2025 (11) TMI 323 - HC - Customs

Section 75A requires interest on drawback from claim date (12.12.1994) until payment; Section 27A rate applies

Madras HC held that Section 75A mandates payment of interest on drawback from the date of filing the claim (12.12.1994) after one month until actual ... Interpretation of statute - Section 75A of Customs Act, 1962 - Liability to pay statutory interest amount on delayed payment of drawback - availment of Duty Entitlement Exemption Certificate (DEEC) - rejection of request made by the petitioner for conversion of advance licence shipping bills to drawback shipping bills - HELD THAT:- On a careful reading of Section 75A, it is seen that where the drawback becomes payable to a claimant under Section 74 or Section 75 of the Act and if it is not paid within a period of one month from the date of filing of the claim for payment of such drawback, the claimant is entitled to payment of interest at the rate fixed under Section 27A from the date after the expiry of the period of one month till the date of payment of such drawback - Section 27A of the Act speaks about the interest on delayed refunds. For the purposes of Section 75A, this provision will have relevance only in so far as determining the rate of interest payable on the drawback is concerned. It is also relevant to take note of the fact that the order dated 14.9.2020 passed by the second respondent was taken on appeal before the CESTAT, which, by order dated 04.2.2022, came to the conclusion that under Section 75 of the Act, the drawback should be allowed wherever the imported materials were utilized in the manufacture of goods, which were exported. There was no denial of the fact that the petitioner had satisfied this requirement. It was further concluded that there was absolutely no justification in adopting the drawback for 50% of the FOB value and that it was not in line with Section 75 of the Act. Ultimately, the matter was remanded to the file of the second respondent for passing fresh orders. The respondents have come to the conclusion that the interest was payable only if there was a delay of more than one month from the date of sanction. This interpretation given by the respondents runs contrary to the plain language used under Section 75A of the Act. This provision makes it clear that the interest was payable on the drawback amount from the date of filing the claim for payment of such drawback. Hence, it must relate back to the date of application made by the petitioner on 12.12.1994. Section 75A of the Act is a statutory right, which cannot be watered down by the Authorities. The Hon'ble Apex Court, in the decision in B.T.Patil & Sons Belgaum (Construction) (P) Ltd. [2024 (2) TMI 324 - SUPREME COURT], held that interest on delayed drawback runs from the date of claim till the date of payment and that any delay in payment of the amount does not provide an excuse for the Authorities to deny payment of interest - the petitioner made the claim in the year 1994 and the delay was not attributable to the petitioner. Once an order has been passed in favour of the petitioner for payment of drawback, in the light of the language used under Section 75A of the Act, the payment of interest will start after 30 days from the date of filing of the claim. Such a beneficial piece of legislation must be given a wide interpretation and it cannot be interpreted in a pedantic manner as was attempted to be done by the respondents. The impugned proceedings of the third respondent dated 13.6.2024 is hereby set aside and there shall be a direction to respondents 4 and 5 to pay the statutory interest under Section 27A of the Act on the drawback amount from 12.12.1994 till the date of actual payment of the drawback amount as mandated under Section 75A of the Act. Petition allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether interest under Section 75A of the Customs Act accrues from the date of filing the drawback claim or from the date when the claim is held to be complete / sanctioned by the Customs authorities. 2. Whether an order allowing drawback, rendered after long delay and remitted/reviewed by appellate fora, must be given effect with interest relating back to the original date of claim where the delay was attributable to the authorities. 3. Whether authorities can limit or curtail the statutory interest entitlement under Section 75A by invoking procedural completeness or sanction dates so as to deny interest for the period of delay not attributable to the claimant. 4. Whether the decision of the Apex Court holding that interest on delayed drawback runs from the date of claim till date of payment is applicable and binding on the interpretation of Sections 75 and 75A in the present facts. