Akil Kureshi - (1.) The petitioners have challenged three separate orders, all dated 13-3-2018, passed by the Development Commissioner, Kandla Special Economic Zone as at Annexure-N collectively. By such orders, the said authority rejected the petitioners' request for dropping the show cause notices for confirmation of demand. Resultantly, the petitioners failed to persuade the said authority to refund a sum of Rs. 45,74,285/- which is a total of the demand covered under three separate show cause notices in respect of which said three impugned orders came to be passed.
(2.) Facts in brief are as under. The petitioners are engaged in manufacturing various dyes and intermediates. They had a Export Oriented manufacturing unit situated at Bharuch. On such manufacture and clearance of goods, the petitioners would receive various benefits as an EOU, one of them being reimbursement of central sales tax on goods purchased by the petitioners and utilised for such manufacturing activity. Such reimbursement was granted at the relevant time. The department however issued show cause notices seeking recovery of part of such reimbursement which related to the petitioners' purchases of such goods from other EOU units. While the petitioners were in the process of contesting such show cause notices, the petitioners desired to exit from EOU. The departmental authorities would not permit de-bonding of the petitioners' manufacturing unit unless and until all dues were cleared. According to the petitioners, though the demands raised by the authorities under the show cause notices were yet to be adjudicated, since the authorities would not allow the petitioners to exit from EOU, the petitioners deposited a total of Rs. 45,74,285/- under protest on two different dates i.e. 19-8-2016 and 10-10-2016. At the same time, the petitioners continued to oppose the show cause notices. The competent authority disposed of all the three proceedings by the impugned orders. After recording the stand of the department and the petitioners' contentions, in such orders he observed as under : "Findings : (a) During the Audit conducted by the CRA review by CAG, Ahmedabad for the year 2012 it was observed that an amount of Rs. 38,46,108/- for the CST claims had been erroneously paid to your company. (b) Appendix 14-I-I of HBP Vol. 1 of relevant period clearly mentioned that EOUs are entitled to reimbursement of CST paid by them on purchases made from DTA subject to fulfilment of certain terms and conditions. Further as per para 9.21 of FTP "Domestic Tariff Area (DT)"means area within India which is outside SEZs and EPU/EHTP/STB/BTP. Therefore CST refund on supplies from EOU to EOU are inadmissible. This has resulted in incorrect grant of CST amount. (c) As per para 2(a) of Appx-14-I-I in the relevant period the supplies from DTA to eOu must be utilized by them for production of goods meant for export and/or utilized for export of services and may include raw material components, consumables, packing material, capital goods, spares, material handling equipment, etc., on which CST has been actually paid by EOU. Therefore proportionate CST amount involved in DTA clearances was in admissible. (d) The unit was given opportunity to appear for personal hearing on 7-8-2015, 221-2016 and on 6-6-2016 but none of the representative attended for personal hearing. (e) However during the exit from 100% EOU Scheme, the unit had paid an amount of Rs. 48,79,876/- against their pending paras of all their 100% EOUs (i.e. Meghmani Organics Ltd., Vatva (Unit-II) Meghmani Organics Ltd., Agro Div (Unit-II), Meghmani Organics Ltd, Panoli (Unit-I) vide following Demand Drafts : (i) D.D. No. 514909, dated 17-8-2016 for Rs. 21,72,876/- of SBI. (ii) D.D. No. 515731, dated 10-10-2016 for Rs. 27,07,000/- of SBI. ORDER (1) In view of the above facts and circumstances, I find sufficient ground to drop show cause notice proceedings as unit has paid an total amount of Rs. 38,46,108/-(Rupees Thirty Eight Lakh Forty Six Thousand One Hundred Eight only) under Section 13 of the Foreign Trade (Development and Regulation) Act, 1992 as amended read with Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 as amended."
(3.) We find two things somewhat curious about such order of Development Commissioner. Firstly, in the concluding portion, he records that he found sufficient grounds to drop the show cause notice proceedings as the unit has paid the total demand. We may recall the petitioners had deposited the amount under protest since the petitioners were in a hurry to exit EOU but still continued to contest the show cause notices. There was therefore, no question of dropping the show cause notices merely because the amount was deposited. Second curious aspect is that the authority made fleeting observation on the inadmissible portion of the petitioners' reimbursement which runs counter to the judgment of this Court in case of Asahi Songwon Colors Ltd. v. Union of India reported in 2017 (356) E.L.T. 532.;