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TMI Blog2006 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, the petitioner exported garments to M/s. Pinky Originals Inc. and M/s. Indo American Design Workshop Inc. USA valued at Rs. 45.75 crores, in respect of which the petitioner was allowed duty drawback. However, the petitioner was not able to realise export proceeds to the extent of Rs. 11.73 crores since the foreign buyers were declared bankrupt. Consequently, the petitioner applied to the Reserve Bank of India (RBI) to write off the amount, as there was no possibility of realising the aforementioned export proceeds. The RBI granted the petitioner the permission subject to certain terms which the petitioner claims to have complied with. 3. By a notice dated 17-11-1997, the Customs Authorities in Delhi (Air Cargo Unit), required the petitioner to surrender/repay the duty drawback allowed earlier to the extent of the amount of sale proceeds not realised. After receiving the reply of the petitioner, the Assistant Commissioner of Customs by an order dated 1-7-1998 confirmed the demand of Rs. 99,69,684 towards principal, along with interest at the rate of 24% per annum amounting to Rs. 71,73,851, aggregating to Rs. 1,71,37,545/-. It is not in dispute that the interest component ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Cannanore Spinning Weaving Mills Ltd . v. Collector of Customs and Central Excise - 1978 (2) E.L.T. (J375) (S.C.) = AIR 1970 SC 1950 and Amba Lal v. Union of India - 1983 (13) E.L.T. 1321 (S.C.) = AIR 1961 SC 264 it was held that Rule 16A of the Duty Drawback Rules, 1995 could not be retrospective and that "all payments made towards the Central Excise component of drawback before 6-12-1995 cannot be recovered even though the export proceeds have not been realised." Consequently, the central government "set aside the orders passed by the lower authorities" and allowed the "Revision Application with consequential relief." 8. The above order dated 11-6-1999 in revision was challenged by the government by way of a Special Leave Petition in Hon'ble Supreme Court which, after grant of leave, was registered as Civil Appeal No. 3743 of 2000 [2003 (153) E.L.T. 500 (S.C.)]. However, the operation of the order dated 11-6-1999 was not stayed. On 21-1-2003 the Hon'ble Supreme Court dismissed the appeal on the ground that there was no satisfactory explanation for delay in filing the appeal. While dismissing the appeal, the leave earlier granted was revoked and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r interest was rejected. The operative portion of the order dated 12-6-2003 reads as follows : "7. In view of the above discussion findings I hereby order the following as consequential relief as required vide the GOI Order dated 11-6-1999 :- (i) The refund of Rs. 1,25,30,645/-(One Crore Twenty Five Lakh, Thirty Thousand, Six Hundred and Forty Five) to M/s. Rangi International, C-58/1, Okhla Industrial Area, Phase-II, New Delhi is hereby sanctioned to be paid by cheque no. 565833 dated 12-6-03 (PNB) issued in their favour. The balance claim of Rs. 46,06,890/- is hereby rejected. (ii) The claim for interest on the amount of deposit is hereby rejected." Interim Order of this Court 12. On 8-12-2003, a Division Bench of this Court passed the following interim order while issuing Rule DB : "Rule D.B. Leave granted to apply for early hearing. Having heard learned counsel for the parties for some time and bearing in mind the fact that an amount of Rs. 71,73,851/- had been charged from and paid by the petitioner as interest @ 24%p.a., in terms of order dated 1 July 1998, which had been set aside by the Government of India, and respondent's SLP against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Duty Drawback Rules 1995 (which provided for refund of duty drawback by the exported in the event of non-realisation of export proceeds) was not on the statute book since it came into effect only from 6-12-1995. Prior to this, there was the Customs and Central Excise Duties Drawback Rules 1971 ('Duty Drawback Rules 1971') which contained no such provision. These were composite rules that covered both the customs and excise components and were relatable to Section 75 of the Customs Act, 1962 and Section 37 of the Central Excises Act, 1944 respectively. Therefore, even the customs component could not be recovered and was required to be refunded to the petitioner on the same terms as the excise component. 16. As regards the petitioner's claim for interest, learned counsel submits that when the drawback amounts were sought to be recovered from the petitioner, interest was charged @ 24% p.a. in terms of Section 28AA of the Customs Act, 1962. Even if there was no specific provision for payment of interest on delayed refund of drawback, this Court should in equity apply the same principle as in Section 27A of the Customs Act, 1962 and Section 11BB of the Central Excises Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed never to have been allowed." Therefore, the legislative intent was clear that the customs duty component is not capable of being refunded. He further relied on Rule 14 of the Duty Drawback Rules 1971 which permits the customs authorities to demand from an assessee drawback that has been paid erroneously or in excess of what the assessee is entitled to. Accordingly he submits that even if it were to be held that Rule 16A is only prospective, Rule 14 of the Duty Drawback Rules 1971 read with the second proviso to Section 75 did not permit the refund of the customs component. He relies on the decision in Union of India v. Orient Enterprises 1998 (99) E.L.T. 193 (S.C.) = (1998) 3 SCC 501 to contend that the claim for interest was in the nature of compensation and a writ petition seeking the payment of interest would not be maintainable. Claim for refund of the Customs Component of the drawback 20. We will first take up the first of the two issues, i.e., whether the petitioner is entitled to the refund of the customs component of the duty drawback in the sum of Rs. 46,06,890/-. The impugned