolute   right   to   a   (usu.
monetary)   benefit,   such   as   social   security,   granted   immediately   upon   meeting   a   legal
requirement.

28
exemption   qua   EOU.     The   provision   in   the   form   of   para   6.11(a)
merely   enables  EOU  to   set  up  a  claim  “in   respect  of”   entitlements
of   DTA   supplier   under   Chapter   8   of   FTP.     There   is   no   separate
entitlement for EOU under Chapter 8 of FTP.   To put it differently,
although the heading of para 6.11 is “Entitlement for supplies from
the   DTA”   and   clause   (a)   thereof   envisages   that   EOU   shall   on
production   of   a   suitable   disclaimer   from   DTA   supplier   be   eligible
for obtaining entitlements specified in Chapter 8 of FTP, it does not
follow that it is the entitlement of EOU.  It is, however, only a case
of   benefit   transferred   to   EOU   concerning   the   entitlement   of   DTA
supplier under Chapter 8 of FTP.
20. That brings us to Chapter 8 of FTP.  The heading of Chapter 8
is “Deemed Exports”.   The original para 8.1 specified that  deemed
exports refer to those transactions in which goods supplied do not
leave   country   and   payment   for   such   supplies   is   received   either   in
Indian rupees or in free foreign exchange.   By way of amendment,
it further provided that the supply of specified goods (noted in para
8.2)   shall   be   regarded   as   deemed   exports   provided   goods   are
manufactured in India.  The original para 8.1 reads thus: ­

29
“ 8.1. Deemed Exports
“Deemed   Exports”   refer   to   those   transactions   in   which
goods   supplied   do   not   leave   country,   and   payment   for
such supplies is received either in Indian rupees or in free
foreign exchange.”
[Para 8.1, after amendment, in 2012­2013 reads thus: ­
“ 8.1. Deemed Exports
Deemed   Exports”   refer   to   those   transactions   in   which
goods supplied do not leave country, and payment for
such supplies is received either in Indian rupees or in
free foreign exchange.   Supply of goods as mentioned
in   Paragraph   8.2   below   shall   be   regarded   as
“Deemed   Exports”   provided   goods   are
manufactured in India .”]
(amendment highlighted)
Para 8.2 of Chapter 8 specifies the categories of supplies which can
be regarded as deemed exports.   Clause (b) thereof is applicable to
the   present   appeals.     Relevant   extract   of   original   para   8.2   is   as
under: ­
“ 8.2. Categories of Supply
Following   categories   of   supply   of   goods   by   main/sub­
contractors shall be regarded as “Deemed Exports” under
FTP, provided goods are manufactured in India:
(a)  xxx xxx xxx
(b)  Supply of goods to EOU/STP/EHTP/BTP;
…..”
[Para 8.2, after amendment, in 2012­2013 reads thus: ­
“ 8.2. Categories of Supply
Following   categories   of   supply   of   goods   by   main/sub­
contractors shall be regarded as “Deemed Exports”:

30
(c)  xxx xxx xxx
(d)  Supply of goods to EOU/STP/EHTP/BTP;
…..”]
In   other   words,   only   the   specified   categories   of   supplies   are
regarded as deemed exports.   In that, import of goods, as specified
in para 8.2(b) from DTA supplier to the EOU is regarded as deemed
exports.    To  put  it  differently,  the  supply  of  goods  by  DTA  Unit   to
EOU with actual user condition and utilised for export production,
are   regarded   as   deemed   exports.     To   such   transactions,   certain
benefits   have   been   extended,   as   provided   in   para   8.3   of   the   FTP
applicable at the relevant time, which reads thus:  
“ 8.3 Benefits for Deemed Exports
Deemed   exports   shall   be   eligible   for   any/all   of   following
benefits   in   respect   of   manufacture   and   supply   of   goods
qualifying   as   deemed   exports   subject   to   terms   and
conditions as in HBP v1:­
(a) Advance   Authorisation/Advance   Authorisation
for annual requirement/DFIA.
(b)  Deemed Export Drawback.
(c)  Exemption   from   terminal   excise   duty   where
supplies  are  made  against   ICB.   In   other  cases,
refund   of   terminal   excise   duty   will   be   given .
Exemption   from   TED   shall   also   be   available   for
supplies   made   by   an   Advance   Authorisation
holder   to   a   manufacturer   holding   another
Advance   Authorization   if   such   manufacturer,   in
turn,   supplies   the   product(s)   to   an   ultimate
exporter.”

31
And original para 8.4 of the FTP providing benefits to the suppliers,
as applicable at the relevant time, reads thus: ­
“ 8.4  Benefits to the Supplier
8.4.1 (i)  In   respect   of   supplies   made   against
Advance   Authorisation   /   DFIA   in   terms   of
paragraph   8.2(a)   of   FTP,   supplier   shall   be
entitled   to   Advance   Authorisation   /   DFIA   for
intermediate supplies.
(ii)   If   supplies   are   made   against   Advance
Release   Order   (ARO)   or   Back   to   Back   Letter   of
Credit   issued   against   Advance   Authorisation   /
DFIA   in   terms   of   paragraphs   4.1.11   and   4.1.12
of   FTP,   suppliers   shall   be   entitled   to   benefits
listed   in   paragraphs   8.3(b)   and   (c)   of   FTP,
whichever is applicable.
8.4.2  In   respect   of   supply   of   goods   to   EOU   /
EHTP   /   STP   /   BTP   in   terms   of   paragraph
8.2(b)   of   FTP,   supplier   shall   be   entitled   to
benefits listed in paragraphs 8.3(a), (b) and (c)
of FTP, whichever is applicable .
8.4.3 In   respect   of   supplies   made   under   paragraph
8.2(c)   of   FTP,   supplier   shall   be   entitled   to   the
benefits listed in paragraphs 8.3(a), (b) and (c) of
the Policy, whichever is applicable.
8.4.4 (i) In respect of supplies made under paragraphs
8.2(d),   (f)   and   (g)   of   FTP,   supplier   shall   be
entitled   to   benefits   listed   in   paragraphs   8.3(a),
(b) and (c), whichever is applicable.
(ii)   In   respect   of   supplies   mentioned   in
paragraph 8.2(d), supplies to projects funded by
such Agencies alone, as may be notified by DEA,
MoF, shall be eligible for deemed export benefits.
A   list   of   such   Agencies   /   Funds   is   given   in
Appendix 13 of HBP v1.
(iii) Benefits of deemed exports under para 8.2(f)
of   FTP   shall   be   applicable   in   respect   of   items,

