Union Of India And Ors. Vs B. T. Patil And Sons Belgaum (Construction) Pvt. Ltd. (Supreme Court of India)
Introduction: The recent Supreme Court judgment in Union of India and Ors. vs. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd. addresses the crucial matter of interest on delayed duty drawback refunds. The court upheld the decision of the High Court of Karnataka, affirming the respondent’s entitlement to 15% interest on the delayed refund of deemed export duty drawback.
The Hon’ble Supreme Court in the case of Union of India and Ors. v. M/s. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd. [Civil Appeal No. 7238 of 2009 dated February 05, 2024] upheld the decision of the Hon’ble Division Bench of High Court of Karnataka where the Respondent was awarded 15% interest on the delayed refund of deemed export duty drawback on construction of civil work. Therefore, the interest was to be calculated from the date on which the application for refund was filed.
Facts:
M/s. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd. (“the Respondent”) was a class-I contractor specializing in the field of civil contract works, especially funneling and hydroelectric power projects. The Central Government had approved funding for the Koyna Hydro Electric Power Project from the International Bank for Reconstruction and Development. The Respondent was awarded a sub-contract to execute civil works from Lake Intake to the Emergency Valve Tunnel.
The Respondent completed the construction work in the month of March 1996 and claimed a refund of duty drawback under the deemed export scheme announced under Exim Policy, 1992-1997 by the Ministry of Commerce, Government of India, and the Director General of Foreign Trade (“the DGFT”).
The DGFT denied the refund application on the grounds that civil construction works were not eligible for the deemed export benefit announced in the Exim Policy, 1992-1997. Thereafter, the DGFT issued a circular on August 20, 1998, under the successor Exim Policy, 1997-2002 to Exim Policy, 1992-1997, clarifying that the supply of goods under paragraph 10(2)(d) of the Exim Policy, 1997-2002 would be entitled to ‘deemed export’ benefit. Following this, on December 5, 2000, the DGFT issued another circular that stated that the drawback was to be paid with respect to excise duty on the supply of goods to projects funded by multilateral agencies. Thereafter, a Policy Interpretation Committee was constituted for the Respondent and decided to give the benefit of duty drawback. Thus, the DGFT issued an order and permitted duty drawback for INR 2,25,79,470 Crores. It was held that the said order was not considered to be as a precedent. Thereafter, the Respondent claimed interest on the delayed refund vide a writ petition before the Single Bench of the High Court. The Single Judge Bench of the High Court held that the interest on delay from December 5, 2000 till payment of refund on November 25, 2002 was payable at 15% as per the Customs Act, 1962 (“the Customs Act”) provides that interest has to be paid in such a case in the range of 5% to 30%. Further, the Respondent filed an appeal before the Division bench and contended that a notification in 1998 was available to the Department. Subsequently, a clarificatory notification was issued on December 12, 2000. Therefore, the interest should be calculated from August 20, 1998. After referring to Sections 27A and 75A of the Customs Act, the Division Bench vide Order dated August 22, 2008 (“the Impugned Order”) held that the Respondent is entitled to interest on delayed refund of duty drawback from the date of expiry of 3 months after submitting the application for refund in the year 1996 at 15%.
Hence, aggrieved by the Impugned Order, the present appeal was filed by the Appellant.
Issue:
Whether interest of 15% should be allowed on delayed refund of deemed-export duty-drawback?
Held:
The Hon’ble Supreme Court in Civil Appeal No. 7238 of 2009 held as under:
