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TMI Blog2017 (5) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... ted these exports prior to 1431997. 3. On account of subsequent developments and noted after the writ petition was filed, by the amended prayers, the petitioners seek a writ of certiorari or any other appropriate writ, order or direction calling for the records pertaining to the Orders dated 2291998 and 30121998, Annexures "M" & "K" respectively to the petition and on a scrutiny as to their legality and validity, to quash and set aside the same. 4. The petitioners are then praying for a direction to the respondents to pay to them a sum of Rs. 2,53,34,229/ as per the particulars of claim at AnnexureN to the writ petition, with further interest at the rate of 24% per annum. 5. The petitioners have pointed out in the petition as to how they are aggrieved and dissatisfied with the action of the respondents who are the Union of India and the Officers exercising powers under the Customs Act, 1962 (for short "the Act"). 6. The petitioners are a Company duly registered under the Indian Companies Act, 1956 and are exporters of certain chemicals and natural essential oils. They are recognised as a Trading House under the Export and Import Policy (f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations in respect of exports in terms of the aforesaid scheme and prior to the said date were being processed, this Public Notice No.34/97 came to be issued. That is why the petitioners were not granted the benefit. The petitioners rely upon a communication whereby the application for supplementary credit was rejected. 10. The petitioners then state that there was a followup with the Department. In the sense that the matter was referred to respondent No.2. The petitioners were awaiting response from this respondent. They addressed a communication and calling upon the said respondent to comply with the requisitions contained therein. 11. There is also reliance placed on a policy circular by the petitioners. 12. It is stated that during the pendency of this writ petition and when the inaction of the respondents was brought to this Court's notice, at the hearing of this petition for admission on 821999, the counsel for the respondents pointed out to the Court that the petitioners have made a representation to the Central Board of Excise and Customs (for short "CBEC") on 17121998 which is pending. The CBEC should be allowed to dispose of this representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney. The money was not released or paid in terms of the entitlement of the petitioners. That was delayed. The wrongful deprivation of this money, therefore, should attract interest. That is how after the writ petition was filed, post filing developments, the surviving claim is now only of interest. 16. An affidavit in reply has been filed to this petition prior amendment and postamendment. We are concerned with the affidavit of the respondents postamendment to the petition. 17. It has been pointed out by the Assistant Commissioner of Customs, in his affidavit in reply filed on behalf of respondent Nos.4 to 6 that the earlier order was passed in accordance with law; the order passed on 30121998 was challenged by way of an appeal being Appeal No.355 of 1999. The Commissioner (Appeals) rejected the appeal on 3131999. A further appeal was preferred before the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai and the Tribunal allowed it. The Tribunal held that the petitioners are entitled to avail of the credit in the Pass Book on the basis of Public Notice No.150/95, dated 2191995. The Tribunal's order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit of Rs. 7,91,557/ was given. The earlier credit is dated 1141997 and the balance is dated 2861999. Thus, the credit has been subsequently given by the respondents to the petitioners by effecting entries in the Pass Book of the petitioners. It is in these circumstances that the petitioners have filed an additional affidavit explaining as to how the Pass Book of the petitioners contained details of the credits given under the Scheme and the amounts used by the petitioners towards the payment of the customs duty utilised from the aforesaid credits. It is in these circumstances that the petitioners submit that their claim for interest is based on the statutory provisions. 22. As already detailed above, this is a surviving claim. 23. Mr. Sridharan, learned Senior Counsel appearing on behalf of the petitioners, after referring to the background facts, would submit that the Customs Notification No.104/95, dated 3051995 r/w the Export Import Policy 19921997, issued by the Central Government under Section 5 of the Foreign Trade Development Regulation Act, 1992 (for short, "FTDR Act") envisages Duty Exemption Scheme. The petitioners have duly ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dharan has invited our attention to Section 27 of the Act and he has outlined the difference between the refund of duties of customs paid and drawback to urge that these are essentially of the same character. If customs duties paid on inputs used in goods exported is called drawback, then, in exercise of the powers conferred by Section 75, the Central Government has enacted the Customs and Central Excise Duties Drawback Rules, 1995. After inviting our attention to these Rules, it is submitted that the amount is credited in terms of para 54 of the Policy and proviso (iii)(a) and (b) of the Customs Notification No.104/95, then, that partakes the character of drawback. It is in these circumstances that he would submit that the contention of the Revenue that drawback is paid in cash and credit is not paid in cash and hence credit is not drawback, is entirely incorrect. In that regard, he relied upon an extract from the work of Kanga and Palkhivala's "Law and Practice of Income Tax", Eight Edition, at page 210. It is contended that the rationale underlying payment of interest under Section 27A applies to the present case. The Revenue's stand is completely untenable and inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 27 and 27A of the Act. They relied upon the copy of the General Exemption No.84C of the Customs Tariff of India 199798, as in operation on 131997. They have also relied on the Customs and Central Excise Duties Drawback Rules, 1995. The petitioners have also pointed out as to how the claim of interest was recognised by this Court and in that regard the attention of this Court is invited to the Judgment in the case of Shri Balaji Automobiles Vs. Union of India, reported in 2002 (140) E.L.T. 367 (Bom.), that is for awarding interest on delayed refund. 