Duty drawback entitlement for deemed exports in civil construction supplies affirmed, with delayed refund attracting interest at the fixed government rate.

Duty exemption and duty drawback entitlement for supplies to civil construction projects was affirmed where supplies qualified as deemed exports under the Exim Policy, entitling contractors to drawback. The document explains that duty free imports under special imprest licences and related categories permit suppliers to be treated as deemed exporters, and that delayed payment of drawback attracts interest under the Customs Act; the applicable interest rate is the rate fixed by the Central Government for the purpose of the statutory interest provision, which in the cited instance was fifteen percent per annum, producing an entitlement to refund plus interest at that rate.

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Issues Involved:
1. Entitlement to Duty Drawback
2. Interest on Delayed Payment of Duty Drawback
3. Applicability of Circulars and Notifications
4. Retrospective Effect of Clarificatory Notifications

Summary:

1. Entitlement to Duty Drawback:
The respondent, a class-I contractor, was awarded a sub-contract for the Koyna Hydro Electric Power Project. The respondent completed the work in March 1996 and filed applications for duty drawback under the Exim Policy, 1992-1997. Initially, the Director General of Foreign Trade (DGFT) rejected these applications, stating that civil construction work did not qualify for 'deemed export' benefits. However, a Policy Interpretation Committee later decided to extend the duty drawback benefits to the respondent, leading to the DGFT granting a duty drawback of Rs.2,05,79,740.00.

2. Interest on Delayed Payment of Duty Drawback:
The respondent sought interest on the delayed payment of duty drawback, which was rejected by the DGFT. The respondent then filed a writ petition, and the learned Single Judge of the High Court ruled in favor of the respondent, awarding interest at the rate of fifteen percent for the delayed payment. This decision was affirmed by the Division Bench, which held that the respondent was entitled to interest from the date of expiry of three months after submitting the applications for refund in 1996.

3. Applicability of Circulars and Notifications:
The Division Bench examined the circulars dated 20.08.1998 and 05.12.2000, which clarified that civil construction works were entitled to 'deemed export' benefits under the Exim Policy. The Division Bench held that these circulars were clarificatory in nature and thus had retrospective effect, making the respondent eligible for duty drawback benefits.

4. Retrospective Effect of Clarificatory Notifications:
The Division Bench opined that the clarificatory notifications did not create new rights but merely clarified existing entitlements under the Exim Policy. Therefore, the benefits of duty drawback were available to the respondent from the date of the Exim Policy itself. The Division Bench also referred to Sections 27A and 75A of the Customs Act, which provide for interest on delayed refunds, and concluded that the respondent was entitled to interest at the rate of fifteen percent from the date of expiry of three months after the submission of applications for refund.

Conclusion:
The Supreme Court upheld the judgment of the Division Bench, confirming that the respondent was entitled to a duty drawback and interest on the delayed payment at the rate of fifteen percent. The appeal by the appellants was dismissed.

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