UNION OF INDIA AND ORS.versusM/S. B.T. PATIL AND SONS BELGAUM (CONSTRUCTION) PVT. LTD

                   [2024] 2 S.C.R. 91 : 2024 INSC 83

                   Union of India and Ors.
                              v.
 M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.
                      (Civil Appeal Nos. 7238 of 2009)

                               05 February 2024
               [Abhay S. Oka and Ujjal Bhuyan,* JJ.]

                            Issue for Consideration
       Entitlement of the respondent to refund of duty drawback and
       interest for delayed payment thereof.

                                   Headnotes
       Customs Act, 1962 – ss.75A, 27A – Central Excise Act, 1944
       – Foreign Trade (Development and Regulation) Act, 1992 –
       Foreign Trade (Regulation) Rules, 1993 – Customs, Central
       Excise Duties and Service Tax Drawback Rules, 1995 – Exim
       Policy of 1992-1997 – Duty Exemption Scheme – Duty Drawback
       Scheme – Supplies in civil construction work, eligibility for
       ‘deemed export’ benefit under the Exim Policy – Respondent,
       a class-I contractor specializing in the field of civil contract
       works especially funneling and hydro-electric power projects
       had completed the work awarded to it in 1996 in a project called
       Koyna Hydro Electric Power Project, Maharashtra funded by
       the International Bank for Reconstruction and Development, an
       arm of the World Bank – Respondent claimed duty drawback
       and interest for the delayed refund thereof – Entitlement:
       Held: On a conjoint reading of the relevant provisions of the Exim
       Policy, 1992-1997 in conjunction with the Central Excise Act and
       the Customs Act, 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 – Even if there
       was any doubt, the same was fully explained by the 1995 Rules –
       It is not correct on the part of the appellants to contend that there
       was no provision for payment of interest on delayed refund of
       duty drawback – It is also 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 – Respondent entitled

* Author
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      to refund of duty drawback as a deemed export under the Duty
      Drawback Scheme – Applications for refund were made in 1996
      – Decision to grant refund of duty drawback was taken belatedly
      on 07.10.2002 whereafter 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 – Under s.75A(1)
      of the Customs Act, where duty drawback is not paid within three
      months from the date of filing of claim, the claimant would be entitled
      to interest in addition to the amount of drawback – It provides that
      the interest would be at the rate fixed u/s.27A from the date after
      expiry of the said period of three months till the payment of such
      drawback – The interest rate prescribed u/s.27A 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 dtd. 26.5.1995
      had fixed the rate of interest at fifteen percent for the purpose of
      s.27A – 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 – Order of the Division Bench of the High Court
      not interfered with. [Paras 33-39]

                                Case Law Cited
           S. S. Grewal v. State of Punjab [1993] 3 SCR 593 : 1993
           Suppl. 3 SCC 234; Rajagopal Reddy (dead) by Lrs. v.
           Padmini Chandrasekharan (dead) by Lrs. [1995] 1 SCR
           715 : (1995) 2 SCC 630; Zile Singh v. State of Haryana
           [2004] 5 Suppl. SCR 272 : (2004) 8 SCC 1 – referred to.

                                  List of Acts
      Central Excise Act, 1944; Customs Act, 1962; Finance Act,
      1994, Imports and Exports (Control) Act, 1947; Foreign Trade
      (Development and Regulation) Act, 1992; Foreign Trade
      (Regulation) Rules, 1993; Customs, Central Excise Duties and
      Service Tax Drawback Rules, 1995.

                               List of Keywords
      Drawback; Duty drawback; Duty Drawback Scheme; Exim Policy
      of 1992-1997; Duty Exemption Scheme; Deemed export; Delayed
      refund of duty drawback; Interest; Multilateral or bilateral agencies;
      International Bank for Reconstruction and Development; World Bank;
      Central Board of Excise and Customs; Imports of duty free material;
      Notification declaratory/clarificatory; Retrospective operation.
[2024] 2 S.C.R.                                                         93