order has rejected this claim on the ground that the order in revision restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the manner specified below : Provided that the time-limit referred to in this sub-rule shall not be applicable to the goods exported from the Domestic Tariff Area to a special economic zone. (2) If the exporter fails to produce evidence in respect of realisation of export proceeds within the period allowed under the Foreign Exchange Management Act, 1999, or any extension of the said period by the Reserve Bank of India, the Assistant Commissioner of Customs or the Deputy Commissioner of Customs, as the case may be shall cause notice to be issued to the exporter for production of evidence of realisation of export proceeds within a period of thirty days from the date of receipt of such notice and where the exporter does not produce such evidence within the said period of thirty days, the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be shall pass an order to recover the amount of drawback paid to the claimant and the exporter shall repay the amount so demanded within sixty days of the receipt of the said order : Provided that where a part of the sale proceeds has been realised, the amount of drawback to be recovered shall be the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess than the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods, or is not more than such percentage of the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods as the Central Government may, by notification in the Official Gazette, specify in this behalf : Provided further that where any drawback has been allowed on any goods under this sub-section and the sale proceeds in respect of such goods are not received by or on behalf of the exporter in India within the time allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), such drawback shall be deemed never to have been allowed and the Central Government may, by rules made under sub-section (2), specify the procedure for the recovery or adjustment of the amount of such drawback. (1A) …… (2) The Central Government may make rules for the purpose of carrying out the provisions of sub-section (1) and, in particular, such rules may provide- (a) …. (aa) for specifying the goods in respect of which no drawb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as applicable only to drawback claimed on Customs duties paid by the exporter on the value of raw materials imported and used in the manufacture of the goods exported and should not read as applicable to excise duty paid under the Central Excise Act, 1944." 28. Also before the central government in the revision petition the petitioner maintained this distinction between his claims for refund of the excise and customs components. The petitioner's pleas as recorded in the order dated 11-6-1999 of the central government read as under: "(6) Rule 16A of the Drawback Rules, 1995 should be read as applicable only to drawback claimed on customs duty paid by the exporter on the value of the raw materials imported and used in the manufacture of goods exported and should not be read as applicable to excise duty paid under the Excise Act. The Commissioner (Appeals) reliance on the words "deemed to never have been allowed" appearing in Section 75 is totally wrong and out of context. They can apply, if at all, only to the rebate of duty chargeable on any imported material and not to excisable materials used in the manufacture of such goods in India. Rule 16A has to be harmoniously constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. However, in the light of what we proceed to hold, this can be adjusted against the amount payable to him by the respondents by way of interest on the delayed refund to him of the excise duty component. 32. The only issue that survives for consideration is whether the petitioner is entitled to any interest for the delayed refund of the excise duty component along with interest. The said amount i.e. Rs. 1,25,30,645/- became finally payable to the petitioner on 11-6-1999, the date of the order of the central government in revision. This order was never stayed by the Hon'ble Supreme Court. However, the admitted position is that this amount was paid only on 12-6-2003. In our view, the petitioner would be entitled to interest for this period. 33. While there may be no specific provision concerning the payment of interest on the delayed refund of the excise duty component of drawback, we may take cue from Section 11BB of the Central Excises Act 1944 which provides for payment of interest on refund of excise duty at a rate not below 5% and not exceeding 30% as may be fixed by the Central Government, if the duty ordered to be refunded is not refunded within 3 months from the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 36. In Sandvik Asia Ltd. v. Commissioner of Income Tax , the Hon'ble Supreme Court was again considering the claim of interest on a delayed refund in the context of Sections 244 and 244A of the Income Tax Act, 1961. It was held that further interest was payable by the revenue on interest which had to be repaid to the assessee. The Hon'ble Supreme Court on the facts of that case directed the payment of simple interest at 9 per cent per annum. 37. This Court in Tata Infotech Ltd . v. Collector of Customs, New Delhi referred to the Circular issued on 2-6-1998 by the Central Board of Customs and Excise which in principle recognised the liability of the Government to pay interest on delayed refund of customs and excise duties wrongly collected. It was directed that the petitioner would be entitled to interest at the rate of 12 per cent per annum on the amount of refund from the date of the passing of the order of the Tribunal in that case till the actual payment of the principal amount. In Hello Minerals Water (P) Ltd . v Union of India, the High Court of Judicature at Allahabad explained that requirement of payment of interest on the delayed refund was neither ..... X X X X Extracts X X X X X X X X Extracts X X X X
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