Customs Act | Claimant Entitled To Interest On Delayed Return Of The 'Duty Drawback' : Supreme Court

The Supreme Court on Monday (February 5) observed that if there is a delay in refund of the 'duty drawback' to the claimant under the Customs Act, 1962, then the claimant would be entitled to interest in addition to the amount of drawback at the rate of interest which was fixed by the Central Government at the relevant point of time. It was contended on behalf of the Directorate General of Foreign Trade (DGFT) that there was no provision for payment of interest on delayed refund of duty drawback. Rejecting such contention, the Bench of Justices Abhay S. Oka and Ujjal Bhuyan while affirming the findings of the High Court, observed that the claimant would be entitled to receive the interest on the belated refund of the 'duty drawback' by the Director General of Foreign Trade (“DGFT”) under the Customs Act. “It was, therefore, not correct on the part of the appellants to contend that there was no provision for payment of interest on delayed refund of duty drawback. That 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 where after 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.” As per Section 75A (1) of the Customs Act, where duty drawback is not paid within 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. Briefly put, the Respondent in the instant case is a class-I contractor, herein to be referred to as a contractor, specializing in the field of civil contract works, especially funneling and hydroelectric power projects. The Contractor completed the contractual work allotted by the Central Government in March 1996 which was funded by the International Bank for Reconstruction and Development (IBRD), an arm of the World Bank. The contractor has made an application for the refund of the claim of the 'duty drawback' from the DGFT in 1996 on the basis that the supplies in civil construction work were eligible for 'deemed export' benefit under the Exim Policy 1992-1997. The decision to return the duty-drawback was however taken 07.10.2002 i.e., after a huge delay. It is against the delay in the return of the duty drawback that the contractor claimed interest on the delayed payment of the duty drawback, the application of which was turned down by the DGFT. Assailing the order rejecting the application claiming interest on the delayed payment of the duty drawback, the contractor preferred a Writ Petition before the High Court which was subsequently allowed by the Single Judge, and the DGFT was directed to pay the interest on the delayed return of the duty-drawback. The order of the Single Judge remained undisturbed by the Division Bench. It is against the impugned order/judgment of the Division Bench, that the appellant-DGFT preferred a Civil Appeal before the Supreme Court. At the outset, after referring to various provisions of the Customs Act, 1962 and the impugned Judgment of the High Court, the court rejected the contention made by the DGFT that the contractor wouldn't be entitled to the benefits of the Duty drawback scheme, and noted as follows: “Therefore, 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' 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.” Further, the court disagreed with the contention of the DGFT that the return of duty drawback to the contractor was provided as a matter of concession and not be treated as a precedent. The court referred to the minutes of the meeting of the Policy Interpretation Committee to indicate that nothing such benefit was being extended to the respondent as a one-off case or by way of concession. “The Policy Interpretation Committee discussed the case of the respondent and opined that in case any such firms were 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…..From a perusal of the minutes of the meeting of the Policy Interpretation ...

Customs Act | Claimant Entitled To Interest On Delayed Return Of The 'Duty Drawback' : Supreme Court

Yash Mittal

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Yash Mittal

Customs Act | Claimant Entitled To Interest On Delayed Return Of The 'Duty Drawback' : Supreme Court

Yash Mittal

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INR 1099+GST

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Yash Mittal

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