32
import   of   which   is   allowed   by   DoR   at   zero
customs   duty,   subject   to   fulfillment   of
conditions   specified   under   Notification   No.
21/2002­Customs   dated   1.3.2002,   as   amended
from time to time.
(iv)   Supply   of   Capital   goods   and   spares   upto
10%   of   FOR   value   of   capital   goods   to   power
projects   in   terms   of   paragraph   8.2(g),   shall   be
entitled   for   deemed  export  benefits  provided  the
ICB   procedures   have   been   followed   at
Independent Power Producer (IPP) / Engineering
and   Procurement   Contract   (EPC)   stage.   Benefit
of   deemed   exports   shall   also   be   available   for
renovation/modernization   of   power   plants.
Supplier   shall   be   eligible   for   benefits   listed   in
paragraph   8.3(a)   and   (b)   of   FTP,   whichever   is
applicable.     However,   supply   of   goods   required
for   setting   up   of   any   mega   power   project   as
specified   in   S.No.   400   of   DoR   Notification   No.
21/2002­ Customs dated 1.3.2002, as amended,
shall   be   eligible   for   deemed   export   benefits   as
mentioned   in   paragraph   8.3(a),   (b)   and   (c)   of
FTP, whichever is applicable, if such mega power
project   complies   with   the   threshold   generation
capacity   specified   therein,   in   Customs
Notification.
[Para 8.4.4(iv), after amendment, in 2010­2011 reads thus: ­
“(iv)   Supply   of   Capital   goods   and   spares   upto
10%   of   FOR   value   of   capital   goods   to   power
projects   in   terms   of   paragraph   8.2(g),   shall   be
entitled   for   deemed   export   benefits   provided   the
ICB   procedures   have   been   followed   at
Independent Power  Producer  (IPP) / Engineering
and   Procurement   Contract   (EPC)   stage.
However,   in   regard   to   mega   power   projects,
the   requirement   of   ICB   would   not   be
mandatory, if the requisite quantum of power
has   been   tied   up   through   tariff   based
competitive bidding or if the project has been
awarded   through   tariff   based   competitive
bidding . Benefit of deemed exports shall also be

33
available for renovation / modernization of power
plants.   Supplier   shall   be   eligible   for   benefits
listed   in   paragraph   8.3(a)   and   (b)   of   FTP,
whichever   is   applicable.   However,   supply   of
goods required for setting up of any mega power
project   as   specified   in   S.No.   400   of   DoR
Notification   No.   21/2002­   Customs   dated
1.3.2002,   as   amended,   shall   be   88   eligible   for
deemed   export   benefits   as   mentioned   in
paragraph 8.3(a), (b) and (c) of FTP, whichever is
applicable,   if   such   mega   power   project   complies
with   the   threshold   generation   capacity   specified
therein,   in   Customs   Notification.   Further,
supply of goods required for the expansion of
existing   mega   power   project   as   specified   in
Sl.   no   400A   of   DoR   Notification   21/2002­
Customs   dated   1.3.2002,   as   amended   shall
also be  eligible  for deemed  export benefits as
mentioned   in   paragraph   8.3   (a),   (b)   and   (c)   of
FTP, whichever is applicable .”]
(amendments highlighted)
(v)   Supplies   under   paragraph   8.2(g)   of   FTP   to
new   refineries   being   set   up   during   Ninth   Plan
period   and   spilled   over   to   Tenth   Plan   period,
shall   be   entitled   for   deemed   export   benefits   in
respect of goods mentioned in list 17 specified in
S.No.   228   of   Notification   No.   21/2002­Customs
dated   1.3.2002,   as   amended   from   time   to   time.
Supplier   shall   be   eligible   for   benefits   listed   in
paragraphs   8.3(a)   and   (b)   of   FTP,   whichever   is
applicable.
8.4.5 In   respect   of   supplies   made   under   paragraph
8.2(e)   of   FTP,   supplier   shall   be   eligible   for
benefits listed in paragraph 8.3(a) and (b) of FTP,
whichever   is   applicable.   Benefit   of   deemed
exports   shall   be   available   in   respect   of   supplies
of   capital   goods   and   spares   to   Fertilizer   Plants
which   are   set   up   or   expanded   /   revamped   /
retrofitted   /   modernized   during   Ninth   Plan
period.   Benefit   of   deemed   exports   shall   also   be
available  on  supplies  made  to  Fertilizers   Plants,

