Supreme Court: Claimant Entitled to Interest on Delayed Return of ‘Duty Drawback’ Under Customs Act
The bench upheld the decision of the High Court against the Directorate General of Foreign Trade
The Supreme Court has observed that in case of a delay in refund of the 'duty drawback' to the claimant under the Customs Act, 1962, the claimant is entitled to the amount of drawback in addition to the rate of interest fixed by the Central government.
The Directorate General of Foreign Trade (DGFT) had stated that there was no provision for payment of interest on delayed refund of duty drawback.
While rejecting such contention, the bench comprising Justice Abhay S Oka and Justice Ujjal Bhuyan affirmed the findings of the High Court. It observed that under the Customs Act, the claimant was entitled to receive the interest on the belated refund of the 'duty drawback' by the DGFT.
The Court ruled, “It was incorrect on the part of the appellant to contend there was no provision for payment of interest on delayed refund of duty drawback. It is untenable for the appellant to contend that the refund was granted to the respondent as a concession and is not to be treated as a precedent. The respondent is entitled to a refund of duty drawback as a deemed export under the Duty Drawback Scheme.
It added, “The applications for refund were made in 1996. The decision to grant the refund of duty drawback was taken belatedly on 07.10.2002 where after the payments were made by way of cheques on 31.03.2003 and 20.05.2003. Admittedly, there was considerable delay in refunding the duty drawback.”
As per Section 75A (1) of the Customs Act, where duty drawback is not paid within three months from the date of filing of the claim, the claimant is entitled to interest in addition to the amount of drawback. The Section provides that the interest would be at the rate fixed under Section 27A after three months till the payment of such drawback.
The respondent is a Class-I contractor, specializing in the field of civil contract works, especially funneling and hydroelectric power projects.
He completed the contractual work allotted by the Central government in March 1996. It was funded by the International Bank for Reconstruction and Development (IBRD), an arm of the World Bank.
The contractor applied for a refund of the claim of the 'duty drawback' from the DGFT in 1996. It was because the supplies in civil construction work were eligible for 'deemed export' benefit under the Exim Policy 1992-1997. However, the decision to return the duty drawback was taken after a huge delay on 07.10.2002.
The contractor claimed interest in the delayed payment of the duty drawback, which the DGFT rejected.
The contractor preferred a writ petition before the High Court, which was subsequently allowed by the single-judge bench. The DGFT was directed to pay the interest on the delayed return of the duty drawback. The order remained undisturbed by the division bench.
The appellant-DGFT filed a civil appeal before the apex Court against the impugned order of the division bench.
However, the Top Court rejected the contention made by the DGFT that the contractor was not entitled to the benefits of the duty drawback scheme.
Justice Oka and Justice Bhuyan stated, “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 the supply of goods to the project in question by the respondent was a case of 'deemed export'. Thus, it was entitled to the benefit under the Duty Drawback Scheme. The language employed in the policy made this clear and there was no ambiguity in respect of such entitlement.”
The bench disagreed with the contention of the DGFT that the return of duty drawback to the contractor was provided as a matter of concession and was not to be treated as a precedent. The Court referred to the minutes of the meeting of the Policy Interpretation Committee to indicate that no such benefit was extended to the respondent as a one-off case or by way of concession.
The Court held, “The Policy Interpretation Committee discussed the case of the respondent and opined that in case any such firm was still competitive and able to supply goods at international prices despite including the component of excise duty in the price quoted before the project authority, the deemed export benefit could not be denied to such firms.”
It added, “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.”
The Apex Court supported the opinion of the High Court, which observed that the contractor was entitled to interest from the date of expiry of three months after submission of the application for a refund back in the year 1996 till the time the payment was made at the rate of fifteen percent.
While referring to Sec. 75A (1) of the Customs Act, the bench stated, “We have no hesitation in holding that the respondent was entitled to a refund of duty drawback. The appellant had belatedly accepted the claim and made the refund. Since there was a belated refund of the duty drawback to the respondent, it was entitled to interest at the rate fixed by the Central government at the relevant point of time being fifteen percent.”
Thus, the Supreme Court dismissed the appeal of the DGFT. It held, “We find no reason to interfere with the 22.8.2008 judgment and order of the division bench of the High Court.”