2024 (12) TMI 18 - HC - Customs

Demand of interest - Recovery of wrongly availed amount against duty credit scrip as rewards formulated for Service Exports from India Scheme - Foreign Trade Policy authoring the levy of interest u/s 28AA of the Customs Act, 1962 - HELD THAT - No provision of the 1992 Act under which Foreign Trade Policy has been framed has been pointed out to show that the provisions of Section 28AA of the 1962 Act have been made applicable for levying interest on any person who is found ineligible for any benefit received under the terms of any Scheme under the Foreign Trade Policy. It is true that Chapter 3 of the Foreign Trade Policy which was in operation for the period from 01-04-2015 to 31-03-2020 contemplates that if any person is found to be ineligible for the benefit under any Scheme the amount will have to be refunded along with interest u/s 28AA of the 1962 Act. We must hold that the provisions of the Foreign Trade Policy cannot by itself authorise the levy of interest u/s 28AA of the 1962 Act as such levy must be supported by plenary legislation. Petitioner is entitled to succeed. Therefore, this writ petition is allowed.

Summary

Issues:
Interpretation of Foreign Trade Policy regarding duty credit scrip eligibility and interest under Customs Act.

Analysis:
The petitioner, a Private Ltd. Company, claimed entitlement to duty credit scrip under the Foreign Trade Policy for providing placement and supply services of personnel. The competent authority initially granted the duty credit scrip but later demanded its repayment, citing the services provided did not qualify for the benefit. The petitioner complied with the repayment but contested the demand for interest under Section 28AA of the Customs Act, 1962. The petitioner argued that the Foreign Trade Policy did not authorize the levy of interest and relied on legal precedents to support the claim that interest can only be levied if specifically provided for in the statute.

The respondents contended that the Foreign Trade Policy explicitly stated that interest under Section 28AA of the Customs Act would apply to repayments of benefits found to be ineligible. They argued that the policy's clear provision made it mandatory for the petitioner to refund the benefit along with applicable interest, as per the Customs Act.

The court analyzed the provisions of the Foreign Trade Policy in force during the relevant period and examined the legal basis for levying interest under Section 28AA of the Customs Act. Referring to legal precedents, including judgments by the Supreme Court, the court emphasized that interest can only be levied if expressly provided for in the statute. It highlighted that the mere mention of interest in a policy document does not confer the authority to levy interest unless supported by specific legislative provisions.

Based on the legal principles established in the cited cases, the court ruled in favor of the petitioner. It held that the demand for interest under Section 28AA of the Customs Act was not justified as the Foreign Trade Policy did not incorporate the necessary legal framework to authorize such levy. Consequently, the court allowed the writ petition, quashed the demand for interest, and declared the petitioner not liable to pay interest on the amounts repaid due to ineligibility for the Scheme benefits.