34
which have started in the 8th / 9th Plan periods
and spilled over to 10th Plan period.
8.4.6 Supplies   of   goods   to   projects   funded   by   UN
Agencies   covered   under   para   8.2(i)   of   FTP   are
eligible   for   benefits   listed   in   paragraph   8.3(a)
and (b) of FTP, whichever is applicable.
8.4.7 In   respect   of   supplies   made   to   Nuclear   Power
Projects   under   para   8.2(j)   of   FTP,   the   supplier
would be eligible for benefits given in para 8.3(a),
(b)   and   (c)   of   FTP,   whichever   is   applicable.
Supply   of   only   those   goods   required   for   setting
up any Nuclear Power Project specified in list 43
at   S.No.   401   of   Notification   No.   21/2002­
Customs dated 1.3.2002, as amended from time
to time, having a capacity of 440MW or more as
certified   by   an   officer   not   below   rank   of   Joint
Secretary to Government of India in Department
of   Atomic   Energy,   shall   be   entitled   for   deemed
export   benefits   in   cases   where   procedure   of
competitive   bidding   (and   not   ICB)   has   been
followed.
(emphasis supplied)
Though  couched  as  benefits, these  are  essentially  entitlements,  to
be availed by DTA supplier in terms of para 8.4.2.  As noted earlier,
in   terms   of   para   6.11(a),   the   EOU   can   also   avail   of   those
entitlements of DTA as specified in Chapter 8 of FTP, as had been
earmarked   for   DTA   supplier.     That   does   not   mean   that   EOU   is
eligible for those entitlements, on its own accord as, amongst other,
it   is   obliged   to   obtain   disclaimer   from   DTA   supplier   as   a
precondition.  

35
21. As   aforementioned,   para   8.2   lists   the   categories   of   supply   of
goods   which   are   regarded   as   deemed   exports   including   supply   of
goods   to   EOU   [para   8.2   (b)].     The   specified   transactions   are
provided   certain   benefits   mentioned   in   para   8.3,   subject   to   terms
and   conditions   in   the   handbook   procedures,   volume   I,   published
under   FTP.     Para   8.3(c),   inter   alia ,   envisages   that   exemption   from
TED   is   available   for   supplies   made   against   International
Competitive Bidding 31
  and also to Advance Authorisation Holder to
a   manufacturer   holding   another   advance   authorisation   if   such
manufacturer   supplies   the   products   to   an   ultimate   exporter.     In
other cases, (would include other DTA suppliers of goods to EOU),
however,   refund   of   TED   will   be   given.     Further,   the   expression
“will” is to be construed as a mandate to give refund to such DTA
suppliers,   being   its   entitlement   under   FTP.     This   does   not   whittle
down   the   ab   initio   exemption   of   payment   of   duty   given   to   EOU   in
respect of supply from DTA.  
22. Notably, para 8.3(c) of FTP does not provide in­built eligibility
“category”   unlike   specified   in   sub­paras   (a)   and   (b)   for   ICB   and
Advance Authorisation Holder.   The expression “in other  cases” in
31  f or short, “ICB”

36
sub­para   (c)   needs   to   be   understood   in   proper   perspective.
Concededly, paras 8.4.1 to 8.4.7 provide for benefits to the supplier
of   goods   to   EOU   as   being   deemed   export.   It   is   essentially   an
entitlement of DTA supplier — as listed in para 8.3(a), (b) and (c) of
FTP,   as   may   be   applicable.     It   is   seen   that   para   8.4.2   was
substituted   by   the   revised   FTP   of   2012,   wherein   a   table   was
inserted 32
.     As   per   that   table,   benefits   available   under   para   8.2   to
32   Para 8.4, after amendment, in 2012­2013 reads thus:­
"8.4  Benefits to the Supplier 
Following table shows the benefits available to different categories of supplies
as mentioned in Para 8.2 above. In respect of such supplies supplier shall be entitled
to   the   benefits   listed   in   paragraphs   8.3   (a),   (b)   &   (c)   of   the   Policy,   whichever   is
applicable. 
32
Relevant   sub­
para of 8.2
32 Benefit   available   as   given   in   Para   8.3,32
(a) 32 Yes
(for 
intermediate 
supplies) 32 Yes
(against
ARO   or   Back   to
Back   letter   of
credit)
32 Yes
(Against
8.4.1   This   paragraph   is   deleted   because   the   contents   of   this   paragraph
reflected in table given in paragraph 8.4 above. 

37
specified   categories   of   supplies   including   supply   to   EOU   in   para
8.2(b) had been extended benefits under para 8.3, as applicable.
23. The   eligibility   for   refund   of   TED/drawback   in   terms   of   para
8.3(c) of FTP is made dependent on the non­availment of CENVAT
credit/rebate   on   such   goods   by   the   recipient   thereof,   as   is
envisaged in original para 8.5.  The same reads thus:
“ 8.5   Eligibility   for   refund   of   terminal   excise
duty/drawback
Supply   of   goods   will   be   eligible   for   refund   of   terminal
excise   duty   in   terms   of   para   8.3(c)   of   FTP,   provided
recipient   of   goods   does   not   avail   CENVAT   credit   /
rebate   on   such   goods.   Similarly,   supplies   will   be
eligible   for   deemed   export   drawback   in   terms   of   para
8.3(b)   of   FTP   on   Central   Excise   paid   on
inputs/components,   provided   CENVAT   credit
8.4.2   This   paragraph   is   deleted   because   the   contents   of   this   paragraph
reflected in table given in paragraph 8.4 above. 
8.4.3   This   paragraph   is   deleted   because   the   contents   of   this   paragraph
reflected in table given in paragraph 8.4 above. 
8.4.4   (i)   This   paragraph   is   deleted   because   the   contents   of   this   paragraph
reflected in table given in paragraph 8.4 above. 
(ii) This paragraph is deleted because the contents of this paragraph reflected
in paragraphs 8.2(d) and 8.4 above. 
(iii) This paragraph is deleted because the contents of this paragraph reflected
in paragraph 8.2 (f) above. 
(iv) This paragraph is deleted because the contents of this paragraph reflected
in paragraphs 8.2 and 8.4 above. 
 (v) Deleted 
8.4.5 Deleted. 
8.4.6   This   paragraph   is   deleted   because   the   contents   of   this   paragraph
reflected in table given in paragraph 8.4 above. 
8.4.7   This   paragraph   is   deleted   because   the   contents   of   this   paragraph
reflected in paragraphs 8.2 and 8.4 above.”

