Deemed Export Entitles Refund of Duty Drawback with Interest: Supreme Court

In a significant ruling, the Supreme Court of India upheld the decision of the Karnataka High Court, affirming that M/S. B. T. Patil and Sons Belgaum (Construction) Pvt. Ltd. Is entitled to receive interest on the delayed refund of duty drawback under the ‘deemed export’ scheme. The apex court’s bench, comprising Justices Abhay S. Oka and Ujjal Bhuyan, dismissed the appeal filed by the Union of India against the High Court’s judgment.

The case, titled Union of India & Ors. Vs. M/S. B. T. Patil and Sons Belgaum (Construction) Pvt. Ltd. (Civil Appeal No. 7238 of 2009), was pronounced on 5^th February 2024. The judgment critically examined the provisions of the Foreign Trade (Development and Regulation) Act, 1992, Customs Act, 1962, Central Excise Act, 1944, and the Exim Policy of 1992-1997 and 1997-2002.

M/S. B. T. Patil and Sons, a class-I contractor specializing in civil contract works, was involved in the Koyna Hydro Electric Power Project, Maharashtra, financed by the International Bank for Reconstruction and Development. The company claimed duty drawback under the ‘deemed export’ scheme of the Exim Policy, which was initially rejected by the Director General of Foreign Trade (DGFT). However, after various representations and a decision by the Policy Interpretation Committee, the DGFT approved the duty drawback in 2002, which was paid in 2003.

The primary contention arose regarding the entitlement of interest on the delayed payment of duty drawback. The respondent approached the High Court seeking interest due to the delay in the refund, which was granted by the High Court. The Union of India appealed against this decision.

Justice Ujjal Bhuyan, in the judgment, noted, “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 Court further observed that “respondent is entitled to refund of duty drawback as a deemed export under the Duty Drawback Scheme.” Upholding the High Court’s decision, the Supreme Court observed that the respondent was entitled to interest at the rate fixed under Section 27A of the Customs Act, 1962, which at the relevant time was fifteen percent per annum.

The Supreme Court’s judgment reinforces the principle of fairness in the administration of fiscal statutes and emphasizes the entitlement of interest on delayed refunds, marking a significant precedent in cases involving ‘deemed export’ under the Exim Policy.

Date of Decision: 05 February 2024

UNION OF INDIA AND ORS. VS M/S. B. T. PATIL AND SONS BELGAUM