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2008 DIGILAW 437 (KAR)

B. T. Patil and Sons v. Union of India

2008-08-22

K.N.KESHAVANARAYANA, MANJULA CHELLUR

body2008
JUDGMENT Manjula Chellur, J.— These two appeals arise out of common order dt. 22.9.2005. Appeal No. 3699/05 is filed by the writ Petitioner and the appeal in W.A.356/06 is filed by the Union of India and the department concerned. 2. The admitted facts are, there was an approval by the Central Government for the funding of the project namely Koyna Hydro Electric Power Project, Maharashtra by the International Bank for Reconstruction and Development (World Bank) and M/s B.T. Patil & Sons (Belgaum) Constructions Pvt. Ltd, the writ Petitioner was given the contract to execute civil work as a Subcontractor in the said project The sub-contract was in respect of construction of civil works from Lake Intake to Emergency Valve Tunnel. The deemed export scheme which was announced under the Exim policy (1992-1997) was very much in force when the subcontract was given to the Appellant/ writ Petitioner. Certain benefits under the 'deemed export' was also included in this Exim policy. The completion of the construction work was in the month of March 1996. 3. Apparently, the writ Petitioner had sent applications on three occasions seeking 50% of the draw back duty (eligible benefit) as a provisional refund which are at Annexure "J". It is not in dispute that Director General of Foreign Trade (hereinafter referred to as DGFT), Ministry of Commerce, rejected all the three applications as per Annexure "K" series on the ground that civil construction works were not eligible for the 'deemed export' benefit announced in the Exim policy. The writ Petitioner said to have made persistent and constant representations to the DGFT for the refund of draw back benefits contending that he had to borrow several crores of rupees to invest in the project for completion of the said contract undertaken by him and the interest payable by him would become a financial burden to him. Nothing seems to have happened till the year 2000, when a notification dated 5.12.2000 by the DGFT in the nature of clarification was issued declaring that even civil construction works in internationally funded projects were eligible for 'deemed export' benefits. Apparently, only in the year 2003, between 31.3.2003 to 30th May 2003, several cheques were issued to the writ Petitioner totally amounting to Rs. 2.05 crores (Rupees Two crores and five thousand only) towards duty draw back by the third Respondent, Joint Director General of Foreign Trade. 4. Apparently, only in the year 2003, between 31.3.2003 to 30th May 2003, several cheques were issued to the writ Petitioner totally amounting to Rs. 2.05 crores (Rupees Two crores and five thousand only) towards duty draw back by the third Respondent, Joint Director General of Foreign Trade. 4. Therefore, the writ Petitioner approached the authorities seeking for payment of interest on the delayed payment of drawback benefits. The claim of interest for delayed refund came to be rejected and that was the subject matter of writ petition in Writ Petition No. 45525/04. In the writ petition, the writ Petitioner sought for quashing of endorsements at Annexure X & XI. 5. Before the learned Single Judge in the objection statement, the Respondent authorities contended that there was vagueness in interpreting the provision of law so far as entitlement of duty draw back in civil constructions and further contended that there was no specific provision to pay interest for benefits arising out of 'deemed export'. 6. The learned Single Judge after hearing both the parties at the time of preliminary hearing itself disposed of the writ petition holding that till 5.12.2000, there was a dilemma or doubt on account of legal fiction in interpreting the provision of law whether civil constructions would also attract duty draw backs, therefore, subsequent to 5.12.2000 clarification, the duty draw back is paid to the Petitioner on 25.11.2002, hence, there was delay of payment of duty draw back if any, atleast from 5.12.2000 and therefore, from said date of 5.12.2000, they would be entitled for interest on the delayed refund at 15% though the Act provides for interest between 5% to 30%. 7. Aggrieved by this order of the learned Single Judge, the writ Petitioner has come up before this Court contending that the very notification dt. 5.12.2000 at Annexure "P" refers to another notification pertaining to 1998 wherein such clarification was already in existence extending the benefit of duty draw back even to the supply of goods to civil constructions under 'deemed export' scheme. According to the learned Counsel for the writ Petitioner/Appellant, as the notifications dt. 5.12.2000 at Annexure "P" refers to another notification pertaining to 1998 wherein such clarification was already in existence extending the benefit of duty draw back even to the supply of goods to civil constructions under 'deemed export' scheme. According to the learned Counsel for the writ Petitioner/Appellant, as the notifications dt. 20.8.1998 and so also dated 5.12.2000 are the notifications in the nature of clarification, they relate back to the original date of the policy, therefore, as per the Exim policy, from the date on which they were entitled for payment of interest on duty draw back, they are entitled for