38
facility/rebate has not been availed by applicant. Such
supplies   will   however   be   eligible   for   deemed   export
drawback   on   customs   duty   paid   on
inputs/components.
[Para 8.5, after amendment, in 2012­2013 reads thus:­
“ 8.5   Eligibility   for   refund   of   terminal   excise
duty/drawback
Supply   of   goods   will   be   eligible   for   refund   of
terminal excise duty in terms of Para 8.3(c) of FTP,
provided   recipient   of   goods   does   not   avail   CENVAT
credit/rebate on such goods.  A declaration to this
effect, in Annexure II of ANF 8, from recipient of
goods, shall be submitted by applicant.  Similarly,
supplies will be eligible for deemed export drawback
in   terms   of   para   8.3   (b)   of   FTP   of   Central   Excise
duty   paid   on   inputs/components,   provided
CENVAT   credit   /rebate   has   not   been   availed   of
such   duty   paid   by   supplier   of   goods .   A
declaration to this effect, in Annexure III of ANF
8, from supplier of goods, shall be submitted by
applicant .   Such   supplies   shall   however   be   eligible
for   deemed export  drawback on customs  duty  paid
on inputs/components.
(amendments highlighted)
8.5.1  Simple interest @ 6% per annum will be payable
on   delay   in   refund   of   duty   drawback   and   terminal
excise duty under deemed export scheme, if the case is
not   settled   within   30   days   of   receipt   of   complete
application (as in paragraph 9.10.1 of HBP v1).”
24. Similarly,   benefit   under   para   8.3(b)  of   FTP   regarding   deemed
export   drawback   can   be   availed,   provided   CENVAT   credit/rebate
has   not   been   availed   by   DTA   supplier   and   subject   to   complying
other   formalities.   Para   8.4.2   as   originally   stood,   is   indicative   of

39
option   given   only   to   supplier   (DTA)   in   connection   with   supply   of
goods to EOU, as specified in para 8.3 (a), (b) and (c) of FTP.  That
has   remained   intact   despite   the   amendment   of   2012,   until   March
2013.  Be it noted that the purport of para 8.5 states that supply of
goods will be eligible for TED refund only if CENVAT credit/rebate
has   not   been   availed   on   such   goods.     These   stipulations
demonstrate that the scheme of FTP is explicit and not ambiguous
nor silent in respect of benefits and entitlements of the concerned
entities.   It   needs   no   elaboration.     Thus,   an   argument   having
potential   of   defeating   the   intent   of   the   applicable   FTP,   in   any
manner, ought to be negated.
25. Going by the scheme of FTP applicable at the relevant period,
it   is   crystal   clear   that   EOUs   were   entitled   to   ab   initio   exemption
from payment of Central Excise duty on goods procured from DTA
on goods manufactured in India, as the import of such goods was
to be made without payment of duty.   No more and no less.   That,
however, did not preclude the EOU from availing of the entitlement
of   DTA   supplier   under   Chapter   8   upon   obtaining   a   suitable
disclaimer   from   DTA   supplier,   as   provided   in   para   6.11(a).     That

40
availment by EOU had been linked to entitlement of DTA supplier,
as specified in Chapter 8.  The DTA supplier could (entitled to) take
refund   of   TED   in   respect   of   goods   supplied   by   it   to   EOU   being
exempted   from   TED,   in   light   of   para   8.3(c).     The   eligibility   for
refund of TED, however, has been circumscribed by formalities and
requirements to be adhered to, including as noted in para 8.5.   In
that,   recipient   of   goods   (EOU)   does   not   avail   CENVAT   credit   or
rebate.  Similarly, DTA supplier would be eligible for deemed export
drawback in terms of para 8.3(b) of FTP on Central Excise paid on
inputs/components,   provided   CENVAT   credit   facility/rebate   has
not been availed.
26. Upon conjoint reading of the relevant para and its clauses, it
leaves no manner of doubt that the intent of the subject FTP was to
encourage   DTA   suppliers   by   providing   refund   of   TED   in   terms   of
para   8.3(c),   subject   to   fulfilment   of   formalities   and   stipulations   in
Chapter 8 of FTP.  This was also to generate foreign exchange as a
consequence of goods supplied as inputs or otherwise, were finally
exported   by   the   EOU.     The   EOU,   on   the   other   hand,   could   only
avail of the entitlement of the DTA supplier if the DTA supplier had
not taken rebate or CENVAT credit facility (as per para 8.5) treating

41
it   as   deemed   export.     This   dispensation   was   uniformly   followed
until   the   issue   of   policy   circular   dated   15.3.2013.     That   circular
reads thus:­
“Government of India
Ministry of Commerce and Industry
Directorate General of Foreign Trade
Udyog Bhawan, New Delhi
Policy Circular No. 16 (RE­2012/2009­14)
Dated:  15 th
 March, 2013
To,
All Regional Authorities
All Development Commissioners, SEZ.
Subject: Clarification   regarding   TED   Refund   where   TED
exemption is available.
It   has   come   to   the   notice   of   this   Directorate   that
some   RAs   of   DGFT   and   the   Officers   of   Development
Commissioners   of   SEZ   are   providing   refund   of   TED   even
in   those   cases   where   supplies   of   goods,   under   deemed
exports, is ab­initio exempted.
2. There are three categories of supplies where supply of
goods,   under   deemed   exports,   are   ab­initio   exempted
from payment of excise duties.  These are as follows:
(i) Supply  of goods under Invalidation letter  issued
against   Advance   Authorisation   [Para   8.3(c)   of
FTP];
(ii) Supply   of   goods   under   ICB   [Para   8.3(c)   of   FTP];
and
(iii) Supply of goods to EOUs [Para 6.11(c)(ii) of FTP]

