Benefit Of Cash Compensatory Scheme Cannot Be Denied On Castor Oil Exports Based On Subsequent Test Change: Bombay High Court

The Bombay High Court stated that benefit of cash compensatory scheme benefit cannot be denied on castor oil exports based on subsequent test change. The Division Bench of Justices M.S. Sonak and Jitendra Jain has observed that contracts executed prior to the cutoff day would not be governed by the subsequent change in the scheme granting the benefit. There is no dispute that the exports made for the period under consideration were in respect of contracts executed prior to 23 June 1989 Therefore, even on this count, the rejection of the benefit of cash compensatory support scheme by the respondents is not justified, added the bench. In this case, on 8 May 1991, the respondent issued Circular whereby it clarified that 'Castor Oil First Special' would be eligible for cash compensatory support. Based on this Circular, the assessee was denied the benefit of cash compensatory support scheme for the period 22 June 1989 to 8 May 1991. The assessee has filed the petition challenging the order passed by the Respondent No.2 whereby his application, for the period 3 July 1989 to 7 May 1991, for refund of Cash Compensatory Scheme (CCS) has been rejected primarily on the ground that 'Castor Oil First Special Grade' cannot be equated as 'Castor Oil Medicinal' for grant of benefit of CCS. The assessee submitted that on identical issue the Co-ordinate Bench of the Court in the assessee's own case while dealing with the refund of duty drawback has held that 'Castor Oil First Special' qualifies as 'Castor Oil Medicinal' for the purpose of duty drawback. He submitted that the said decision squarely covers the controversy raised in the Petition and therefore the Respondents be directed to refund the cash compensatory amount as prayed for. The issue before the bench was whether the goods 'Castor Oil Medicinal' is different than the 'Castor Oil First Special' post of the introduction of the new test i.e. TLC. The bench stated that “merely because the test required is changed would not alter the nature of the goods. Furthermore, from 8 May 1991, the benefit of the CCS scheme has been granted to the goods 'Castor Oil First Special'. If that be so, then we fail to understand as to how the said benefit can be denied for the period 22 June 1989 to 8 May 1991 merely on the ground of change in the test. Therefore, looked from any angle, the goods 'Castor Oil Medicinal' and 'Castor Oil First Special' would remain the same although there was a change in the test by Circular dated 23 of June 1989.” The Circular dated 31 March 1989 by which rate of 5% of FOB as CCS was granted applied for the period 1 April 1989 to March 1992 and as per the said Circular, the benefit of CCS was granted to the assessee on export of goods on the premise that the same constitutes of 'Castor Oil Medicinal', observed the bench. The bench further opined that since the said Circular applied for the period 1989 to 1992, the Respondents were not justified in denying the benefit of CCS for the period 22 June 1989 to 8 May 1991 merely on the basis of change of test to be conducted. In view of the above, the bench directed the respondents to pay the assessee the cash assistance of Rs.4,33,75,866/- within 8 weeks. Case Title: Sanjay Kumar Agarwal v. Union of India Case Number: WRIT PETITION NO.872 OF 1994 Counsel for Petitioner/ Assessee: Gouresh Mogre Counsel for Respondent/ Department: Dr G R Sharma Click Here To Read/Download Order

Benefit Of Cash Compensatory Scheme Cannot Be Denied On Castor Oil Exports Based On Subsequent Test Change: Bombay High Court

Mehak Dhiman

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