such interest at 15% p.a. in view of Sections 27A and 75A of the Customs Act. 8. Only under the Foreign Trade policy 2004-2009 as updated on 11.4.2008 at point No. 8.5.1, for the first time, payment of simple interest at 6% p.a. is payable on delay in the refund of Duty drawback and Terminal Excise Duty under deemed export scheme in respect of refunds that have become due on or before 1.4.2007 but which have not been settled within 30 days of its final approval for payment by the Regional Authorities of DGFT organisation. In other words, according to the Counsel for the Union of India, there was no provision at all for payment of interest on delayed refund of duty drawback so far as 'deemed export' is concerned. Therefore, the applicant was not at all entitled for any interest even from 5.12.2000 as directed by the learned Single Judge. This is the main contention of the Union of India in their appeal before us. 9. As a matter of fact, the learned Counsel appearing for the Union of India attempted to contend that though the Petitioner was not even entitled for duty drawback on the 'deemed export', it was only on account of magnanimity of the Government, such payment came to be made. Therefore, as of a right, interest cannot be demanded on such gesture of the department. We are unable to accept this contention of the learned Counsel for the Union of India in view of the fact that even according to them, subsequent to 5.12.2000 notification, the dilemma or doubt which was in existence came to be resolved with the clarification that even civil constructions were entitled for benefits available on 'deemed export' under the Exim policy. 10. Apparently, in the year 2003, Rs. 10. Apparently, in the year 2003, Rs. 2.05 crores has been refunded as duty drawback amount, therefore, we are only concerned with the question of payment of interest on the delayed refunds. In order to decide this issue, the dates of clarification regarding the interpretation are very relevant. In the notification dt. 5.12.2000, a reference is made to the notification dt. 20.8.1998. The contents of notification dt. 20.8.98 placed before us, explains how the Exim policy has to be applied in respect of different items of 'deemed export' including the goods and services of civil construction projects. The gist of the said notification is to the effect that the duly drawback under the exim policy was extended even to civil constructions. We accept the contention of the learned Counsel for the claimant/Appellant that they were not aware of this notification dt. 20.8.1998 and therefore, they could not bring it to the notice of the learned Singe Judge that prior to 5.12.2000 itself a clarification in this regard was very much within the knowledge of the department and inspite of it, they came out with false statement that the dilemma was clarified only in the year 2000 by notification at Annexure "P". It would be impossible to accept the contention of the department that they were not aware of this notification dt. 20.8.1998 as it is issued by the Office of DGFT, Udyog Bhavan, New Delhi signed by Dy. Director General of Foreign Trade. Even as on the date of filing of objection statement before the learned Single Judge they were very much aware of this notification as this notification is referred to in the subsequent notification dt. 5.12.2000. By 1998 itself, the department by a notification had clarified that civil constructions are also attracted for extending benefits of duty drawback on 'deemed exports'. 11. The next question would be whether the department having issued this clarification on 20.8.1998, would be liable to pay interest after the expiry of three months from the date of application for refund of duty drawback ? 12. We refer to the following judgments in order to hold that the clarificatory or declaratory notifications have the retrospective operation: 1. S.S. Grewal Vs. State of Punjab and others, AIR 1994 SC 1232 Para 9. 12. We refer to the following judgments in order to hold that the clarificatory or declaratory notifications have the retrospective operation: 1. S.S. Grewal Vs. State of Punjab and others, AIR 1994 SC 1232 Para 9. From a perusal of the letter dated April 8, 1980, we find that it gives clarifications on certain doubts that had been created by some Departments in the matter of implementation of the instructions contained in the earlier letter dated May 5, 1975. Since the said letter dated April 8, 1980 is only clarificatory in nature, there is no question of its having an operation independent of the instructions contained in the letter dated May 5, 1975 and the clarifications contained in the letter dated April 8, 1980 have to be read as a part of the instructions contained in the earlier letter dated May 5, 1975. In this context, it may be stated that according to the principles of statutory construction a statute which is explanatory or clarificatory of the earlier enactment is usually held to be retrospective. It must, therefore, be held that all appointments against vacancies reserved for Scheduled Castes made after May 5, 1975 (after May 14, 1977 in sofar as the Service is concerned) have to be made in accordance with the instructions as contained in the letter dated May 5, 1975 as clarified by the letter dated April 8, 1980. On that view, the appointment of Shri Balwant Rai in 1979 has to be treated to be an appointment