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TMI Blog2024 (2) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... acture 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 relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectric power projects. 2.2. Central Government had approved funding of a project called Koyna Hydro Electric Power Project, Maharashtra by the International Bank for Reconstruction and Development, which is an arm of the World Bank. In the said project, respondent was awarded a sub-contract to execute civil works from Lake Intake to the Emergency Valve Tunnel. Respondent has relied upon a letter dated 08.08.1991 issued by the Chief Engineer of the project. Relevant portion of the letter reads thus:- 4.2. Information regarding the benefits available under the Deemed Export concept for this World Bank Aided (Loan) Project may please be obtained by the contractors from their own sources and the information gained by them may be utilised, while quoting the rates. 2.3. A deemed export scheme was announced under the Exim Policy, 1992-1997 by the Ministry of Commerce, Government of India and the Director General of Foreign Trade under the Foreign Trade (Development and Regulation) Act, 1992. Certain benefits under deemed export were also included in the said Exim Policy. 2.4. Respondent completed the construction work awarded to it in the month of March, 1996 and thereafter filed applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.2003, 17.07.2003, 29.10.2003 and 10.08.2004 seeking interest on the duty drawback amount paid on the ground of delayed payment. However, the request for interest made by the respondent was rejected by the DGFT. 3. Aggrieved by rejection of the request for interest on the amount of duty drawback paid, respondent preferred a writ petition before the High Court which was registered as Writ Petition No.45525 of 2004. After hearing the parties, a learned Single Judge of the High Court vide the judgment and order dated 22.09.2005 referred to the notification dated 05.12.2000 and held that respondent was entitled for duty drawback. After observing that there was delay in payment of duty drawback, learned Single Judge held that respondent would be entitled to interest for delayed payment of duty drawback. Since Customs Act, 1962 provides that interest has to be paid in such a case in the range of five percent to thirty percent, learned Single Judge awarded interest at the rate of fifteen percent. Consequently, directions were issued to the appellants to consider the claim of the respondent for payment of interest on delayed refund from the date of notification dated 05.12.2000 till the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that DGFT had passed order dated 01.11.2002 emphasizing that the duty drawback paid to the respondent would not be treated as a precedent. He submitted that duty drawback was extended to the respondent as a special case which was not available to the respondent under the Exim Policy of 1992-1997. In such circumstances, question of awarding any interest to the respondent on the ground of alleged delay in payment of duty drawback did not arise. There was no provision under the Exim Policy of 1992-1997 for payment of such interest. Therefore, learned Single Judge erred in awarding interest to the respondent, that too, at the high rate of fifteen percent. 5.1. He further argued that the Division Bench had fallen in error taking the view that circulars dated 20.08.1998 and 05.12.2000 were clarificatory in nature and therefore would have retrospective effect covering the case of the respondent. According to him, these circulars were issued under the successor Exim Policy, 1997-2002 and thus could not be applied to cases like that of the respondent under the Exim Policy 1992-1997. He, therefore, submitted that the present is a fit case for interfering with the decision of the learned Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person liable to pay duty either voluntarily or after determination under Section 11A to pay interest in addition to the duty under sub-section (1) of Section 11AA. As per sub-section (2), such interest shall not be below ten percent and shall not exceed thirty six percent per annum, as the Central Government may by notification in the Official Gazette fix. Such interest shall be calculated from the date on which the duty becomes due up to the date of actual payment of the amount due. 9.2. Section 11B of the Central Excise Act entitles any person claiming refund of any duty of excise and interest to make an application for refund of such duty and interest before the expiry of one year from the relevant date (prior to 12.05.2000, it was six months instead of one year). 9.3. Section 11BB provides for interest on delayed refund. It says that if any duty ordered to be refunded under sub-section (2) of Section 11B to any applicant is not refunded within three months from the date of receipt of the application under subsection (1) of that section, there shall be paid to such applicant interest at such rate not below five percent and not exceeding thirty percent per annum as for the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawback on imported materials used in the manufacture of goods which are exported. On the other hand, Section 75A deals with interest on drawback. Sub-section (1) of Section 75A says that, where any drawback payable to a claimant under Section 74 or Section 75 is not paid within a period of one month (earlier it was two months and prior thereto it was three months) from the date of filing a claim for payment of such drawback, there shall be paid to that claimant in addition to the amount of drawback, interest at the rate fixed under Section 27A from the date after the expiry of the said period of one month till the date of payment of such drawback. 13. In exercise of the powers conferred under Section 3 of the Imports and Exports (Control) Act, 1947, the Central Government notified the Export and Import (Exim) Policy for the period 1992-1997. It came into effect from 01.04.1992 and remained in force for a period of five years up to 31.03.1997. 