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SUPREME COURT OF INDIA
ABHAY S. OKA, UJJAL BHUYAN, JJ.
Union of India and Others – Appellants
Versus
M/s. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd. – Respondent
Civil Appeal No. 7238 of 2009
Decided On : 05-02-2024
Central Excise Act, 1944 – Section 11A – Customs Act, 1962 – Section 27A – Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 – Rule 3 – Interest on amount of duty drawback paid – Rejection of request – Drawback may be allowed on export of goods at such amount or at such rates as may be determined by Central Government – Respondent was entitled to refund of duty drawback – It is wholly untenable for appellants to contend that refund of duty drawback was granted to respondent as a concession, not to be treated as a precedent – Respondent is entitled to refund of duty drawback as a deemed export under Duty Drawback Scheme – Since there was belated refund of duty drawback to respondent, it was entitled to interest at the rate which was fixed by Central Government at the relevant point of time being fifteen percent – No good reason to interfere with Judgment and Order of Division Bench of High Court. (Paras 34.1, 35, 38 and 39)
Facts of the case:
Appellants i.e. Union of India, Director General of Foreign Trade and Joint Director General of Foreign Trade by means of this civil appeal have taken exception to judgment and order dated 22.08.2008 passed by a Division Bench of High Court of Karnataka, Circuit Bench at Dharwad in Writ Appeal No. 356 of 2006 affirming the judgment and order of Single Judge dated 22.09.2005 allowing Writ Petition No. 45525 of 2004 filed by respondent.
Findings of Court:
Central Board of Excise and Customs vide its notification bearing No. 32/1995 (NT) - Customs dated 26.5.1995 had fixed the rate of interest at fifteen percent for the purpose of Section 27A of Customs Act. High Court while awarding interest at the rate of fifteen percent per annum, however, did not refer to such notification; rather, there was no discussion at all as to why rate of interest on the delayed refund should be fifteen percent. Therefore, at the first glance, rate of interest awarded by the High Court appeared to be on the higher side and without any reason.
Result : Appeal dismissed.
JUDGMENT :
UJJAL BHUYAN, J.
1. Appellants i.e. Union of India, Director General of Foreign Trade and Joint Director General of Foreign Trade by means of this civil appeal have taken exception to the judgment and order dated 22.08.2008 passed by a Division Bench of the High Court of Karnataka, Circuit Bench at Dharwad in Writ Appeal No. 356 of 2006 affirming the judgment and order of the learned Single Judge dated 22.09.2005 allowing Writ Petition No. 45525 of 2004 filed by the respondent.
2. Facts lie within a narrow compass. Nonetheless, for a determination of the lis, it would be necessary to briefly narrate the relevant facts as projected by the respondent in the related writ petition.
2.1. Respondent is a class-I contractor specializing in the field of civil contract works especially funneling and hydro electric 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:
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 applications dated 25.03.1996, 13.09.1996 and 20.12.1996 claiming duty drawback for Rs. 35,75,679.00, Rs. 88,98,206.00 and Rs. 85,05,853.00 respectively.
2.5. By endorsements dated 10.11.1996, 06.12.1996 and 31.12.1996, Director General of Foreign Trade (for short ‘DGFT’ hereinafter) rejected the applications of the respondent for duty drawback on the ground that supplies in civil construction work were not eligible for ‘deemed export’ benefit.
2.6. Notwithstanding such rejection, respondent made representations for reconsideration of such decision and sought for duty drawback under the Exim Policy, 1992-1997. One such representation is dated 05.02.1997. However, the same was rejected by the DGFT vide the order dated 10.08.1997 stating that civil construction work did not qualify for drawback.
2.7. On 20.08.1998, DGFT issued a circular under the successor Exim Policy, 1997-2002 clarifying that supply of goods under paragraph 10(2)(d) of the 1997-2002 Exim Policy would be entitled for ‘deemed export’ benefit. It may be mentioned that the Exim Policy of 1992-1997 had expired with effect from 31.03.1997.
2.8. On 05.12.2000, DGFT issued a circular that drawback was to be paid in respect of excise duty on supply of goods to projects funded by multilateral agencies.
2.9. In the above scenario, respondent once again addressed a letter dated 28.08.2001 to the DGFT to finalize the issue. However, DGFT rejected the claim vide the communication dated 21.06.2002.
2.10. Notwithstanding the same, a Policy Interpretation Committee was constituted which examined the case of the respondent in its meeting held on 07.10.2002. It was decided that the benefit of duty drawback under the ‘deemed export’ scheme would be extended to the respondent. Consequently, in supersession of the earlier rejection order dated 21.06.2002 and in the light of the decision of the Policy Interpretation Committee dated 07.10.2002, DGFT vide the order dated 01.11.2002 permitted duty drawback of Rs. 2,05,79,
Interest on amount of duty drawback paid – Respondent is entitled to refund of duty drawback as a deemed export under Duty Drawback Scheme.
Duty drawback on deemed exports is available without needing to furnish actual customs duty payment evidence if All Industry Rates are specified, irrespective of prior cenvat credit claims.
Availing a concession under Notification 27/02 exempts the importer from paying the entire customs duty, and thus, the importer is not entitled to any drawback under Section 74 of the Customs Act, 19....
The court ruled that eligibility for deemed export benefits under the Foreign Trade Policy requires explicit endorsement as a sub-contractor in the Main Contract, which was not satisfied in this case....
The main legal point established in the judgment is that interest on delayed refunds is a statutory liability under Section 11BB of the Central Excise Act, 1944, and becomes payable if the duty order....
Since the provisions of section 11B of the Act are not applicable to the claim of refund made by the petitioner, the limitation prescribed under the said provision would also not be applicable and th....
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