made under the said instructions and operation of these instructions cannot be postponed till April 8, 1980. If the matter is considered in this light then the sub-roster as indicated in the letter dated April 8, 1980 would have to be applied in respect of the post on which Sri Balwant Rai was appointed in 1979 and the said appointment has to be regarded as having been made against the vacancy at Point No. 1 in the roster which was reserved for Balmikis or Mazhabi Sikhs but since no Balmiki or Mazhabi Sikh was selected for that post, the said vacancy was assigned to Shri Balwant Rai who belonged to a Scheduled Caste other than a Balmiki or Mazhabi Sikh. The said vacancy which was reserved for Balmikis or Mazhabi Sikhs could not be carried forward in view of the directions contained in the letter dated April 8, 1980. The said vacancy which was reserved for Balmikis or Mazhabi Sikhs could not be carried forward in view of the directions contained in the letter dated April 8, 1980. The next post reserved for Scheduled Caste at Point No. 5 in the roster was meant for a person belonging to a Scheduled Caste other man Balmikis and Mazhabi Sikhs. In the selections that were made in 1981 and 1982 no person belonging to a scheduled caste was selected and therefore, posts at Point Nos. 5 & 6 in the roster became available to candidates in the general category and the vacancy at Point No. 5 reserved for Scheduled Castes was carried forward to Point No. 7. In 1986 two persons belonging to Scheduled Castes, namely Shri G.S. Samra and Respondent No. 3 were selected Shri G.S. Samra belonged to a Scheduled Caste other than Balmiki and Mazhabi Sikh whereas Respondent 3 was a Mazhabi Sikh. Since the post at Point No. 5 which had been carried forward to Point No. 7 was reserved for a candidate belonging to a Scheduled Caste other than Balmiki or Mazhabi Sikh, it had to be assigned to Shri G.S. Samra falling in that category and Respondent 3 who was a Mazhabi Sikh could only be appointed against the reserved vacancy at Point No. 9 in the roster. Respondent No. 3 cannot claim that the vacancy at Point No. 7 should be assigned to him. If Respondent No. 3 is adjusted against the vacancy at Point No. 9 in the roster, he has to be placed in seniority below the Appellant who was appointed against Point No. 8 in the roster. 2. Zile Singh Vs. State of Haryana and Others, AIR 2004 SC 5100 Para 14. The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended..... An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended..... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit A clarificatory amendment of this nature will have retrospective effect. 3. R. Rajagopal Reddy and Others (deceased by legal representatives) Vs. Padmini Chandrasekharan (deceased by legal representatives), AIR 1996 SC 238 a Para 17: As regards, reason 3, we are of the considered view that the Act cannot be treated to be declaratory in nature. Declaratory enactment declares and clarifies the real intention of the legislature in connection with an earlier existing transaction or enactment, it does not create new rights or obligations. On the express language of Section 3, the Act cannot be said to declaratory but in substance it is prohibitory in nature and seeks to destroy the rights of the real owner qua properties held benami and in this connection, it has taken away the right of the real owner both for filing a suit or for taking such a defence in a suit by benamidar. Such an Act which prohibits benami transactions and destroys rights flowing from such transactions as existing earlier is really not a declaratory enactment. With respect, we disagree with the line of reasoning which commanded to the Division Bench. In this connection, we may refer to the following observations in Principles of Statutory Interpretation, 5th Edn., 1992, by Shri G.P. Singh, at page 315 under the caption 'Declaratory statutes'; The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court: For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word "declared" as well as the word enacted. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word "declared" as well as the word enacted. But the use of the words, 'it is declared' is not conclusive that the Act is declaratory for these words may, at times be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to be substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal act was existing law when the constitution came into force the amending act also will be part of the existing law. In Mithilesh Kumari v. Prem Behari Khare Section 4 of the Benami Transactions (Prohibition) Act, 1988 was, it is submitted, wrongly held to be an Act declaratory in nature for it was not passed to clear any doubt existing as to the common law or the meaning or effect of any statute. The conclusion however, that Section 4 applied also to past benami transactions may be supportable on the language used in the Section. 13. The conclusion however, that Section 4 applied also to past benami transactions may be supportable on the language used in the Section. 