42
3. Prudent   financial   management   and   adherence   to
discipline   of   budget   would   be   compromised   if   refund   is
provided, in cases, where exemption is mandated.  In fact,
in   such   cases   the   relevant   taxes   should   not   have   been
collected   to   begin   with.     And   if,   there   has   been   an
error/oversight   committed,   then   the   agency
collecting  the   tax  would  refund   it , rather  than  seeking
reimbursement   from   another   agency.     Accordingly,   it   is
clarified   that   in   respect   of   supplies,   as   stated   at   Para   2
above,   no   refund   of   TED   should   be   provided   by   RAs   of
DGFT/Office   of   Development   Commissioners,   because
such   supplies   are   ab­initio   exempted   from   payment   of
excise duty.
4. This issue with the approval of DGFT.
(Jay Karan Singh)
Joint Director of Foreign Trade
…..”
(emphasis supplied)

43
33   Section 5, as it existed before amendment in 2010:
5.   Export   and   import   policy .   —   The   Central   Government   may,   from   time   to   time
formulate and announce, by notification in the Official Gazette, the export and import policy
and may also, in the like manner, amend that policy.
               Section 5, as substituted by Act 25 of 2010 w.e.f. 27.8.2010:
5.   Foreign   Trade   Policy .   —   The   Central   Government   may,   from   time   to   time,
formulate and announce, by notification in the Official Gazette, the   foreign trade policy   and
may also, in like manner, amend that policy:
Provided that the Central Government may direct that, in respect of the Special
Economic   Zones,   the   foreign   trade   policy   shall   apply   to   the   goods,   services   and
technology with such exceptions, modifications and adaptations, as may be specified by
it by notification in the Official Gazette .

44
27. As   regards   the   claim   for   refund   of   TED   by   EOU,   therefore,
need   to   be   governed   by   the   dispensation   provided   in   para   6.11(a)
read   with   entitlement   of   DTA   supplier   under   Chapter   8   of   FTP.
However, it may have to be processed by the authorities under the
FTP   keeping   in   mind   the   principle   underlying   the   refund   of
CENVAT credit granted under Rule 5 of the 2004 Rules and in the
manner   provided   therefor,  though  not   covered   by   Rule   5.     That   is
because in law it is a case of deemed export by virtue of applicable
FTP. 
28. If   the   refund   claim   is   by   the   EOU,   the   same   needs   to   be
processed   by   the   authorities   under   the   FTP   by   reckoning   the
entitlement   of   DTA   supplier   specified   in   Chapter   8   of   the   FTP
concerning   the   goods   supplied   to   it,   being   a   case   of   deemed
exports.  The EOU on its own, however, is not entitled for refund of
TED,   as   the   mandate   to   EOU   is   to   procure   or   import   goods   from
DTA   supplier,   without   payment   of   duty   in   view   of   the   express   ab
initio   exemption   provided   in   terms   of   para   6.2(b)   read   with   para
34            To be published in the Gazette of India Extraordinary
Part II, Section 3, Sub­Section (II)
Government of India

45
6.11(c)(ii).  However, despite such express obligation on the EOU, if
the   EOU   has   had   imported   goods   from   DTA   supplier   by   paying
TED,   it   can   only   claim   the   benefit   of   refund   provided   to   DTA
supplier under para 8.4.2 read with paras 8.3(c) and 8.5 subject to
Ministry of Commerce and Industry
Department of Commerce
   Udyog Bhawan
Notification No. 4 (RE­2013)/2009­2014
Dated:  the 18 th
 April, 2013
Subject: Amendments in Paragraph 8.3(c) and Paragraph 8.4 of FTP pertaining to
deemed exports scheme – Regarding.
S.O (E): In   exercise   of   the   powers   conferred   by   Section   5   of   the   Foreign   Trade
(Development   &   Regulation)   Act,   1992,   as   amended,   read   with   paragraph   1.3   of   the   Foreign
Trade Policy, 2009­2014, the Central Government hereby makes the following amendments in
Foreign Trade Policy, 2009­2014.
2. The existing paragraphs 8.3 (c) and 8.4 in the FTP are substituted by amended
paragraphs 8.3(c) and 8.4 as given below:
 
(i)           Existing Paragraph 8.3 (c)
“Exemption from terminal excise duty where supplies are made against ICB. In
other   cases,   refund   of   terminal   excise   duty   will   be   given.   Exemption   from   TED   shall
also   be   available   for   supplies   made   by   an   Advance   Authorisation   holder   to   a
manufacturer   holding   another   Advance   Authorisation   if   such   manufacturer,   in   turn,
supplies the product(s) to an ultimate exporter.”
              Amended Paragraph 8.3 (c)
“Refund   of   terminal   excise   duty   will   be   given   if   exemption   is   not   available.
Exemption from TED is available to the following categories of supplies:
(i) Supplies against ICB;
(ii) Supplies   of   intermediate   goods,   against   invalidation   letter,
made   by   an   Advance   Authorisation   holder   to   another   Advance
Authorisation holder; and
(iii)      Supplies of goods by DTA unit to EOU / EHTP / STP / BTP unit
Thus such categories of supply which are exempt ab initio will not be eligible to
receive refund of TED”.
                     