                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

                           Case Arising From

     CIVIL APPELLATE JURISDICTION : Civil Appeal No.7238 of 2009

     From the Judgment and Order dated 22.08.2008 of the High Court
     of Karnataka at Bangalore in WA No.356 of 2006
                        Appearances for Parties
     V C Bharathi, Raj Bahadur Yadav, Shashank Bajpai, Mrs. Sweta
     Singh Verma, A. K. Kaul, Praneet Pranab, Advs. for the Appellants.
     Basuva Prabhu Patil, Sr. Adv., Amit Sharma, Dipesh Sinha, Ms.
     Pallavi Barua, Ms. Aparna Singh, Advs. for the Respondent.
                Judgment / Order of the Supreme Court
                                Judgment
     Ujjal Bhuyan, J.
     Appellants i.e., Union of India, Director General of Foreign Trade and
     Joint Director General of Foreign Trade by means of this civil appeal
     have taken exception to the judgment and order dated 22.08.2008
     passed by a Division Bench of the High Court of Karnataka, Circuit
     Bench at Dharwad in Writ Appeal No.356 of 2006 affirming the
     judgment and order of the learned Single Judge dated 22.09.2005
     allowing Writ Petition No.45525 of 2004 filed by the respondent.
2.   Facts lie within a narrow compass. Nonetheless, for a determination
     of the lis, it would be necessary to briefly narrate the relevant facts
     as projected by the respondent in the related writ petition.
     2.1. Respondent is a class-I contractor specializing in the field of
          civil contract works especially funneling and hydro electric
          power projects.
     2.2. 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 has relied
          upon a letter dated 08.08.1991 issued by the Chief Engineer
          of the project. Relevant portion of the letter reads thus:-
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           4.2. Information regarding the benefits available
           under the “Deemed Export” concept for this World
           Bank Aided (Loan) Project may please be obtained
           by the contractors from their own sources and the
           information gained by them may be utilised, while
           quoting the rates.
      2.3. A deemed export scheme was announced under the Exim
           Policy, 1992-1997 by the Ministry of Commerce, Government
           of India and the Director General of Foreign Trade under the
           Foreign Trade (Development and Regulation) Act, 1992. Certain
           benefits under ‘deemed export’ were also included in the said
           Exim Policy.
      2.4. Respondent completed the construction work awarded to it in
           the month of March, 1996 and thereafter filed applications dated
           25.03.1996, 13.09.1996 and 20.12.1996 claiming duty drawback
           for Rs.35,75,679.00, Rs.88,98,206.00 and Rs.85,05,853.00
           respectively.
      2.5. By endorsements dated 10.11.1996, 06.12.1996 and 31.12.1996,
           Director General of Foreign Trade (for short ‘DGFT’ hereinafter)
           rejected the applications of the respondent for duty drawback
           on the ground that supplies in civil construction work were not
           eligible for ‘deemed export’ benefit.
      2.6. Notwithstanding such rejection, respondent made representations
           for reconsideration of such decision and sought for duty drawback
           under the Exim Policy, 1992-1997. One such representation is
           dated 05.02.1997. However, the same was rejected by the DGFT
           vide the order dated 10.08.1997 stating that civil construction
           work did not qualify for drawback.
      2.7. On 20.08.1998, DGFT issued a circular under the successor
           Exim Policy, 1997-2002 clarifying that supply of goods under
           paragraph 10(2)(d) of the 1997-2002 Exim Policy would be
           entitled for ‘deemed export’ benefit. It may be mentioned that
           the Exim Policy of 1992-1997 had expired with effect from
           31.03.1997.
      2.8. On 05.12.2000, DGFT issued a circular that drawback was to
           be paid in respect of excise duty on supply of goods to projects
           funded by multilateral agencies.
[2024] 2 S.C.R.                                                            95

