2025 (1) TMI 1458 - AT - Customs

Grant of interest - relevant date for calculation of interest - whether the appellant should be granted interest from 14.04.2003 which date is one month after the issuance of the let export order on 13.03.2003 or from one month after 31.05.2012 on which date the proceedings initiated against the appellant by issuance of show cause notice were dropped for the second time? - HELD THAT - Section 75 of the Customs Act deals with drawback on imported materials used in the manufacture of goods which are exported. Sub-section (1) provides that drawback should be allowed of the duties of customs chargeable under the Customs Act on any imported material of a class or description used in the manufacture or processing of such goods or carrying out any operation of such goods. It also provides that the Central Government may make rules for the purpose of carrying out the provisions of sub-section (1). In the present case the appellant had filed seven shipping bills on 24.02.2003 and the let export order was given on 13.03.2003. Under rule 13 of the Customs Central Excise Duties and Service Tax Drawback Rules 1995 that have been framed under section 75(2) of the Customs Act the submission of the shipping bills is deemed to be a claim for drawback filed on the date on which the proper officer of customs makes an order permitting clearance and loading of goods - The amount of drawback should have been sanctioned within a period of one month from the date the let export order was issued on 13.03.2003 but it was actually sanctioned on 24.04.2022. Interest has been paid to the appellant by the Commissioner (Appeals) from a date after a period of one month from 31.05.2012 when the show cause notice was dropped by the adjudicating authority for the second time pursuant to the order passed by the Supreme Court and not from 13.03.2003 when the let export order was issued. It is on the instance of the department that proceedings were initiated and ultimately the claim of the appellant was found to be correct and the drawback was sanctioned. In such circumstances the issue that would require consideration is whether 31.05.2012 should be the date relevant for the purposes of determining interest payable to the appellant. This date cannot be the relevant date. The appellant cannot be blamed or penalized for the prolonged litigation undertaken by the department. Rule 13 of the Drawback Rules which has been referred to by the Commissioner (Appeals) in the impugned order clearly provides that the shipping bills shall be treated as a claim for drawback filed on a date on which the proper officer of customs makes an order permitting clearance. In terms of section 75A of the Customs Act the appellant is entitled to get interest from a date after the expiry of one month from 13.03.2003 upto the date of payment of the drawback amount. The appellant had accordingly claimed interest from 14.04.2003 but the Commissioner (Appeals) allowed interest only from 01.07.2012 which date is after the expiry of a period of one month from 31.05.2012. 26. The Commissioner (Appeals) has relied upon the decision of a learned member of this Tribunal in Web Knit Exports 2014 (1) TMI 1118 - CESTAT CHENNAI to hold that the relevant date would be 31.05.2012 because the value of the export goods stood finalized when the adjudicating authority passed the order. The said decision of a learned Member the Tribunal would not be applicable to the facts of the present case. In the present case it is not the case of the department that the documents as contemplated under rule 13 of the Drawback Rules had not been filed by the appellant. On the other hand the show cause notice that was issued to the appellant raising a doubt about the value of the export goods was dropped by order dated 31.01.2005. Thus the value of the export goods declared by the appellant was found to be correct and the Deputy Commissioner after remand of the matter by the Supreme Court also dropped the show cause notice. Conclusion - Where drawback should have been given to the appellant within a period of one month from 13.03.2003 when the let export order was issued and since it was not given the appellant would be entitled to interest from a period after month at the rate provided for in section 27A of the Customs Act upto the date of payment of drawback. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the appellant, M/s Siddhachalam Exports Pvt. Ltd., is entitled to interest on the drawback amount from 14.04.2003, which is one month after the "let export order" was issued, or from one month after 31.05.2012, the date when the proceedings initiated against the appellant were dropped for the second time.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The legal framework revolves around Sections 75 and 75A of the Customs Act, 1962. Section 75 provides for the drawback on imported materials used in the manufacture of goods that are exported, while Section 75A deals with the interest on such drawback if not paid within a specified period. The Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, particularly Rule 13, are also relevant as they define the submission of shipping bills as a claim for drawback.

Court's Interpretation and Reasoning:

The Tribunal interpreted that the "let export order" issued on 13.03.2003 should be considered the date for filing the drawback claim. The Tribunal reasoned that the appellant should not be penalized for the prolonged litigation initiated by the department, which delayed the finalization of the drawback claim.

Key Evidence and Findings:

The appellant filed seven shipping bills on 24.02.2003, and the "let export order" was issued on 13.03.2003. A show cause notice was issued on 11.09.2003, which was eventually dropped twice, with the final order being upheld by the Tribunal on 07.10.2021. Despite these proceedings, the Tribunal found that the appellant's declared value was correct, and the drawback should have been sanctioned within one month from the "let export order" date.

Application of Law to Facts:

The Tribunal applied Section 75A of the Customs Act, which mandates interest payment if the drawback is not paid within one month from the claim filing date. The Tribunal found that the shipping bills, deemed filed on the "let export order" date, constituted the claim for drawback, and thus interest should accrue from one month after this date.

Treatment of Competing Arguments:

The appellant argued for interest from 14.04.2003 based on the "let export order" date, while the department contended that interest should only accrue from 31.05.2012, when the valuation was finalized. The Tribunal rejected the department's argument, emphasizing that the appellant should not suffer due to departmental delays.

Conclusions:

The Tribunal concluded that the appellant was entitled to interest from 14.04.2003, as the drawback claim was effectively filed on the "let export order" date, and the delay was due to the department's actions.

3. SIGNIFICANT HOLDINGS

Core Principles Established:

The Tribunal established that the date of the "let export order" is critical for determining the start of the interest period on drawback claims. It emphasized that claimants should not be penalized for departmental delays in finalizing claims.

Final Determinations on Each Issue:

The Tribunal modified the order of the Commissioner (Appeals) to grant interest from 14.04.2003, rather than from 01.07.2012. It directed the department to pay this interest within one month, failing which additional interest would accrue.

Verbatim Quotes of Crucial Legal Reasoning:

The Tribunal stated: "In terms of section 75A of the Customs Act, the appellant is entitled to get interest from a date after the expiry of one month from 13.03.2003 up to the date of payment of the drawback amount."

The appeal was allowed to the extent of modifying the interest payment period, highlighting the importance of timely processing of drawback claims and the responsibility of the department to avoid unnecessary delays.