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Accrual date of interest under Section 75A - legal framework Legal framework: Section 75A prescribes that where drawback payable under Sections 74 or 75 is not paid within one month from the date of filing a claim, interest (at the rate fixed under Section 27A) is payable from the date after expiry of the said one-month period until payment. Section 27A fixes the rate of interest on delayed refunds and is relevant only for determining the interest rate for Section 75A. Precedent treatment: The Court relied upon the Apex Court decision holding that interest on delayed drawback runs from the date of claim until payment and that delays do not supply an excuse to deny interest. Interpretation and reasoning: The plain language of Section 75A fixes the relevant starting point as the 'date of filing a claim for payment of such drawback.' The Court rejected the respondents' narrower reading that interest accrues only from the date of sanction or when the claim becomes 'complete.' The statutory wording compels a relation back to the original claim date - interest becomes payable after one month from that date if payment is not made. Ratio vs. Obiter: Ratio - the statutory accrual point is the date of filing the claim; any contrary administrative construction that delays accrual to the sanction/completion date is inconsistent with the statute. Conclusion: Interest under Section 75A accrues from the date of filing the claim (subject to the one-month grace), not from the date of sanction/receipt of complete documents. Issue 2: Effect of administrative and judicial delay - relation back of entitlement Legal framework: When a claim is made and later allowed by competent authority or on judicial review, the claimant's substantive entitlement to drawback is to be assessed according to Sections 74/75; Section 75A independently prescribes interest for delayed payment measured from date of claim. Precedent treatment: The Court followed the Apex Court authority that interest on delayed drawback runs from claim date irrespective of the period of delay and the reason for delay. Interpretation and reasoning: Where authorities rejected or delayed consideration (including where an earlier adverse order was set aside by judicial process) and the ultimate allowance is premised on the original claim, the right to drawback and the statutory incident of interest must relate back to the original filing. The Court observed apportionment of culpability: initial delay was attributable to customs authorities and subsequent protraction to judicial delay; in any event the claimant cannot be penalised by denying statutory interest. The statutory interest is a beneficial provision to be construed broadly rather than pedantically. Ratio vs. Obiter: Ratio - when allowance is given in favour of a claimant for a claim originally filed at an earlier date, interest under Section 75A must be computed from that original claim date where delay is not attributable to the claimant. Conclusion: Where the claim filed on 12.12.1994 was ultimately allowed, the interest entitlement must relate back to 12.12.1994; administrative or judicial delay does not curtail that statutory right. Issue 3: Validity of limiting interest by reference to 'completeness' or sanction date Legal framework: Section 75A conditions interest on non-payment one month from filing of claim; it contains no express proviso permitting denial of interest where the claim was later held incomplete until a later date. Precedent treatment: The Court relied on higher judicial pronouncement rejecting administrative attempts to deny interest for the intervening period of delay. Interpretation and reasoning: The respondents advanced the position that interest becomes payable only from the date when the claim was complete (12.4.2021) and that payment within one month thereafter excluded interest. The Court held that this construction is contrary to the plain statutory text and would impermissibly water down a statutory right. The Court remarked that beneficial statutes should be given a wide interpretation and administrative constructions adopted in a pedantic manner cannot be upheld. Ratio vs. Obiter: Ratio - administrative denial of interest by reference to a later 'completion' date is inconsistent with Section 75A and cannot defeat the claimant's statutory entitlement where the claim was originally filed and the delay was not the claimant's fault. Conclusion: Authorities may not deny or curtail interest under Section 75A by treating the accrual point as the date of completeness or sanction where the original claim date gives rise to the entitlement and delay is attributable to authorities. Issue 4: Application of precedent and final determination Legal framework: Binding effect of higher court precedent on statutory interpretation and entitlement to interest under Sections 75/75A. Precedent treatment: The Court applied and followed the Apex Court decision holding that interest runs from the date of claim till payment and that delay in payment does not excuse denial of interest. Interpretation and reasoning: Given the earlier judicial pronouncement, the respondents' contrary construction could not be sustained. The Court noted that the appellate tribunal (CESTAT) had already held that drawback should be allowed on merits and remitted for fresh orders; consequentially, the statutory interest must be calculated from the original filing date where the claim is allowed. Ratio vs. Obiter: Ratio - the Apex Court authority is followed and treated as binding on the interpretation of Section 75A in the present factual matrix. Conclusion: The precedent is followed and compels payment of interest from the original claim date to the date of actual payment at the rate prescribed under Section 27A. Final Disposition (operative conclusion) Conclusion: The impugned administrative order denying interest is set aside. Respondent authorities are directed to pay statutory interest at the rate fixed under Section 27A from 12.12.1994 (the date of filing of the claim) until actual payment, in accordance with Section 75A. The Court considered the right to interest statutory, beneficial, and not subject to administrative narrowing; the writ is allowed and a timeline for disbursement was imposed.