                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

     2.9. In the above scenario, respondent once again addressed
          a letter dated 28.08.2001 to the DGFT to finalize the issue.
          However, DGFT rejected the claim vide the communication
          dated 21.06.2002.
     2.10. Notwithstanding the same, a Policy Interpretation Committee
           was constituted which examined the case of the respondent in
           its meeting held on 07.10.2002. It was decided that the benefit
           of duty drawback under the ‘deemed export’ scheme would be
           extended to the respondent. Consequently, in supersession of
           the earlier rejection order dated 21.06.2002 and in the light of the
           decision of the Policy Interpretation Committee dated 07.10.2002,
           DGFT vide the order dated 01.11.2002 permitted duty drawback
           of Rs.2,05,79,740.00 to the respondent. Thereafter cheques
           for Rs.25,00,000.00, Rs.63,23,575.00, Rs.81,05,583.00 and
           Rs.56,50,312.00, totalling Rs.2,25,79,470.00 vide endorsements
           dated 31.03.2003 and 20.05.2003 were issued. However, it was
           clarified that duty drawback granted to the respondent would
           not be treated as a precedent.
     2.11. Respondent thereafter submitted representation addressed
           to the appellants dated 06.06.2003, 14.06.2003, 17.07.2003,
           29.10.2003 and 10.08.2004 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.
3.   Aggrieved by rejection of the request for interest on the amount
     of duty drawback paid, respondent preferred a writ petition before
     the High Court which was registered as Writ Petition No.45525 of
     2004. After hearing the parties, a learned Single Judge of the High
     Court vide the judgment and order dated 22.09.2005 referred to the
     notification dated 05.12.2000 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. Since
     Customs Act, 1962 provides that interest has to be paid in such a
     case in the range of five percent to thirty percent, learned Single
     Judge awarded interest at the rate of fifteen percent. Consequently,
     directions were issued to the appellants to consider the claim of
     the respondent for payment of interest on delayed refund from the
     date of notification dated 05.12.2000 till the date of payment to the
     respondent within a period of three months.
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4.    This judgment and order of the learned Single Judge came to be
      assailed by the appellants before the Division Bench of the High Court
      which was registered as Writ Appeal No.356 of 2006. Respondent
      also filed Writ Appeal No.3699 of 2005 assailing the direction of
      the learned Single Judge to pay interest only from 05.12.2000. The
      Division Bench took note of the fact that since duty drawback was
      refunded by the appellants to the respondent, the only question to
      be considered was the entitlement of the respondent to interest for
      the delayed refund. In this connection, the Division Bench examined
      the notification dated 20.08.1998 and observed that this notification
      had clarified that ‘deemed export’ would include goods and services
      of civil construction projects. Thus, duty drawback under the Exim
      Policy in force was extended even to civil construction. This position
      was further clarified by the subsequent notification dated 05.12.2000.
      Such notification was held by the Division Bench to be clarificatory
      in nature, thus having retrospective effect. After referring to Sections
      27A and 75A of the Customs Act, 1962, the Division Bench held that
      respondent would be entitled to interest after expiry of three months
      from the date of making the applications for refund of duty drawback.
      Vide the judgment and order dated 22.08.2008, 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. While the writ appeal of
      the respondent was allowed, the writ appeal of the appellants was
      dismissed.
5.    Mr. V. C. Bharathi, learned counsel for the appellants submitted a short
      list of dates and events. He pointed out therefrom that applications
      filed by the respondent for duty drawback were repeatedly rejected
      by the DGFT. Notwithstanding such rejection, respondent continued
      to file one representation after the other claiming duty drawback.
      It is in such circumstances that a Policy Interpretation Committee
      was constituted by the DGFT which examined the case of the
      respondent and vide its decision dated 07.10.2002 decided to extend
      the benefit of duty drawback to the respondent as a special case. It
      is in this backdrop that DGFT had passed order dated 01.11.2002
      emphasizing that the duty drawback paid to the respondent would
      not be treated as a precedent. He submitted that duty drawback was
      extended to the respondent as a special case which was not available
      to the respondent under the Exim Policy of 1992-1997. In such
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                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

     circumstances, question of awarding any interest to the respondent
     on the ground of alleged delay in payment of duty drawback did not
     arise. There was no provision under the Exim Policy of 1992-1997
     for payment of such interest. Therefore, learned Single Judge erred
     in awarding interest to the respondent, that too, at the high rate of
     fifteen percent.
     5.1. He further argued that the Division Bench had fallen in error taking
          the view that circulars dated 20.08.1998 and 05.12.2000 were
          clarificatory in nature and therefore would have retrospective
          effect covering the case of the respondent. According to him,
          these circulars were issued under the successor Exim Policy,
          1997-2002 and thus could not be applied to cases like that of
          the respondent under the Exim Policy 1992-1997. He, therefore,
          submitted that the present is a fit case for interfering with the
          decision of the learned Single Judge as affirmed by the Division
          Bench.
6.   Per-contra, Mr. Basuva Prabhu Patil, learned senior counsel for the
     respondent supported the orders of the learned Single Judge and
     that of the Division Bench. He submitted that the appellants having
     granted the benefit of duty drawback to the respondent though
     belatedly, it is not open to them to now contend that respondent
     was not entitled to such duty drawback which was only granted as a
     concession. Admittedly, there was delay in refund of duty drawback.
     Respondent is, therefore, entitled to interest on such delayed refund
     which was rightly awarded by the High Court.
     6.1. Referring to the provisions of Section 27A of the Customs Act,
          1962 (referred to as the ‘Customs Act’ hereinafter), learned
          senior counsel submitted that the High Court had taken a rather
          conservative figure considering the legislative scheme while
          awarding interest at the rate of fifteen percent to the respondent.
          He, therefore, submitted that no interference would be called
          for in the orders of the High Court and that the civil appeal filed
          by the appellants should be dismissed.
7.   Submissions made by learned counsel for the parties have received
     the due consideration of the Court.
8.   Before we examine the decisions of the High Court, it would be
     apposite to briefly highlight the statutory framework and the concerned
     Exim Policy.
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9.    Section 11A of the Central Excise Act, 1944 (briefly ‘Central Excise
      Act’ hereinafter) deals with recovery of duties not levied or not paid
      or short-levied or short paid or erroneously refunded. Relevant for
      our purpose is sub-section (1) which says that where any duty of
      excise has not been levied or not paid or has been short levied or
      short paid or erroneously refunded, for any reason other than the
      reason of fraud or collusion etc. with intent to evade payment of
      duty, the Central Excise Officer shall serve notice on the person so
      chargeable within two years from the relevant date requiring him
      to show cause why he should not pay the amount specified in the
      notice. The person chargeable with duty may either before service
      of notice pay on the basis of his own ascertainment or the duty
      ascertained by the Central Excise Officer, the amount of duty along
      with interest payable thereon under Section 11AA. In the event of
      fraud, collusion etc. the notice period gets extended to five years.
      9.1. Duty is cast upon the person liable to pay duty either voluntarily
           or after determination under Section 11A to pay interest in
           addition to the duty under sub-section (1) of Section 11AA.
           As per sub-section (2), such interest shall not be below ten
           percent and shall not exceed thirty six percent per annum,
           as the Central Government may by notification in the Official
           Gazette fix. Such interest shall be calculated from the date on
           which the duty becomes due up to the date of actual payment
           of the amount due.
      9.2. Section 11B of the Central Excise Act entitles any person
           claiming refund of any duty of excise and interest to make an
           application for refund of such duty and interest before the expiry
           of one year from the relevant date (prior to 12.05.2000, it was
           six months instead of one year).
      9.3. Section 11BB provides for interest on delayed refund. It says
           that if any duty ordered to be refunded under sub-section (2)
           of Section 11B to any applicant is not refunded within three
           months from the date of receipt of the application under sub-
           section (1) of that section, there shall be paid to such applicant
           interest at such rate not below five percent and not exceeding
           thirty percent per annum as for the time being fixed by the
           Central Government, by notification in the Official Gazette. Prior
           to 11.05.2001, the rate of interest was not below ten percent.
[2024] 2 S.C.R.                                                         99

