A) ABSTRACT / HEADNOTE

This case primarily discusses the eligibility of the respondent for a refund of duty drawback and interest due to delayed payment under the Exim Policy of 1992-1997. The respondent, a civil contractor engaged in hydroelectric power projects, contended that supplies made under the Koyna Hydro Electric Power Project, funded by the World Bank, qualified as “deemed export” and were therefore entitled to the benefits of the Duty Drawback Scheme. The Union of India argued against this entitlement and refused to grant interest on the delayed refund of duty drawback, citing lack of provision in the applicable policy. The court examined relevant provisions under the Customs Act, 1962, Central Excise Act, 1944, and relevant policies and rules, concluding that the respondent was indeed entitled to the benefits, including interest.

Keywords: Deemed Export, Duty Drawback, Customs Act, Exim Policy 1992-1997, Interest on Refund

B) CASE DETAILS

i) Judgement Cause Title: Union of India & Ors. v. M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.
ii) Case Number: Civil Appeal Nos. 7238 of 2009
iii) Judgement Date: 05 February 2024
iv) Court: Supreme Court of India
v) Quorum: Hon’ble Justices Abhay S. Oka and Ujjal Bhuyan
vi) Author: Justice Ujjal Bhuyan
vii) Citation: [2024] 2 S.C.R. 91; 2024 INSC 83
viii) Legal Provisions Involved:

• Customs Act, 1962 – Sections 75A, 27A
• Central Excise Act, 1944 – Sections 11A, 11B, 11BB
• Foreign Trade (Development and Regulation) Act, 1992
• Customs, Central Excise Duties and Service Tax Drawback Rules, 1995

ix) Judgments Overruled: None
x) Case Related To: Customs and Excise Law, Taxation Law, Public International Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute emerged from the delayed refund of duty drawback to the respondent under the Exim Policy of 1992-1997. Duty drawback provides reimbursement of customs and excise duties paid on materials used in the manufacture of goods for export or deemed export. Despite clarifications in subsequent circulars issued in 1998 and 2000, the appellants (Union of India) delayed refunding the duty drawback to the respondent and rejected claims for interest. The Supreme Court addressed whether the respondent was entitled to interest for the delayed refund.

D) FACTS OF THE CASE

1. Project Background: The respondent undertook civil works under the Koyna Hydro Electric Power Project in Maharashtra, funded by the International Bank for Reconstruction and Development (World Bank).

2. Claims for Duty Drawback: Applications were submitted in 1996 for a duty drawback amounting to ₹2.05 crores. The DGFT initially rejected these claims, stating civil construction works were ineligible for such benefits.

3. Subsequent Developments: Following clarificatory notifications in 1998 and 2000, the respondent renewed its claims, which were eventually accepted in 2002 after a decision by the Policy Interpretation Committee.

4. Delayed Refund and Interest Denial: Refund payments were issued in 2003, but the DGFT refused to pay interest on the delayed refund, leading to the litigation.

E) LEGAL ISSUES RAISED

1. Whether the respondent’s supplies under the project qualify as deemed export under the Exim Policy of 1992-1997?
2. Whether the respondent is entitled to interest for the delayed refund of duty drawback under applicable laws?

F) PETITIONER/APPELLANT’S ARGUMENTS

1. The DGFT and Union of India argued that civil construction works were not originally eligible for deemed export benefits under the Exim Policy of 1992-1997.
2. They contended that clarificatory circulars issued under subsequent policies (1997-2002 and 2004-2009) could not apply retrospectively.
3. The appellants emphasized that the refund granted was a special concession and should not accrue interest.

G) RESPONDENT’S ARGUMENTS

1. The respondent asserted that the Exim Policy and subsequent circulars clearly defined the project as deemed export.
2. They argued that the delay in refunding duty drawback violated statutory provisions, making interest on delayed payments mandatory under Sections 27A and 75A of the Customs Act, 1962.
3. They submitted that non-payment of interest undermined their legitimate rights and contradicted the policy’s objective.

H) JUDGEMENT

a. RATIO DECIDENDI

1. The court held that the supplies constituted deemed export under the Exim Policy of 1992-1997 and were eligible for duty drawback benefits.
2. The DGFT’s refusal to pay interest violated statutory provisions ensuring prompt refunds under the Customs Act, 1962.

b. OBITER DICTA
The court observed that clarificatory circulars issued under successor policies had retrospective applicability to clarify pre-existing rights.

c. GUIDELINES

1. Clarificatory circulars should apply retrospectively to resolve ambiguities in policy implementation.
2. Authorities must process duty drawback claims promptly to avoid liabilities for interest.
3. Interest rates for delayed refunds must comply with statutory mandates.

I) CONCLUSION & COMMENTS

The judgment emphasizes the importance of timely processing refunds under statutory schemes and promotes accountability in government administration. It reinforces exporters’ confidence in claiming benefits under foreign trade policies.

J) REFERENCES

1. Customs Act, 1962, Sections 27A, 75A
2. Central Excise Act, 1944, Sections 11B, 11BB
3. Exim Policy of 1992-1997
4. S. S. Grewal v. State of Punjab, [1993] 3 SCR 593
5. Rajagopal Reddy v. Padmini Chandrasekharan, (1995) 2 SCC 630
6. Zile Singh v. State of Haryana, (2004) 8 SCC 1