14. After the enactment of The Foreign Trade (Development and Regulation) Act, 1992, the Exim Policy, 1992-1997 was deemed to have been made under the aforesaid Act. That being the position, we will briefly refer to the said enactment. 15. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w materials, components, intermediates, consumables, parts, spares including mandatory spares and packing materials to main/sub-contractors for the manufacture and supply of products to such projects. 20. Chapter X introduced the concept of deemed exports . Section 120 defines deemed exports to mean those transactions in which the goods supplied did not leave the country and the payment for the goods was received by the supplier in Indian rupees but the supplies earned or saved foreign exchange for the country. 21. Under Section 121 (f), supply of goods 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 would be regarded as deemed exports under the Exim Policy of 1992-1997. 22. Section 122 provides that deemed exports shall be eligible for the benefits in respect of manufacture and supply of goods qualifying as deemed exports , including under the Duty Drawback Scheme. 23. In exercise of the powers conferred by Section 75 of the Customs Act, Section 37 of the Central Excise Act and Section 93A read with Section 94 of the Finance Act, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Finance, Department of Revenue in the Official Gazette of India dated 26.05.1995. 25. Likewise, in exercise of the powers conferred by Section 11BB of the Central Excise Act, the Central Board of Excise and Customs issued notification No.22/95-Central Excises (NT) dated 29.05.1995 fixing the rate of interest at fifteen percent per annum for the purposes of the said section. This was also notified by the Central Government in the Official Gazette of India on 29.05.1995. 26. Though it may not be necessary, still we may refer to the circulars dated 20.08.1998 and 05.12.2000 issued by the DGFT. Circular dated 20.08.1998 says that representations had been received from individual exporters as well as clarifications sought for by different regional licencing authorities with regard to availability of deemed export benefit for supply of goods and services to civil construction projects. Circular dated 20.08.1998 says that the issue as to whether supply of goods and services to civil construction projects would be entitled for deemed export benefit or not had been examined in detail, whereafter it was clarified that supply of goods under paragraph 10(2)(d) of the Exim Policy wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he price quoted before the project authority, the deemed export benefit could not be denied to such firms. Hence, the committee decided to permit deemed export benefit even in cases where the excise duty component was factored in the pricing quoted provided other conditions of deemed export benefit were adhered to. 27.1. From a perusal of the minutes of the meeting of the Policy Interpretation Committee held on 07.10.2002, it is evident that the committee had opined to extend the deemed export benefit to those firms which included excise duty component in the tender pricing quoted before the project authority such as the respondent. There is nothing in the minutes to indicate that such benefit was being extended to the respondent as a one off case or by way of concession. 28. Based on the minutes of the Policy Interpretation Committee meeting held on 07.10.2002, DGFT issued letter dated 01.11.2002, a copy of which was marked to the respondent, superseding the previous rejection order dated 21.06.2002 and allowing duty drawback to be paid to the respondent for materials/goods, such as, steel, cement etc., used in the civil works of Koyna Hydro Electric Project. The amount of drawbac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in refund of duty drawback was provided. There was no provision for payment of interest on delayed refund of duty drawback on deemed export prior thereto. Therefore, respondent was not entitled to interest even from 05.12.2000 as directed by the learned Single Judge. It was canvassed before the Division Bench on behalf of the appellants that only due to magnanimity on the part of the Central Government refund of duty drawback under deemed export was paid to the respondent. As such, refund would not carry any interest. 30.2 The Division Bench repelled such contentions advanced on behalf of the appellants and held that in view of the circular dated 05.12.2000, it was clarified that even civil construction works were entitled to the benefit of deemed export under the Exim Policy. After saying so, the Division Bench noted that as a matter of fact, an amount of Rs.2,05,79,740.00 was paid to the respondent as duty drawback. Thereafter, the Division Bench analysed the circular dated 05.12.2000 and upon such analysis it was observed that the position vis- -vis refund of duty drawback in civil construction work treating it as deemed export was clarified in an earlier circular dated 20.08.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 31.1 In Chapter X deemed export has been defined. It is a transaction in which the goods supplied do not leave the country and the payment for the goods is received by the supplier in Indian rupees, but the supplies earn or save foreign exchange for the country. Section 121 declares that the categories of supply of goods mentioned in the said sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apart, it is wholly untenable for the appellants to contend that refund of duty drawback was granted to the respondent as a concession, not to be treated as a precedent. As we have seen, respondent is entitled to refund of duty drawback as a deemed export under the Duty Drawback Scheme. The applications for refund were made in 1996. Decision to grant refund of duty drawback was taken belatedly on 07.10.2002 whereafter the payments were made by way of cheques on 31.03.2003 and 20.05.2003. Admittedly, there was considerable delay in refund of duty drawback. 36. As we have already examined, 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. If we look 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. 37. The Central B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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