                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

           The applicant would be entitled to interest after expiry of three
           months from the date of receipt of such application till the date
           of refund of such duty.
10. Section 27 of the Customs Act deals with claim for refund of duty.
    As per sub-section (1), any person claiming refund of any duty or
    interest paid by him or borne by him, may make an application in
    the prescribed form and manner, for such refund addressed to the
    designated authority before the expiry of one year from the date of
    payment of such duty or interest. Explanation below sub-section (1)
    clarifies that for the purpose of sub-section (1), the date of payment
    of duty or interest in relation to a person, other than an importer,
    shall be construed as the date of purchase of goods by such person.
     10.1. Sub-section (2) says that if on the receipt of such application
           the designated authority is satisfied that the whole or any part
           of the duty and interest, if any, paid on such duty, paid by the
           applicant is refundable, he may make an order accordingly and
           the amount so determined shall be credited to the Consumer
           Welfare Fund established under Section 12C of the Central
           Excise Act. However, as per the proviso, the amount of duty and
           interest so determined shall be paid to the applicant instead of
           being credited to the Consumer Welfare Fund if such amount is
           relatable, amongst others, to drawback of duty payable under
           Sections 74 and 75 of the Customs Act.
11. Section 27A of the Customs Act provides for interest on delayed
    refund. It says that, if any duty ordered to be refunded under sub-
    section (2) of Section 27 to an applicant is not refunded within three
    months from the date of receipt of the application, there shall be paid
    to that applicant interest at such rate not below five percent and not
    exceeding thirty percent per annum as is for the time being fixed
    by the Central Government, by notification in the Official Gazette,
    on such duty from the date immediately after the expiry of three
    months from the date of receipt of such application till the date of
    refund of such duty.
12. Chapter X of the Customs Act comprising of Sections 74 to 76 deals
    with drawback. While Section 74 allows drawback on re-export of
    duty-paid goods, Section 75 provides for drawback on imported
    materials used in the manufacture of goods which are exported. On
    the other hand, Section 75A deals with interest on drawback. Sub-
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       section (1) of Section 75A says that, where any drawback payable
       to a claimant under Section 74 or Section 75 is not paid within a
       period of one month (earlier it was two months and prior thereto
       it was three months) from the date of filing a claim for payment of
       such drawback, there shall be paid to that claimant in addition to
       the amount of drawback, interest at the rate fixed under Section 27A
       from the date after the expiry of the said period of one month till the
       date of payment of such drawback.
13. In exercise of the powers conferred under Section 3 of the Imports
    and Exports (Control) Act, 1947, the Central Government notified the
    Export and Import (Exim) Policy for the period 1992-1997. It came
    into effect from 01.04.1992 and remained in force for a period of
    five years up to 31.03.1997.
14. After the enactment of The Foreign Trade (Development and
    Regulation) Act, 1992, the Exim Policy, 1992-1997 was deemed to
    have been made under the aforesaid Act. That being the position,
    we will briefly refer to the said enactment.
15. The Foreign Trade (Development and Regulation) Act, 1992 (briefly
    ‘the 1992 Act’ hereinafter) is an act to provide for the development
    and regulation of foreign trade by facilitating imports into and
    augmenting exports from India and for matters connected therewith
    or incidental thereto.
       15.1. Section 4 declares that all orders made under the Imports and
             Exports (Control) Act, 1947 and in force immediately before the
             commencement of the 1992 Act shall so far as they are not
             inconsistent with the provisions of the 1992 Act would continue
             to be in force and shall be deemed to have been made under
             the 1992 Act.
       15.2. Thus, by virtue of Section 4 of the 1992 Act, the Exim Policy of
             1992-1997 continued to be in force and was deemed to have
             been made under the 1992 Act.
16. Section 5 of the 1992 Act, as it stood at the relevant point of time,
    dealt with export and import policy. As per Section 5, the Central
    Government may from time to time formulate and anounce by
    notification in the Official Gazette, the export and import policy and
    may also, in the like manner, amend that policy.
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                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