31. Mr. Rao, appearing on behalf of the respondents, on the other hand, submitted that the petitioners have filed claims between December, 1996 to February, 1997 in the prescribed format for credit in accordance with Public Notice No.150/95, dated 2191995. The Customs Department granted credit based on the amended Notification No.24/97, dated 631997. There was a bona fide dispute raised by the Customs Department that the amendment was made on 631997 and that would apply even to pending applications, though exports have been made prior to 631997. However, the credit, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual to basic customs duties on the inputs used in the products exported by the importer as verified by an Assistant Commissioner of Customs; provided that credit shall not be allowed by the designated authority in respect of goods exported under a claim for drawback or in discharge of export obligation against a licence issued under Duty Exemption Scheme contained in Chapter VI of the Export and Import Policy where export was from a port other than the port of jurisdiction of the designated authority. The said Pass Book is produced before the designated authority for debit of the duties leviable on the goods but for exemption contained therein. A proviso is inserted to condition No.3 which contemplates that exemption from duty shall not be admissible if there is insufficient credit in the said Pass Book for debiting the duty leviable on the goods but for this exemption. The said Pass Book shall be valid for credits by the designated authority for two years from the date of issue thereof and any credit in the said Pass Book, if not utilised within three years from the date of its issue, shall lapse. Then, there is an explanation which is inserted so as to define what is "Export and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentations made to the concerned Department to first grant credits on time, and secondly, had the grant of credit been processed on time, there would not have been any issue of the applicability of the amended regime. The representations point out as to how the Departments have also understood the issue and problems raised by the petitioners. 37. The petitioners, therefore, requested that the Board should direct the Customs to apply Notification No.104/95 as applicable and admitted by them and grant a supplementary credit at the earliest. 38. Then, the petitioners relied upon Policy Circular No.52, dated 18111998. The petitioners were first informed on 121999 that their request contained in the representation to the Board dated 17121998 was examined and rejected. 39. We need not refer to the orders passed by the authorities for the simple reason that after the matter was directed to be reexamined by the Board, the Board has made an order. The Board's order, dated 30121998, has been communicated to the petitioners during the pendency of this petition. The relevant portion thereof reads thus: "ORDER I have carefully gone thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamined the representation of the petitioners. The dispute was about the method of valuation of inputs used in the exported goods under the Pass Book Scheme in respect of exports made during November, 1996 to February, 1997. The facts of the case and the practice followed was rechecked. Prior to 631997, the parameters of valuation laid down in Notification No.104/95, dated 3051995 r/w Notification No.155/95, dated 27101995 and the Board's Circular No.62/95, dated 761995 were applicable. They provide that for the purpose of allowing credit, the value of input shall be comparable with the international prices of such inputs. Thus, the value may be determined on the basis of normal price of inputs prevalent in the international market for import at Mumbai as on the date of exports of the export product. 41. In view of this, it was not proper to apply the method of valuation prescribed in Notification No.24/97 which was issued on 631997 for exports which have been effected prior to 631997. Therefore, the Board decided to allow credits to the petitioners in the Pass Book as per their representation, and the value shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) Where any drawback has been paid to the claimant erroneously or it becomes otherwise recoverable under this Act or the rules made thereunder, the claimant shall, within a period of two months from the date of demand, pay in addition to the said amount of drawback, interest at the rate fixed under section 28AA and the amount of interest shall be calculated for the period beginning from the date of payment of such drawback to the claimant till the date of recovery of such drawback." 47. Where any drawback payable to a claimant under Section 74 or Section 75 is not paid within a period of one month from the date of filing of the claim for payment of such drawback, there will be paid to that claimant in addition to the amount of drawback, interest at the rate fixed under Section 27A from the date of expiry of the said period of one month till the date of payment of such drawback. 48. The petitioners rely on the rules in that behalf. 