The mini-Exim Policy this year has dealt a severe blow to status holders (i.e., export houses, trading houses etc) by excluding several categories from computation of incremental exports, thus eliminating their hopes of getting a 10 per cent duty free entitlement against incremental exports and by restricting certain items for imports against the duty free entitlement.
Some of the status holders have approached the courts pleading that the restrictions should only operate with prospective effect. Now, status holders have suffered another major blow with regard to the income tax relief under Section 80 HHC of the Income Tax Act, 1961.
According to the Supreme Court judgment last week in the case of IPCA Laboratories, exporters claiming deduction on profits of self-manufactured goods by ignoring losses from the export of trading goods are no more entitled to deduction under Section 80HHC of the Income Tax Act.
In other words, a deduction can be permitted under Section 80HHC(3) only if there is a profit in the exports of both self-manufactured as well as trading goods.
The Supreme Court held that "in arriving at profits earned from the export of both self-manufactured goods and trading goods, profits and losses in both the trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction under Section 80HHC(i). If there is a loss he will not be entitled to any deduction".
Meanwhile, the Central Board of Excise & Customs issued a circular denying the right to claim refund without challenging the original Customs assessment order.
The Supreme Court, in the case of Flock India (2000(120) ELT 285 SC) involving excise matters, had held that a refund claim is not maintainable when the assessee had not challenged the assessment order. In the case of Super Cassette Industries, the Tribunal had held that even in Customs cases the rationale of the Flock India judgment would hold.
While dismissing the appeal of Super Cassette Industries (2003(58) RLT F9), the Supreme Court had said it did not see a reason to interfere.
When the Supreme Court passed a non-speaking order in the case of GMMCO Ltd, the CBEC took a view that non-speaking orders of Supreme Court judgments have no binding effect (CBEC Circular no. 85/2002 dated 11.2.2002).
But, the same CBEC has now taken advantage of non-speaking dismissal orders of the Supreme Court in the case of Super Cassette Industries to deny refund claims of the assessees in Customs matters.
The CBEC has, however, provided a breather by advising field formations not to hold up import consignments on account of classification disputes. They must be released under provisional assessment against bond/bank guarantees.
Also, in all the cases, where samples are required to be sent for testing hazardous dyes to the Textiles Committee laboratory under the ministry of commerce, the testing for composition (i.e., texturised/non-texturised) should also be done at the Textiles Committee laboratory to avoid duplication.
However, where no test for azo-dyes are required as per the Directorate-General of Foreign Trade notification, the test for composition, i.e, texturised/non-texturised, shall be carried out at the CRCL in-house testing laboratory, says the CBEC.
For those already reeling under the impact of the mini-Exim Policy, the Supreme Court judgment on Section 80 HHC and the CBEC circular on refunds have come as bad news. It has been a 'feel bad' week' for exporters and importers.