17. Rule 2(e) of the Foreign Trade (Regulation) Rules, 1993, framed
    under the 1992 Act, defines the word ‘policy’ to mean export and
    import policy formulated and announced by the Central Government
    under Section 5.
18. Let us now revert back to the Exim Policy, 1992 – 1997. Section 7
    of the said policy ascribes meaning to the words and expressions for
    the purpose of the policy. As per Section 7(13), ‘drawback’ in relation
    to any goods manufactured in India and exported means the rebate
    of duty chargeable on any imported materials or excisable materials
    used in the manufacture of such goods in India.
19. Chapter VII of the policy provides for ‘Duty Exemption Scheme’.
    Section 47, which is the first section in Chapter VII, mentions
    that under the Duty Exemption Scheme, imports of duty free raw
    materials, components, intermediates, consumables, parts, spares
    including mandatory spares and packing materials required for the
    purpose of export production may be permitted by the competent
    authority under the five categories of licences mentioned in the
    said chapter, including special imprest licence. As per Section
    56 (ii)(3), supplies made to projects financed by multilateral or
    bilateral agencies like the International Bank for Reconstruction and
    Development would be entitled to duty free import of raw materials,
    components, intermediates, consumables, parts, spares including
    mandatory spares and packing materials to main/sub-contractors for
    the manufacture and supply of products to such projects.
20. Chapter X introduced the concept of ‘deemed exports’. Section 120
    defines ‘deemed exports’ to mean those transactions in which the
    goods supplied did not leave the country and the payment for the
    goods was received by the supplier in Indian rupees but the supplies
    earned or saved foreign exchange for the country.
21. Under Section 121 (f), supply of goods to projects financed by
    multilateral or bilateral agencies, such as, the International Bank
    for Reconstruction and Development under international competitive
    bidding or under limited tender system would be regarded as ‘deemed
    exports’ under the Exim Policy of 1992-1997.
22. Section 122 provides that ‘deemed exports’ shall be eligible for the
    benefits in respect of manufacture and supply of goods qualifying
    as ‘deemed exports’, including under the Duty Drawback Scheme.
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23. In exercise of the powers conferred by Section 75 of the Customs
    Act, Section 37 of the Central Excise Act and Section 93A read with
    Section 94 of the Finance Act, 1994, the Central Government has
    made a set of rules called the Customs, Central Excise Duties and
    Service Tax Drawback Rules, 1995. Rule 2(a) defines ‘drawback’ in
    relation to any goods manufactured in India and exported, to mean
    the rebate of duty or tax as the case may be, chargeable on any
    imported materials or excisable materials used or taxable services
    used as input services in the manufacture of such goods. ‘Excisable
    material’ has been defined under Rule 2(b) to mean any material
    produced or manufactured in India subject to a duty of excise under
    the Central Excise Act. Likewise, the expression ‘imported material’
    has been defined under Rule 2(d) to mean any material imported
    into India and on which duty is chargeable under the Customs Act.
       23.1. Rule 3 provides for allowance of drawback. Sub-rule (1) says
             that subject to the provisions of the Customs Act, Central
             Excise Act, the Finance Act, 1994 and the rules made under
             the aforesaid three enactments, a drawback may be allowed
             on the export of goods at such amount or at such rates as may
             be determined by the Central Government.
       23.2. Rule 14 deals with payment of drawback and interest. Sub-
             rule (1) says that the drawback under the Customs, Central
             Excise Duties and Service Tax Drawback Rules, 1995 (briefly
             ‘the 1995 Rules’ hereinafter) and interest, if any, shall be paid
             by the proper officer of customs to the exporter or to the agent
             specially authorized by the exporter to receive the said amount
             of drawback and interest. Sub-rule (2) clarifies that the officer
             of customs may combine one or more claims for the purpose of
             payment of drawback and interest, if any, as well as adjustment
             of any amount of drawback and interest already paid and may
             issue a consolidated order for payment. As per sub-rule (3),
             the date of payment of drawback and interest, if any, shall be
             deemed to be, in the case of payment by cheque, the date of
             issue of such cheque; or by credit in the exporter’s account
             maintained with the Custom House, the date of such credit.
24. At this stage, we may mention that in exercise of the powers conferred
    by Section 27A of the Customs Act, the Central Board of Excise and
    Customs had issued notification bearing No.32/1995 (NT)-Customs
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                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

