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Deemed exports – Interpretation by Policy Interpretation Committee, prospective

18 August, 2014

Bombay High Court has held that interpretation placed on 15th March 2011 by the Policy Interpretation Committee in respect of deemed export benefits would not apply to supplies made prior to such interpretation. The court said that such cases would be processed by the authorities in accordance with the policy prevailing and as clarified prior to 15th March 2011.

The case involved supplies of iron and steel, cement and fuel to power projects and involved refund of terminal excise duty on such supplies. Refund was granted by the department but show cause notices were issued later to recover such refund, relying on interpretation given in minutes of meeting dated 15-3-2011 of the Policy Interpretation Committee.

The High Court in its order dated 21-7-2014 held that such minutes of the meeting cannot override the FTP provisions. Considering such denial of benefit as afterthought, the court held that such interpretation issued afterwards could not have relied upon to reopen the concluded cases or review them. The interpretation was further held as not applicable in pending applications.

Writ petition – Non-applicability of bar when alternative remedy available

Initially, the writ petition against the show cause notices was allowed to be entertained by the court, upholding assessee’s view that no useful purpose would be served by showing cause before the adjudicating authority as the SCNs were based or founded only on the decision of the Policy Interpretation Committee. Department’s reliance on Section 15(2) of the Foreign Trade (Development & Regulation) Act, 1992 was also rejected by the court in this regard. It was also observed that availability of alternative remedy by itself will not constitute a bar to entertaining writ petition as such rule is one of prudence and caution only
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