2024 (2) TMI 324 - SC - Customs

Rejection of the request for interest on the amount of duty drawback paid - Duty Exemption Scheme - supplies in civil construction work - eligibility for deemed export benefit was decided in favor of the class-I contractor specializing in the field of civil contract works especially funneling and hydro electric power projects. - HELD THAT - It is noted that under the Duty Exemption Scheme, import of duty free raw materials, components, intermediates, consumables, parts, spares including mandatory spares and packing materials required for the purpose of export production could be permitted by the competent authority under five categories of licences mentioned in Chapter VII including special imprest licence. Section 56 provided that a special imprest licence was granted for the duty free import of raw materials, components, consumables, parts, spares including mandatory spares and packing materials to main/sub-contractors for the manufacture or supply of products when such supply were made to projects financed by multilateral or bilateral agencies, such as, the International Bank for Reconstruction and Development under international competitive bidding or under limited tender system. On a conjoint and careful reading of the relevant provisions of the Exim Policy, 1992-1997 in conjunction with the Central Excise Act and the Customs Act, it is evident that supply of goods to the project in question by the respondent was a case of deemed export and thus entitled to the benefit under the Duty Drawback Scheme. The language employed in the policy made this very clear and there was no ambiguity in respect of such entitlement - under sub-section (1) of Section 75A of the Customs Act, where duty drawback is not paid within a period of three months from the date of filing of claim, the claimant would be entitled to interest in addition to the amount of drawback. This section provides that the interest would be at the rate fixed under Section 27A from the date after expiry of the said period of three months till the payment of such drawback. On looking at Section 27A, the interest rate prescribed thereunder at the relevant point of time was not below ten percent and not exceeding thirty percent per annum. The Central Board of Excise and Customs vide its notification bearing No.32/1995 (NT) Customs dated 26.5.1995 had fixed the rate of interest at fifteen percent for the purpose of Section 27A of the Customs Act. The High Court while awarding interest at the rate of fifteen percent per annum, however, did not refer to such notification; rather, there was no discussion at all as to why the rate of interest on the delayed refund should be fifteen percent. Therefore, at the first glance, the rate of interest awarded by the High Court appeared to be on the higher side and without any reason. There are no hesitation in holding that the respondent was entitled to refund of duty drawback. Appellants had belatedly accepted the said claim and made the refund. Since there was belated refund of the duty drawback to the respondent, it was entitled to interest at the rate which was fixed by the Central Government at the relevant point of time being fifteen percent. There are no good reason to interfere with the judgment and order of the Division Bench of the High Court dated 22.8.2008. There is no merit in the appeal, which is accordingly dismissed.

Issues Involved:
1. Entitlement to Duty Drawback
2. Interest on Delayed Payment of Duty Drawback
3. Applicability of Circulars and Notifications
4. Retrospective Effect of Clarificatory Notifications

Summary:

1. Entitlement to Duty Drawback:
The respondent, a class-I contractor, was awarded a sub-contract for the Koyna Hydro Electric Power Project. The respondent completed the work in March 1996 and filed applications for duty drawback under the Exim Policy, 1992-1997. Initially, the Director General of Foreign Trade (DGFT) rejected these applications, stating that civil construction work did not qualify for 'deemed export' benefits. However, a Policy Interpretation Committee later decided to extend the duty drawback benefits to the respondent, leading to the DGFT granting a duty drawback of Rs.2,05,79,740.00.

2. Interest on Delayed Payment of Duty Drawback:
The respondent sought interest on the delayed payment of duty drawback, which was rejected by the DGFT. The respondent then filed a writ petition, and the learned Single Judge of the High Court ruled in favor of the respondent, awarding interest at the rate of fifteen percent for the delayed payment. This decision was affirmed by the Division Bench, which held that the respondent was entitled to interest from the date of expiry of three months after submitting the applications for refund in 1996.

3. Applicability of Circulars and Notifications:
The Division Bench examined the circulars dated 20.08.1998 and 05.12.2000, which clarified that civil construction works were entitled to 'deemed export' benefits under the Exim Policy. The Division Bench held that these circulars were clarificatory in nature and thus had retrospective effect, making the respondent eligible for duty drawback benefits.

4. Retrospective Effect of Clarificatory Notifications:
The Division Bench opined that the clarificatory notifications did not create new rights but merely clarified existing entitlements under the Exim Policy. Therefore, the benefits of duty drawback were available to the respondent from the date of the Exim Policy itself. The Division Bench also referred to Sections 27A and 75A of the Customs Act, which provide for interest on delayed refunds, and concluded that the respondent was entitled to interest at the rate of fifteen percent from the date of expiry of three months after the submission of applications for refund.

Conclusion:
The Supreme Court upheld the judgment of the Division Bench, confirming that the respondent was entitled to a duty drawback and interest on the delayed payment at the rate of fifteen percent. The appeal by the appellants was dismissed.

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