     dated 26.05.1995 fixing the rate of interest at fifteen percent for the
     purposes of Section 27A of the Customs Act. This was notified by
     the Central Government in the Ministry of Finance, Department of
     Revenue in the Official Gazette of India dated 26.05.1995.
25. Likewise, in exercise of the powers conferred by Section 11BB of the
    Central Excise Act, the Central Board of Excise and Customs issued
    notification No.22/95-Central Excises (NT) dated 29.05.1995 fixing
    the rate of interest at fifteen percent per annum for the purposes of
    the said section. This was also notified by the Central Government
    in the Official Gazette of India on 29.05.1995.
26. Though it may not be necessary, still we may refer to the circulars
    dated 20.08.1998 and 05.12.2000 issued by the DGFT. Circular
    dated 20.08.1998 says that representations had been received from
    individual exporters as well as clarifications sought for by different
    regional licencing authorities with regard to availability of deemed
    export benefit for supply of goods and services to civil construction
    projects. Circular dated 20.08.1998 says that the issue as to whether
    supply of goods and services to civil construction projects would be
    entitled for deemed export benefit or not had been examined in detail,
    whereafter it was clarified that supply of goods under paragraph 10(2)
    (d) of the Exim Policy would be entitled to deemed export benefit.
    Therefore, if within the scope of a work of turn-key civil construction
    project, supply of goods is included then supply of such goods would
    be entitled to deemed export benefit.
     26.1. It appears that representations were continued to be received
           by the DGFT regarding admissibility of duty drawback on
           supplies made to turn-key projects, considered as deemed
           export in terms of the Exim Policy. Circular dated 05.12.2000
           mentions that the matter was deliberated upon by the Policy
           Review Committee. It was noted that it was not possible for a
           single contractor to manufacture himself all the items required
           for execution of such projects. Hence certain items, either
           imported or indigenous, had necessarily to be procured from
           other sources. It was, therefore, clarified that all such directly
           supplied items, whether imported or indigenous, and used in the
           projects, the condition ‘manufactured in India’, a pre-requisite
           for grant of deemed export benefit, was satisfied in view of
           the fact that such activities being undertaken at the project
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            site constituted ‘manufacture’ as per the definition provided in
            the Exim Policy. Accordingly, it was clarified that the duties,
            customs and central excise, suffered on such goods should
            be refunded through the duty drawback route. Referring to the
            previous circular dated 20.08.1998, it was further clarified that
            excise duty paid on supply of inputs, such as, cement, steel
            etc., would be refunded through the duty drawback route in the
            same manner as in any other case of excisable goods being
            supplied to any other project qualifying for deemed export
            benefit, subject to the project authority certifying the receipt
            and use of such inputs in the project.
27. As already noted above, a Policy Interpretation Committee was
    constituted. The said committee held a meeting on 07.10.2002,
    chaired by the DGFT. One of the agenda items deliberated upon
    in the said meeting was the claim of the respondent regarding
    inclusion of excise duty component in the price quoted before the
    project authority as a case of deemed export and refund of the
    same through the duty drawback route. The Policy Interpretation
    Committee discussed the case of the respondent and opined that in
    case any such firms were still competitive and able to supply goods
    at international prices despite including the component of excise duty
    in the price quoted before the project authority, the deemed export
    benefit could not be denied to such firms. Hence, the committee
    decided to permit deemed export benefit even in cases where the
    excise duty component was factored in the pricing quoted provided
    other conditions of deemed export benefit were adhered to.
       27.1. From a perusal of the minutes of the meeting of the Policy
             Interpretation Committee held on 07.10.2002, it is evident
             that the committee had opined to extend the deemed export
             benefit to those firms which included excise duty component
             in the tender pricing quoted before the project authority such
             as the respondent. There is nothing in the minutes to indicate
             that such benefit was being extended to the respondent as a
             one off case or by way of concession.
28. Based on the minutes of the Policy Interpretation Committee meeting
    held on 07.10.2002, DGFT issued letter dated 01.11.2002, a copy
    of which was marked to the respondent, superseding the previous
    rejection order dated 21.06.2002 and allowing duty drawback to be
[2024] 2 S.C.R.                                                          105

