Union of India vs. M/s. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.
Background
M/s. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd., a Class-I contractor specializing in civil works, executed a sub-contract for the Koyna Hydro Electric Power Project. The company applied for a duty drawback refund under the “deemed export” scheme of the Exim Policy 1992-1997. The Directorate General of Foreign Trade (DGFT) initially denied the refund, claiming ineligibility under the policy. However, subsequent government circulars clarified the entitlement, and the refund was eventually granted, but with significant delay.
Legal Issue
The core issue before the Supreme Court was whether the respondent was entitled to interest on the delayed payment of duty drawback, and if so, at what rate and from which date. The Union of India argued that the relevant government circulars were not retrospective and that the respondent was not entitled to interest for the period of delay.
Arguments
Union of India: Contended that the circulars clarifying eligibility for duty drawback were issued under the subsequent Exim Policy (1997-2002) and could not be applied retrospectively to claims under the 1992-1997 policy. They also argued that interest was not payable since the benefit was granted as a concession.
Respondent: Asserted that the benefit of duty drawback was ultimately granted (albeit belatedly), and as there was an admitted delay in payment, interest was justly due. The respondent relied on statutory provisions and judicial precedents supporting the right to interest on delayed refunds.
Supreme Court’s Analysis
The Supreme Court examined the relevant provisions of the Central Excise Act and the Customs Act, which provide for payment of interest on delayed refunds. The Court emphasized that government authorities are not exempt from the obligation to pay interest for delayed payments, especially when the entitlement is ultimately recognized.
The Court held that the clarificatory circulars, though issued under a later policy, clarified the position under the earlier policy as well and should be applied to the respondent’s case.
The Court noted the inordinate delay in granting the refund and reaffirmed that the respondent was entitled to interest at 15% per annum on the delayed refund, as awarded by the Karnataka High Court.
Judgment
The Supreme Court dismissed the appeal of the Union of India, upholding the Karnataka High Court’s decision.
It affirmed the respondent’s entitlement to 15% interest per annum on the delayed duty drawback refund, calculated from the date of the refund application until the actual payment.
Significance
This judgment reinforces the principle that government departments must pay interest on delayed refunds, even in cases involving clarificatory policy changes. It underscores the judiciary’s commitment to ensuring procedural fairness and timely administration in tax and export incentive matters.
Citation:
Union of India & Ors. v. M/s. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd., Civil Appeal No. 7238 of 2009, Supreme Court of India, decided on February 5, 2024.
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