Union of India (UOI) and Ors. Vs. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd. (Neutral Citation: 2024 INSC 83) - (Supreme Court) (05 Feb 2024)

When 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

MANU/SC/0081/2024

Customs

In present matter, Respondent is a class-I contractor specializing in the field of civil contract works especially funnelling and hydro electric power projects. Aggrieved by rejection of the request for interest on the amount of duty drawback paid, Respondent preferred a writ petition before the High Court. After hearing the parties, a learned Single Judge of the High Court vide the judgment referred to the notification dated 5th December, 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.

This judgment and order of the learned Single Judge came to be assailed by the Appellants before the Division Bench of the High Court assailing the direction of the learned Single Judge to pay interest only from 5th December, 2000. Vide the judgment, the Division Bench opined that Respondent would be entitled to interest from the date of expiry of three months after submitting the applications for refund of duty drawback in the year 1996 at the rate of fifteen percent as awarded by the learned Single Judge.

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, 1962, 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. As per 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.

The Central Board of Excise and Customs vide its notification bearing No. 32/1995 (NT) - Customs dated 26th May, 1995 had fixed the rate of interest at fifteen percent for the purpose of Section 27A of the Customs Act. The 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 the rate of interest on the delayed refund should be fifteen percent. Therefore, at the first glance, the rate of interest awarded by the High Court appeared to be on the higher side and without any reason.

The Respondent was entitled to refund of duty drawback. Appellants had belatedly accepted the said claim and made the refund. Since there was belated refund of the duty drawback to the Respondent, it was entitled to interest at the rate which was fixed by the Central Government at the relevant point of time being fifteen percent. There is no good reason to interfere with the judgment and order of the Division Bench of the High Court. Appeal dismissed.

Tags : INTEREST PAYMENT DIRECTION