(ii)       Existing Paragraph 8.4
                  “Following table shows the benefits available to different categories of supplies
as mentioned in Para 8.2 above.     In respect of such supplies supplier shall be entitled
to   the   benefits   listed   in   paragraphs   8.3   (a),   (b)   &   (c)   of   the   Policy,   whichever   is
applicable.
Relevant 

46
obtaining   disclaimer   from   DTA   supplier   in   that   regard   and
complying with other formalities and requirements.
29. We   thus   agree   with   the   conclusion   reached   by   the   Bombay
High Court that the EOU is not entitled to claim refund of TED on
its   own.     However,   we   add   a   caveat   that   EOU   may   avail   of   the
entitlements   of   DTA   supplier   specified   in   Chapter   8   of   FTP   on
condition that it will not pass on that benefit back to DTA supplier
later   on.     In   any   case,   the   refund   claim   needs   to   be   processed   by
keeping   in   mind   the   procedure   underlying   the   refund   of   CENVAT
credit/rebate of excise duty  obligations.   If CENVAT credit utilised
by DTA supplier or EOU, as the case may be, cannot be encashed,
there is no question of refunding the amount in cash.  In that case,
the commensurate amount must be reversed to the CENVAT credit
account of the concerned entity instead of paying cash.
30. If, the claim for refund by DTA supplier under the scheme of
FTP   is   allowed,   it   can   be   in   cash   if   TED   had   been   paid   in   cash.
Else,   it   can   be   in   the   form   of   reversal   of   commensurate   CENVAT
credit amount to the concerned account of DTA supplier.
sub­para of 8.2    

47
31. As regards the refund claim of DTA supplier, as noted earlier,
it needs to be processed by the authorities under the FTP keeping
in   mind   the   purport   of   stipulations   spelt   out   in   Chapter   8   of
subject FTP, such as the goods imported or supplied to EOU shall
be   with   actual   user   condition   and   shall   be   utilised   for   export
production and that the EOU did not avail CENVAT credit or rebate
in   relation   to   the   goods   supplied   to   EOU.     Similarly,   if   the   DTA
supplier   has   utilised   the   CENVAT   credit,   commensurate   amount
needs to be reversed to its CENVAT credit account, in which case,
there   is   no   question   of   refunding   the   amount   in   cash   to   the   DTA
supplier.
32. We   shall   now   revert   to   the   judicial   pronouncements   dealing
with   the   subject   FTP.     Except   the   decision   of   the   Bombay   High
Court commended to us, which is under challenge in the first two
appeals   pertaining   to   refund   claim   by   EOU,   all   other   reported
decisions   are   in   respect   of   DTA   supplier   of   specified
goods/services.  
33. The earliest decision is that of the learned Single Judge of the
Calcutta   High   Court   in   IFGL   Refractories   Limited 35
.     The   High
35  supra at Footnote No.22

48
Court   noted   that   the   Export   and   Import   Policy   for   the   relevant
years   was   adopted   amongst   other   to   promote   export   of   Indian
products   to   foreign   countries   aiming   at   to   earn   foreign   exchange
and   to   increase   global   market.     The   scheme   was   propounded   to
encourage   indigenous   supplier   by   providing   certain   benefits   and
entitlements,   either   by   way   of   exemption   from   payment   of   excise
duty or to get refund of excise duty, if already paid.   The object of
the scheme was to provide exporters duty­free input for production
of export materials and for that reason, it exempted supplier from
payment   of   any   excise   duty   and,   if   paid,   to   provide   for   refund   of
TED.       The   High   Court   further   noted   that   merely   because   such
refund was not permissible to the DTA supplier under the 1944 Act
and   the   rules   framed   thereunder,   that   would   not   deprive  the   DTA
supplier to avail of the entitlements and benefits under the FTP.  It
held   that   it   is   open   to   the   assessee   to   take   advantage   of   any   law,
particularly   which   is   more   beneficial.     Accordingly,   learned   Single
Judge   issued   directions   to   pay   the   refundable   amount   along   with
interest   at   the   rate   of   12   %   per   annum.     The   appeal   filed   by   the
Department against the said decision was rejected by the Division

49
Bench   of   the   Calcutta   High   Court   in   Joint   Director   General   of
Foreign Trade 36
.   The Division Bench, however, directed the DGFT
to refund TED amount as it was the concerned Authority under the
FTP,   subject   to   assessee   completing   necessary   formalities   as
provided   for   in   the   FTP.     This   decision   was   then   affirmed   by   this
Court consequent to dismissal of special leave petition being S.L.P.
(C) No.5368 of 2002, on 7.10.2002.
34. The next decision is of the High Court of Gujarat in the case
of   Commissioner   of   Central   Excise   and   Customs   vs.   NBM
Industries 37
.   The Division Bench of the High Court considered the
question   whether   DTA   supplier   of   goods   to   EOU   is   entitled   for
refund   of   the   CENVAT   credit   despite   Rule   5   of   the   2004   Rules,
dealing   with   refund   of   CENVAT   credit.     The   Authorities   had   held
that not being a case of export of goods out of India, the assessee
was   not   entitled   for   refund   of   CENVAT   credit   amount   utilised   in
respect of subject goods supplied to EOU.   The High Court relying
36  supra at Footnote No.19
37   2012 (276) ELT 9 (Guj.)