49. In the compilation handed over by the petitioners, there is a copy of the Customs and Central Excise Duties Drawback Rules, 1995. The term "drawback" is defined therein. The Rule 2(a), which is a part of the definition, contains the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarified that the goods shall be deemed to have been entered for export on the date with reference to which the rate of duty is calculated under Section 16; in the case of goods assessed to duty provisionally under Section 18, the date of payment of the provisional duty shall be deemed to be the date of payment of duty. 53. By Section 75, drawback on imported materials used in the manufacture of goods which are exported is taken care of. Therefore, we have two categories of drawbacks, the first being allowable on reexport of duty paid goods and the second being drawback on imported materials used in the manufacture of goods which are exported. The petitioners' claim refers to the second category, falling in Section 75. The Section 75 reads as under: "75. Drawback on imported materials used in the manufacture of goods which are exported. (1) Where it appears to the Central Government that in respect of goods of any class or description manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for export and in respect of which an order permitting the clearance and loading thereof for exportation has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exported shall, for the purpose of subsection (1), be deemed to be imported material. (2) The Central Government may make rules for the purpose of carrying out the provisions of subsection (1) and, in particular, such rules may provide (a) for the payment of drawback equal to the amount of duty actually paid on the imported materials used in the manufacture or processing of the goods or carrying out any operation on the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture or processing of export goods or carrying out any operation on export goods of that class or description either by manufacturers generally or by persons processing or carrying on any operation generally or by any particular manufacturer or particular person carrying on any process or other operation, and interest, if any, payable thereon; (aa) for specifying the goods in respect of which no drawback shall be allowed; (ab) for specifying the procedure for recovery or adjustment of the amount of any drawback which had been allowed under subsection (1) or interest chargeable thereon; (b) for the produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck can be considered in the light of the unamended provisions, or Notifications, or the amended one. 57. The petitioners were forced to come to this Court though the provisions were crystal clear. They were forced to even approach the Board because it was the respondents who made the statement before this Court that the matter would be examined by the Board. We have no doubt, therefore, that it is the respondents who took the stand that the petitioners are not entitled to such interest which is clearly referable to Section 75A. They were continuously of the opinion that the claim for drawback made by the petitioners, though styled as supplementary credit under the Pass Book Scheme, was not tenable until the matter went to the Board, but the Board did not issue a speaking order until this Court directed it to do so. It is entirely the respondents who have delayed the matter. Once the clarification came from the Board, then, there was no substance in the contention and the stand of the respondents. Thus, from inception the petitioners were entitled to those credits but which were released in part. The supplementary credit was obtained by the petitioners only after the Board clarifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserted in these two enactments by Finance Act, 1995 with effect from 2651995. A writ petition filed praying for award of such interest for earlier period was therefore rightly not maintainable. The Hon'ble Supreme Court held that the claim arose not for enforcement of legal right available under any statute. That is how, applying Suganmal (supra) the writ petition, seeking relief of interest in respect of the amount deposited towards redemption charges under an adjudication order and which amount had been refunded after the said order was set aside, could not be maintained under Article 226 of the Constitution of India. That is how the allowing of such a writ petition by the High Court was faulted by the Hon'ble Supreme Court. That Judgment of the High Court was set aside. 64. This Judgment is, therefore, clearly distinguishable and once the statutory scheme has been duly referred and explained by us in the foregoing paragraphs. 65. The issue before the High Court of Judicature at Madras in the matter of Tanfac Industries Ltd. Vs. Asstt. Commr. of Cus., Cuddalore, reported in 2009 (240) E.L.T. 341 (Mad.) was whether, adjustment of credit granted by the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, so long as there is no duty, there is no obligation to pay interest. 68. That is how the question of duty on the drawback is equivalent to payment of duty arose before the Tribunal and equally before the High Court of Judicature at Madras. Explaining the whole scheme in paras 8 and 9, the High Court of Judicature at Madras concluded eventually in para 12 that the debit of any amount under the DEPB Scheme is a mode of payment of duty on the imported goods and cannot be treated as exempted goods, unlike the goods under the DEEC Scheme. That is why outlining the difference between the two Schemes, the assessee's appeal was dismissed. 69. We do not see how any assistance can be derived by the Revenue from this Judgment. Before us, this issue has never been raised. On the other hand, the argument was that there is no obligation to pay interest, though there is an entitlement which is computed in terms of money as far as the petitioners are concerned. If that is indicated in the Pass Book but eventually to be released in the form of money, then, not releasing the same within the statutory limit, attracts interest, is the argument of the assessee/petitioners before us. That ..... X X X X Extracts X X X X X X X X Extracts X X X X
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