                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

     paid to the respondent for materials/goods, such as, steel, cement
     etc., used in the civil works of Koyna Hydro Electric Project. The
     amount of drawback refundable to the respondent was quantified
     at Rs.2,05,79,740.00. In the said letter, it was, however, mentioned
     that grant of drawback should not be treated as a precedent. It was
     thereafter that cheques were issued paying the aforesaid amount of
     duty drawback to the respondent. At that stage, respondent submitted
     representations contending that there was delay in the refund of
     drawback and therefore, it was entitled to interest from the relevant
     date at the rate of fifteen percent in terms of the notification No.22/95
     dated 29.05.1995 (we may mention that the respondent had placed
     reliance on the aforesaid notification which fixed interest at the rate
     of fifteen percent for delayed refund of duty under Section 11BB of
     the Central Excise Act). However, such representations were rejected
     by the DGFT on 10.07.2003 and 06.08.2003 respectfully. In the
     rejection letter dated 10.07.2003, respondent was informed by the
     office of DGFT that there was no provision for payment of interest
     on the deemed export duty drawback. Therefore, the request for
     payment of interest could not be agreed upon.
29. Learned Single Judge referred to the circular dated 05.12.2000 and
    observed that pursuant thereto appellants had paid the duty drawback
    to the respondent. However, there was delay in payment of duty
    drawback at least from the date of the clarificatory circular dated
    05.12.2000. Therefore, respondent would be entitled to interest from
    the date of the clarification till the date of payment. After observing
    that the Customs Act provides for interest on delayed refund within
    the range from five percent to thirty percent, learned Single Judge
    directed the appellants to pay interest on the delayed refund from
    the date of the clarificatory circular dated 05.12.2000 till the date of
    payment within a period of three months.
30. Appellants filed Writ Appeal No.356 of 2006 assailing the aforesaid
    decision of the learned Single Judge. On the other hand, respondent
    also filed a writ appeal being Writ Appeal No.3699 of 2005 assailing
    the directions of the learned Single Judge to pay interest only from
    the date of the circular dated 05.12.2000.
     30.1. Before the Division Bench, it was contended on behalf of the
           appellants that it was only under the Foreign Trade Policy,
           2004-2009 that for the first time payment of simple interest
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            at the rate of six percent per annum in the event of delay in
            refund of duty drawback was provided. There was no provision
            for payment of interest on delayed refund of duty drawback on
            deemed export prior thereto. Therefore, respondent was not
            entitled to interest even from 05.12.2000 as directed by the
            learned Single Judge. It was canvassed before the Division
            Bench on behalf of the appellants that only due to magnanimity
            on the part of the Central Government refund of duty drawback
            under deemed export was paid to the respondent. As such,
            refund would not carry any interest.
       30.2. The Division Bench repelled such contentions advanced on
             behalf of the appellants and held that in view of the circular
             dated 05.12.2000, it was clarified that even civil construction
             works were entitled to the benefit of deemed export under the
             Exim Policy. After saying so, the Division Bench noted that as
             a matter of fact, an amount of Rs.2,05,79,740.00 was paid
             to the respondent as duty drawback. Thereafter, the Division
             Bench analysed the circular dated 05.12.2000 and upon such
             analysis it was observed that the position vis-à-vis refund of
             duty drawback in civil construction work treating it as deemed
             export was clarified in an earlier circular dated 20.08.1998.
             Thus, according to the Division Bench, by the year 1998 itself,
             DGFT had clarified that civil construction work was entitled to
             the benefit of duty drawback as deemed export. Having held
             so, the Division Bench posed a question as to whether the
             respondent would be entitled to interest after expiry of three
             months from the date of the applications for refund of duty
             drawback? Corollary to the above question was an ancillary
             question as to whether a clarificatory or declaratory notification
             or circular would have retrospective operation? After referring to
             decisions of this Court reported in 1993 Supplementary (3) SCC
             234 S. S. Grewal versus State of Punjab, (1995) 2 SCC 630
             Rajagopal Reddy (dead) by Lrs. Vs. Padmini Chandrasekharan
             (dead) by Lrs., and (2004) 8 SCC 1 Zile Singh versus State of
             Haryana, the Division Bench opined that the minute the Exim
             Policy came into force the benefit of duty drawback automatically
             became available to the respondent and that the clarification
[2024] 2 S.C.R.                                                       107