50
on   its   earlier   decision   in   Commissioner   of   Central   Excise   vs.
Shilpa   Copper   Wire   Industries 38
,   negatived   that   stand   of   the
Department.     Instead,   the   High   Court   held   that   the   claim   for
refund was in reference to the applicable FTP and not on the basis
of the provisions of the 1944 Act and the rules framed thereunder.
The entitlement of DTA supplier was specified in the applicable FTP
being   deemed   exports   which   in   law   are   regarded   as   physical
exports   for   the   purpose   of   entitling   refund   of   unutilised   CENVAT
credit.
35. Then came the decision of the High Court of Delhi in   Kandoi
Metal   Powders   Manufacturing   Company   Private   Limited 39
.
Even, this was a case of supplier manufacturing goods supplied to
EOU  in  reference  to  the  applicable  FTP.    The High  Court  not  only
relied   on   the   decision   of   the   Division   Bench   of   the   Calcutta   High
Court   in   Joint   Director   General   of   Foreign   Trade 40
,   but
38   2011 (269) ELT 17 (Guj.)
39  supra at Footnote No.18
40  s upra at Footnote No.19

51
independently   opined   that   DGFT   having   formulated   the   FTP,   the
claim   of   the   assessee   was   governed   by   the   entitlements   specified
therein in paras 8.2, 8.3, 8.4 and 8.5 as applicable at the relevant
time.     Accordingly,   the   High   Court   allowed   the   writ   petition   and
relegated   the   writ   petitioner   before   the   Authority   concerned   for
deciding   the   refund   claim   of   the   petitioner.     This   judgment   has
been  followed in  subsequent  decisions,  not  only  by   the coordinate
Benches of the High Court of Delhi, but also by other High Courts.
36. The   Madras   High   Court   in   the   case   of   Raja   Crowns   and
Cans Pvt. Limited vs. Union of India 41
 dealt with similar claim of
the   DTA   supplier   of   goods   to   EOU   and   whilst   following   the
decisions   of   the   High   Court   of   Delhi   and   Calcutta   High   Court
referred to above, opined that the assessee was entitled to maintain
an   application   for   refund   of   TED.     The   High   Court,   accordingly,
directed   the   Authorities   concerned   to   consider   the   refund
application of the writ petitioner.  Later on, the Madras High Court
41   2015 (317) ELT 40 (Mad.)

52
took   the   same   view   in   Lenovo   (India)   Pvt.   Ltd. 42
  and   Manali
Petrochemical   Limited   vs.   Additional   Director   General   of
Foreign Trade, New Delhi & Anr. 43
.
37. As   aforesaid,   the   decision   in   Kandoi   Metal   Powders
Manufacturing   Company   Private   Limited 44
  has   been
subsequently   followed   by   the   High   Court   of   Delhi   in   Union   of
India   vs.   Alstom   India   Limited 45
,   Commissioner   of   Central
Excise, Delhi II vs. Welspring Universal 46
, Deepak Enterprises
vs. Union of India 47
, Alstom Transport India Ltd. vs. Union of
42  supra at Footnote No.25
43  W.P. No.23194 of 2009, decided on 16.9.2019
44  s upra at Footnote No.18
45   2015 (325) ELT 72 (Del.)
46   2018 (359) ELT 635 (Del.)
47   2018 (360) ELT 905 (Del.)

53
India 48
,   Motherson   Sumi   Electric   Wires   vs.   Union   of   India 49
,
Multitex Filtration Engineers Limited vs. Union of India 50
  and
Hindustan Tin Works Limited vs. Union of India 51
.
38. The   view   taken   by   the   Calcutta   High   Court   and   followed   by
the   High   Court   of   Delhi   commended   even   to   the   High   Court   of
Karnataka in  Acer India Pvt. Ltd. 52
. 
39. The view taken in these decisions at the instance of the DTA
supplier  of specified goods to EOU is in consonance with the view
taken   by   us   in   this   judgment.     To   that   extent,   we   affirm   these
decisions and hold that the DTA supplier of goods to EOU would be
entitled   for   refund   of   TED   on   the   basis   of   applicable   para   6.11(a)
48   2018 (363) ELT 69 (Del.)
49   2018 (364) ELT 91 (Del.)
50   2020 (373) ELT 68 (Del.)
51   2020 (373) ELT 217 (Del.)
52  supra at Footnote No.21

54
read   with   paras   8.3(c),   8.4.2   and   8.5   of   the   FTP   under
consideration.  The modality of refund, however, ought to be in the
form   of   reversal   of   commensurate   amount   in   the   CENVAT   credit
account   of   the   DTA   supplier,   if   the   DTA   supplier   had   utilized
CENVAT credit account in respect of goods supplied to EOU; and if
it had paid the amount in cash, the DTA supplier would be entitled
for refund of cash with simple interest at the rate of 6% per annum
as provided in para 8.5.1 of the applicable FTP on delay in refund
of duty drawback and TED under deemed exports scheme.
40. Reverting to the case of EOU considered by the Bombay High
Court in the impugned judgment, we hold that EOU is entitled only
for   ab   initio   exemption   from   payment   of   central   excise   duty   in
terms of para 6.11(c)(ii) of the FTP; and obliged to import the goods
from DTA supplier without payment of duty in terms of para 6.2(b)
of the FTP.   The arrangement provided in para 6.11(a) is, however,
in the nature of “benefit” given to EOU in the event it had paid the
amount   towards   TED   in   relation   to   goods   procured   by   it   to   DTA
supplier.     In   that   case,   EOU   will   be   eligible   only   for   obtaining
entitlements   of   DTA   supplier   as   specified   in   Chapter   8   of   the   FTP

