Foreign Trade Policy cannot authorize interest levy under Section 28AA without statutory backing for duty credit recovery

The Kerala HC held that the Foreign Trade Policy cannot independently authorize levy of interest under Section 28AA of the Customs Act, 1962 for recovery of wrongly availed duty credit scrip rewards under the Service Exports from India Scheme. The court ruled that while the Foreign Trade Policy contemplated refund with interest for ineligible benefits, such interest levy must be supported by plenary legislation, not merely policy provisions. The petitioner succeeded, and the writ petition was allowed, establishing that policy frameworks cannot substitute for statutory authority in imposing interest obligations.

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Issues:
Interpretation of Foreign Trade Policy regarding duty credit scrip eligibility and interest under Customs Act.

Analysis:
The petitioner, a Private Ltd. Company, claimed entitlement to duty credit scrip under the Foreign Trade Policy for providing placement and supply services of personnel. The competent authority initially granted the duty credit scrip but later demanded its repayment, citing the services provided did not qualify for the benefit. The petitioner complied with the repayment but contested the demand for interest under Section 28AA of the Customs Act, 1962. The petitioner argued that the Foreign Trade Policy did not authorize the levy of interest and relied on legal precedents to support the claim that interest can only be levied if specifically provided for in the statute.

The respondents contended that the Foreign Trade Policy explicitly stated that interest under Section 28AA of the Customs Act would apply to repayments of benefits found to be ineligible. They argued that the policy's clear provision made it mandatory for the petitioner to refund the benefit along with applicable interest, as per the Customs Act.

The court analyzed the provisions of the Foreign Trade Policy in force during the relevant period and examined the legal basis for levying interest under Section 28AA of the Customs Act. Referring to legal precedents, including judgments by the Supreme Court, the court emphasized that interest can only be levied if expressly provided for in the statute. It highlighted that the mere mention of interest in a policy document does not confer the authority to levy interest unless supported by specific legislative provisions.

Based on the legal principles established in the cited cases, the court ruled in favor of the petitioner. It held that the demand for interest under Section 28AA of the Customs Act was not justified as the Foreign Trade Policy did not incorporate the necessary legal framework to authorize such levy. Consequently, the court allowed the writ petition, quashed the demand for interest, and declared the petitioner not liable to pay interest on the amounts repaid due to ineligibility for the Scheme benefits.

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