Interest entitled if duty drawback not paid within 3 months from date of filing of claim: Supreme Court

Facts- Respondent is a class-I contractor specializing in the field of civil contract works especially funneling and hydroelectric power projects.

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 completed the contractual work awarded to it in the month of March 1996. Thereafter, the Respondent filed applications claiming duty drawback. DGFT rejected the applications on the ground that supplies in civil construction work were not eligible for ‘deemed export’ benefit.

Thereafter, a Policy Interpretation Committee was constituted which examined the case of the respondent and decided that the benefit of duty drawback under the ‘deemed export’ scheme would be extended to the respondent. Respondent thereafter submitted representation 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.

Conclusion- 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.

Held that 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.