55
upon   obtaining   a   suitable   disclaimer   from   DTA   supplier.
Accordingly,   in   addition   to   ab   initio   exemption,   the   EOU   is
additionally   eligible   to   receive   entitlements   of   DTA   supplier   as
specified   in   Chapter   8   of   the   FTP   subject   to   complying   with
necessary   requirements   and   formalities.     In   other   words,   EOU   is
not   entitled   for   refund  of  TED   on   its  own   accord,   but   can   avail   of
the entitlements of DTA supplier on complying essential procedure.
As   mentioned   earlier,   the   interest   on   the   refundable   amount,   if
paid in cash ought to be refunded with simple interest at the rate
of 6% per  annum  as provided in para 8.5.1 of the applicable FTP,
even in the case of application for refund by EOU.
41. The next question is: the refund claim should be set up before
which   Authority?     As   noted   earlier,   since   the   entitlement   of
exemption and refund of TED flows from the provisions of 1992 Act
and   FTP   framed   thereunder   by   the   Central   Government,   which   is
an   independent   dispensation   than   the   one   provided   in   the   1944
Act   and   the   rules   framed   thereunder,   with   the   avowed   purpose   of
promoting export and earning foreign exchange, it is the obligation
of Authority responsible to implement the subject FTP, to deal with

56
refund   claim   of   the   concerned   entities.     For,   it   is   not   a   case   of
refund under  the 1944 Act or   2002 Rules or   2004 Rules as  such,
but under the applicable FTP.
42. In   conclusion,   we   hold   that   the   EOU   entities,   who   had
procured   and   imported   specified   goods   from   DTA   supplier,   are
entitled to do so without payment of duty [as in para 6.2(b)] having
been   ab initio   exempted from such liability under para 6.11(c)(ii) of
the   FTP,   being   deemed   exports.     Besides   this,   there   is   no   other
entitlement of EOU under the applicable FTP.   Indeed, under para
6.11(a)   of   the   FTP,   EOU   is   additionally   eligible   merely   to   avail   of
entitlements   of   DTA   supplier   as   specified   in   Chapter   8   of   the   FTP
upon   production   of   a   suitable   disclaimer   from   the   DTA   supplier
and   subject   to   compliance   of   necessary   formalities   and
stipulations.  It would not be a case of entitlement of EOU, but only
a   benefit   passed   on   to   EOU   for   having   paid   such   amount   to   the
DTA   supplier,   which   was   otherwise   ab   initio   exempted  in   terms   of
para 6.11(c)(ii) of the FTP coupled with the obligation to import the
same without payment of duty under para 6.2(b).

57
43. Besides,   if   the   DTA   supplier   as   well   as   EOU   had   utilized   its
CENVAT   credit   for   importing   goods   in   question,   the   refund   would
be   in   the   form   of   reversal   of   commensurate   amount   of   CENVAT
credit to the account of the concerned entity.  However, if TED has
been   paid   in   cash   by   the   EOU,   the   EOU   may   get   refund   of   that
amount   from   Authority   implementing   the   applicable   FTP   in   cash
with   simple   interest   at   the   rate   of   6%   per   annum   for   the   delayed
refund of duty (para 8.5.1) on condition that it would not pass on
that benefit to the DTA supplier owing to such refund/rebate.
44. As   regards   DTA   supplier   of   goods   to   EOU,   it   is   entitled   to
receive   the   refund   of   TED   in   terms   of   para   8.3(c)   read   with   paras
8.4.2 and 8.5 of the applicable FTP subject to complying necessary
formalities   and   stipulations   provided   therein,   being   a   case   of
deemed   exports.     Even,   in   the   case   of   DTA   supplier   of   goods   to
EOU, if TED has been paid by utilizing CENVAT credit, the refund
would   be   in   the   form   of   reversal   of   commensurate   amount   in   its
CENVAT credit account.  And if the amount towards TED has been
paid in cash by the DTA supplier to the Authorities under the 1944
Act,   the   refund   of   TED   amount   would   be   made   by   the   Authority

58
implementing the applicable FTP in cash with simple interest at the
rate   of   6%   per   annum   for   the   delay  in   refund   of   TED   as   per   para
8.5.1.  
45. In both cases, as aforesaid, responsibility of refund of TED in
reference   to   applicable   FTP   would   be   that   of   the   Authority
responsible   to   implement   the   FTP   under   the   1992   Act,   which   has
had consciously accorded such entitlements/benefits for promoting
export   and   earning   foreign   exchange.     Further,   the   fact   that   the
concerned   entity   had   unsuccessfully   applied   for   refund   to   the
Authorities   under   the   1944   Act   and   the   rules   made   thereunder,
that   would   not   denude   it   of   its   entitlement   to   get   refund   of   TED
under   the   FTP,   as   may   be   applicable   being   mutually   exclusive
remedies.  It is so because it is well settled that the assessee is free
to take benefit of more beneficial regime.
46. Learned   counsel   for   the   parties   had   referred   to   other
decisions, which in our opinion need not be dealt with as the same
are  not   directly  dealing  with  the  issue(s)  answered  in  these  cases,
in particular dispensation provided under the applicable FTP.

59
47. In view of the above, the appeals filed by  the  assessee (EOU)
against   the   decision   of   the   Bombay   High   Court   partly   succeed   in
the   above terms;  and  the   appeals  filed by   the  Department  against
the   decision   of   the   High   Court   of   Delhi   and   High   Court   of
Karnataka   are   also   partly   allowed   in   the   aforementioned   terms.
There shall be no order as to costs.
Pending application(s), if any, are disposed of accordingly.
..……………………………J.
       (A.M. Khanwilkar)
………………………………J.
(Dinesh Maheshwari)
………………………………J.
      (Krishna Murari)
New Delhi;
January 4, 2022.