                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

           was only with regard to the doubts expressed in some quarters
           as to whether civil construction works were also entitled to
           such benefit. By virtue of the two circulars dated 20.08.1998
           and 05.12.2000, no new right or benefit came to be created;
           those two circulars were clarificatory in nature only clarifying
           that the benefit under the Exim Policy 1992-1997 was available
           to civil construction as well. Therefore, such benefit would
           take effect from the date of the Exim Policy. It was thereafter
           that the Division Bench posed the further question as to what
           would be the rate of interest on the delayed refund. In this
           connection, the Division Bench referred to Sections 27A and
           75A of the Customs Act and came to the conclusion that the
           date of payment of interest would have to be on expiry of the
           period of three months from the date of making an application
           for refund of duty drawback. The Division Bench held that the
           respondent would be entitled to interest from the date of expiry
           of three months after submission of applications for refund back
           in the year 1996 till the time the payment was made at the rate
           of fifteen percent as awarded by the learned Single Judge.
           Consequently, the appeal of the appellants was dismissed
           while the appeal of the respondent was allowed.
31. Reverting back to the Exim Policy of 1992-1997, we have already
    noted about the Duty Exemption Scheme. We have noted that under
    the Duty Exemption Scheme, import of duty free raw materials,
    components, intermediates, consumables, parts, spares including
    mandatory spares and packing materials required for the purpose of
    export production could be permitted by the competent authority under
    five categories of licences mentioned in Chapter VII including special
    imprest licence. Section 56 provided that a special imprest licence
    was granted for the duty free import of raw materials, components,
    consumables, parts, spares including mandatory spares and packing
    materials to main/sub-contractors for the manufacture or supply
    of products when such supply were made to projects financed by
    multilateral or bilateral agencies, such as, the International Bank for
    Reconstruction and Development under international competitive
    bidding or under limited tender system.
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       31.1. In Chapter X ‘deemed export’ has been defined. It is a transaction
             in which the goods supplied do not leave the country and the
             payment for the goods is received by the supplier in Indian
             rupees, but the supplies earn or save foreign exchange for
             the country. Section 121 declares that the categories of supply
             of goods mentioned in the said section would be regarded as
             ‘deemed export’ under the Exim Policy provided the goods
             were manufactured in India and the payment was received
             in Indian rupees. This included supply of goods to projects
             financed by multilateral or bilateral agencies or any other
             agency that may be notified by the Central Government, such
             as, the International Bank for Reconstruction and Development
             under international competitive bidding or under limited tender
             system in accordance with the procedures of those agencies.
       31.2. Section 122 clarifies that deemed export would be eligible
             for benefits under the Duty Drawback Scheme in respect of
             manufacture and supply of goods by treating those as deemed
             export.
32. That apart, as already mentioned in the earlier part of the judgement,
    the Explanation below sub-section (1) of Section 27 of the Customs
    Act clarifies that the expression ‘the date of payment of duty or interest’
    in relation to a person other than an importer shall be construed as
    ‘the date of purchase of goods’ by such person.
33. Therefore, 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, 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.
34. Even if there was any doubt, the same was fully explained by the
    1995 Rules. In fact, under the definition clause of the 1995 Rules,
    duty drawback, in relation to any goods manufactured in India
    and exported has been defined to mean the rebate of duty or tax
    chargeable on any imported materials or excisable materials used
[2024] 2 S.C.R.                                                        109

                        Union of India and Ors. v.
       M/S. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

     or taxable services used in the manufacture of such goods. In the
     preceding paragraphs, we have noted the meaning of the expressions
     ‘excisable materials’ and ‘manufacture’.
     34.1. Rule 3 of the 1995 Rules makes it abundantly clear that a
           drawback may be allowed on the export of goods at such
           amount or at such rates as may be determined by the Central
           Government. Further, Rule 14 provides for payment of drawback
           and interest.
35. It was, therefore, not correct on the part of the appellants to contend
    that there was no provision for payment of interest on delayed refund
    of duty drawback. That apart, 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 whereafter 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.
36. As we have already examined, 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. If we look at 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.
37. The Central Board of Excise and Customs vide its notification bearing
    No.32/1995 (NT) – Customs dated 26.5.1995 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.
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38. Be that as it may, having regard to our discussions made above,
    we have no hesitation in holding that 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.
39. That being the position, we find no good reason to interfere with the
    judgment and order of the Division Bench of the High Court dated
    22.8.2008. There is no merit in the appeal, which is accordingly
    dismissed. No costs.


       Headnotes prepared by: Divya Pandey   Result of the case: Appeal dismissed.