2017 (5) TMI 498 - HC - Customs

Entitlement to interest - delay in giving credits - drawback on imported materials used in the manufacture of goods which are exported - Validity of application of Public Notice No.150/95, dated 21. 9 .1995 with retrospective effect - beneficiaries of Pass Book Scheme - The petitioners pointed out that the credits have to be given in the Pass Book issued to the petitioners. Once the earlier stand was incorrect and the petitioners were deprived of the credits without adherence to the law, the credits are in terms of money. They being entitlement for payment of customs duty can therefore be safely equated with money. The money was not released or paid in terms of the entitlement of the petitioners. That was delayed. The wrongful deprivation of this money, therefore, should attract interest. Held that - A bare perusal of Section 27 A would indicate that, if any duty ordered to be refunded under sub section (2) of Section 27 to an applicant is not refunded within three months from the date of receipt of application made under sub section (1) of Section 27, then, there shall be paid to that applicant interest at such rate, not below five per cent and not exceeding thirty per cent per annum as is for the time being fixed by the Central Government, by Notification in the Official Gazette. Where any drawback payable to any claimant under Sections 74 or 75 is not paid within the period set out under sub section (1) of Section 75 A, then, there is an obligation to pay interest. That interest is to be paid at the rate fixed under Section 27 A. The entitlement for interest is from the date after the expiry of the period of one month till the payment of such drawback. At the relevant time, it was three months. It is, therefore, not possible to agree with Mr. Rao that for such delayed release of the supplementary credit, though in terms of money, there is no obligation to pay interest - respondents shall pay the amount of interest quantified at ₹ 1,58,91,182/ within a period of six weeks - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Application of Notification No.104/95 and Public Notice No.150/95 to exports.
2. Restraint from applying Notification No.24/97 and Public Notice No.34/97 retroactively.
3. Legality and validity of Orders dated 22-9-1998 and 30-12-1998.
4. Claim for a sum of ?2,53,34,229/- with interest at 24% per annum.
5. Entitlement to interest on delayed credit in the Pass Book.

Detailed Analysis:

1. Application of Notification No.104/95 and Public Notice No.150/95 to Exports:
The petitioners sought a writ of mandamus directing the respondents to apply Notification No.104/95 and Public Notice No.150/95 to their exports, as detailed in Annexure-F, and to credit them accordingly. The petitioners were recognized as a Trading House under the EXIM Policy and exported various goods. They were beneficiaries of the Pass Book Scheme under Chapter VII of the EXIM Policy, which allowed duty-free import of raw materials for export products. The seventh respondent was responsible for calculating the import contents of the export and determining the customs duty to be credited in the Pass Book.

2. Restraint from Applying Notification No.24/97 and Public Notice No.34/97 Retroactively:
The petitioners argued that Notification No.24/97 and Public Notice No.34/97 should not apply retroactively as their exports were completed before 14-3-1997. They claimed that the export obligation was completed prior to the issuance of Public Notice No.34/97, and their applications were processed under the earlier scheme. The petitioners' applications for supplementary credit were rejected due to the issuance of Public Notice No.34/97 during the processing period.

3. Legality and Validity of Orders Dated 22-9-1998 and 30-12-1998:
The petitioners challenged the legality and validity of the Orders dated 22-9-1998 and 30-12-1998, which denied them the supplementary credit. The Board initially rejected the petitioners' representation, but upon re-examination, it was decided that the valuation parameters laid down in Notification No.104/95 should apply to exports made before 6-3-1997. Consequently, the petitioners were entitled to the supplementary credit.

4. Claim for a Sum of ?2,53,34,229/- with Interest at 24% Per Annum:
The petitioners claimed a sum of ?2,53,34,229/- with interest at 24% per annum, later revised to 15%. The claim was based on the delayed grant of supplementary credit. The Customs Department initially allowed a lower credit amount, and the balance was granted after the Tribunal's order. The petitioners argued that the delayed release of credits, which were equivalent to money, should attract interest.

5. Entitlement to Interest on Delayed Credit in the Pass Book:
The petitioners contended that the delayed credit in the Pass Book should attract interest as per Sections 27 and 27-A of the Customs Act, 1962. The respondents argued that there was no provision for payment of interest on credits under the EXIM Policy or the Notifications. However, the court found that the statutory scheme provided for interest on delayed refunds and drawbacks, and the petitioners were entitled to interest on the delayed supplementary credit. The court held that the respondents' delay in granting the supplementary credit justified the payment of interest.

Conclusion:
The court ruled in favor of the petitioners, granting them interest on the delayed supplementary credit. The respondents were directed to pay the amount of interest quantified at ?1,58,91,182/- within six weeks, failing which it would carry interest at 6% per annum until actual disbursement.