13. From the reading of the above judgments, it is very clear that principles of statutory construction in respect of a statute which is explanatory or clarificatory of the earlier enactment is usually held to be retrospective unless otherwise provided The contents of the notifications did not indicate from what date such clarification comes into effect On the other hand, the very tenor of the clarification under these two notifications would indicate that several representations had been received from the department and other sources seeking clarification whether civil constructions would also come under the purview of 'deemed export' having benefits of duty draw back. Even otherwise, the minute exim policy came into force, such benefit automatically come into play and the clarification is only with regard to doubt expressed by different quarters that whether civil constructions would also get such benefit. Therefore, by virtue of these two notifications dt. 20.8.98 or 5.12.2000, no new right or benefit came to be created. It only clarified that the benefit under Exim policy 1992-1997 was available to civil constructions as well. Therefore, it takes effect retrospectively, from the date of exim policy. 14. Then the next question would be whether the claimant would be entitled for interest on this delayed refund of duty draw back ? 15. Section 27A of Customs Act, 1962 relates to interest on delayed refunds, which reads as under: 27-A Interest on delayed refunds - Of any duty ordered to be refunded under Sub-section (2) of Section 27 to an applicant is not refunded within three months from the date of receipt of application under Section (1) of that Section, they shall be paid to that applicant interest at such rate, (not below five percent) and not exceeding thirty per cent per annum as is for the time being fixed by the Central Government by notification in the Official Gazette) on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty. Provided that where any duty, ordered to be refunded under Sub-section (2) of Section 27 in respect of an application under Sub-section (1) of that Section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty. 16. Section 75-A of Customs Act pertains to interest on draw back, which reads as under: 75-A Interest on drawback: (1) Where any drawback payable to a claimant under Section 74 or Section 85 is not paid within a period of one month from the date of filing a chum for payment of such drawback, there shall be paid to that claimant in addition to the amount of drawback, interest at the rate fixed under Section 27-A from the date after the expiry of the said period of one month till the date of payment of such drawback. (2) Where any drawback has been paid to the claimant erroneously, the claimant shall, within a period of one month from the date of demand, pay in addition to the said amount of drawback, interest at the rate fixed under Section 28AA from the date after the expiry of the said period of (one month) till the date of recovery of such drawback. 17. Section 74 & 75 refers to different provisions pertaining to amounts payable as draw back. 18. As per the Foreign Trade policy, now relied upon by the learned Counsel for the Union of India, this came into existence for foreign trade policy of 2004-2009 i.e. also simple interest @ 6% on duty draw back delayed payments (delayed refunds) and with retrospective effect from 1.4.07 onwards. In other words, only such refunds that have become due on or after 1.4.07 alone would get payment of interest on delayed duty draw back. The very fact that this policy was brought into force would disclose that there was no specific provision for payment of interest so far as delayed refunds or duty draw back. 19. Whether this itself would disentitle the applicant to get interest on the delayed refund of the duty draw back ? 20. The very fact that this policy was brought into force would disclose that there was no specific provision for payment of interest so far as delayed refunds or duty draw back. 19. Whether this itself would disentitle the applicant to get interest on the delayed refund of the duty draw back ? 20. As per Sections 27-A and 75-A of the Customs Act on delayed refunds and so also draw back, interest is payable after the expiry of period of one month till the date of payment of such refund. The construction work came to be completed somewhere before March 1996. The applications for refund also came to be made in the very same year, within one month or two months. It is also noticed from the admissions of the parties that only in the year 2003, refund of duty draw back came to be made. This amount was Rs. 2.05 crores. According to the Appellant-writ Petitioner, he had taken advances from several banks and had to pay interest on the said loam and the said loan was utilised only for the purpose of completing the project undertaken by him as a sub-contractor. Irrespective of receiving duty draw back refund or the interest payable on that, the borrower would be liable to pay interest on the amounts borrowed by him from the bank. Likewise, if he has made any profit on these amounts, he would be liable to pay taxes and on the delayed payment of taxes, he is liable to pay penalty. Similarly, if refund is granted to the Assessee under the Income Tax Act, if that refund is sent with delay, interest also will be paid by the department of income tax. The very fact that under foreign trade policy of 2004-2009, such payment of interest came to be introduced would only indicate that such payment of interest was necessary on account of delayed refunds by the departments concerned. Even the principles of natural justice would demand that no person