Vedanta Limited, formerly Sterlite Industries (India) Limited, has moved the Madras High Court claiming that it might end up suffering a loss of ₹150 crore if it is not allowed to use duty credit certificates beyond 24 months, besides using them to set off Integrated Goods and Services Tax (IGST) and GST Compensation Cess.
The writ petitions filed by the company have been listed for admission before the first Division Bench of Chief Justice Munishwar Nath Bhandari and Justice D. Bharatha Chakravarthy on Monday. In its affidavit, the company said it was engaged in mining and extraction of metals such as copper, zinc, aluminium and iron ore.
It's name got changed due to corporation reorganisation in 2013. Import and export of inputs and final products was part and parcel of its business activities. The Foreign Trade Policy (FTP) for 2004-09 provided a scheme for import duty set off to business houses, which meet certain targets with respect to their exports.
As per the Target Plus Scheme (TPS), star export houses, which secure an incremental growth between 20 to 24.99%, were entitled to 5% duty credit. Similarly, those who had secured a growth between 25 and 99.99% were entitled to 10% duty credit and those who had secured more than 100% growth were entitled to 15% credit.
The duty credit could be used for import of any inputs, capital goods, spares, office equipment, professional equipment, office furniture and so on. Vedanta claimed that it had registered an incremental export growth of 149% in 2005-06 as against the figure for the previous year and was therefore eligible to avail 15% duty credit under TPS.
However, in 2006, the Centre amended the FTP and held that the duty credit would be restricted to only 5% for all categories of star exporters and also gave retrospective effect to the notification. Hence, Vedanta first claimed duty credit of ₹101.9 crore (accounting to 5%) and moved the court along with others to claim the rest of ₹216.38 crore.
The cases were initially heard before the Bombay High Court and then got transferred to the Supreme Court, which in October 2015 ruled in favour of the companies. Claiming that even thereafter, there was huge delay in issuing duty credit certificate, the petitioner said the balance certificate for ₹216.38 crore was issued only on February 24, 2021.
Claiming that it had utilised the certificate for ₹26.24 crore from February 24 to December 31, 2021 and was likely to use it for another ₹66 crore till its expiry on February 24, 2023, the company said it was likely to face a loss of around ₹150 crore unless the “arbitrary” time limit of 24 months imposed by the Director General of Foreign Trade (DGFT) was not set aside.
Vedanta said the FTP had not set any deadline for use of duty credit certificates. Therefore, the DGFT, utilising its powers to frame procedures, could not fix deadlines, the firm claimed. It also challenged a 2017 notification by which a 2006 notification was amended in such a manner that the duty credit certificates could be used only for setting off customs duty.
"The impugned (under challenge) notification operates to the detriment of the petitioner since it affords no relief against the vast amounts of IGST and GST Compensation cess that the petitioner has to discharge post the promulgation of GST laws with effect from July 1, 2017," the affidavit read.
Though the company had its registered office in Mumbai, it chose to file the writ petitions in the Madras High Court since it had been importing and exporting through the ports in Chennai and Thoothukudi.