can retain some one else's money without justification, therefore, if only the duty draw back was refunded to the claimant, at an early date, within three months after making an application, he would not have faced financial crisis and financial burden. Even the principles of natural justice would demand that no person can retain some one else's money without justification, therefore, if only the duty draw back was refunded to the claimant, at an early date, within three months after making an application, he would not have faced financial crisis and financial burden. Even otherwise, just because the department was under a dilemma whether duty draw back was payable on civil constructions, it would not mean that Exim policy did not provide for such benefits. As a matter of fact, clarifications were issued in the year 1998 itself and the benefit of the clarifications would go back to the date of Exim policy with retrospective effect Therefore, the date of payment of interest has to be after the expiry of three months from the date of making an application for refund of duty draw back. 21. Learned Standing Counsel for the Union of India came out with another argument that according to the definition of 'deemed export', it would mean there is no physical export of the goods but it is only a 'deemed export', therefore, interest is not payable on 'deemed exports'. The very word 'deemed' would indicate that 'it has to be considered in accordance with the actual and factual meaning of a fact'. The 'deemed export' would mean, though factually such export does not take place, for all practical purposes, it would have a characteristic of an export. Therefore, 'deemed export' will not be short of export in any sense under any intended meaning. For all practical purposes, 'deemed export' would be equal to actual export. Therefore, the argument of the learned Standing Counsel for the Union of India that interest cannot be paid on the refund pertaining to 'deemed export' is fallacious and we reject the same. We rely on J.K. Cement Works Vs. Asstt. Commissioner of Central Excise and Customs, (2004) 97 ECC 6 at paras 33 & 34. The said decision pertains to similar provisions under Central Excise Act. 33. We rely on J.K. Cement Works Vs. Asstt. Commissioner of Central Excise and Customs, (2004) 97 ECC 6 at paras 33 & 34. The said decision pertains to similar provisions under Central Excise Act. 33. A close reading of Section 11BB, which now governs the question relating to payment of interest on belated payment of interest, makes it clear that relevant date for the purpose of determination the liability to pay interest is not the determination under Sub-section (2) of Section 11B to refund the amount to the applicant and not to be transferred to the Consumer Welfare Fund but the relevant date is to be determined with reference to date of application laying claim to refund. The non-payment of refund to the applicant claimant within three months from the date of such application or in the case governed by proviso to Section 11BB, non-payment within three months from the date of the commencement of Section 11BB brings in the starting point of liability to pay interest, notwithstanding the date on which decision has been rendered by the competent authority as to whether the amount is to be transferred to welfare Fund or to be paid to the applicant. 34. If ultimately it is decided that notwithstanding the refund has become due as per final adjudication and amount is to go to the Consumer Welfare Fund it brings an end to the claim of the applicant whether to refund or interest thereon. However, ultimately if it is found that amount is not to go to the Consumer Welfare Fund but is to be refunded to the applicant, in such event merely because of the time taken in deciding the issue the applicant can not be deprived of the interest on delayed payment of refund which ought to have been paid by the authorities in the first instance within three months of the application for claiming refund. 22. From the stand the Union of India and the department has taken from stage to stage, initially they denied the very eligibility of the duty draw back on 'deemed exports on civil constructions', later, they said they did not understand the Exim policy till a clarification was given in 2000 and later on, it is disclosed that in 1998 itself such clarification was very much available with the department. Before the learned Single Judge, they contend that they were not liable to pay interest as the writ Petitioner approached the Court with delay. However, the fact remains that because of the clarification or dilemma they tried to have regarding the interpretation, they compelled the Appellant/ claimant to have a lengthy correspondence with them. It happened only because of the department and the officers handling the department who were not ready to give a correct, proper and meaningful interpretation of the Exim policy of the government. Hence, we are of the opinion that the claimant/applicant is entitled for interest from the date of expiry of three months after submitting the application for refund of duty draw back in the year 19%, at the rate of 15% as awarded by the learned Single Judge. 23. With these observations, we allow the appeal filed by the Appellant in W.A.3699/05. 24. The appeal in W.A.356/06 filed by Union of India and the department is dismissed.