Gujarat High Court
Messrs Shell Exports (Kandla) vs Union Of India on 27 April, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/16482/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 16482 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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MESSRS SHELL EXPORTS (KANDLA)
Versus
UNION OF INDIA
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Appearance:
MR.ADITYA S. TRIPATHI, ADVOCATE with MR PARESH M DAVE(260) for
the PETITIONER(s) No. 1
MR DEVANG VYAS(2794) for the RESPONDENT(s) No. 1
MS MAITHILI D MEHTA(3206) for the RESPONDENT(s) No. 1
NOTICE SERVED BY DS(5) for the RESPONDENT(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 27/04/2018
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Page 1 of 18 C/SCA/16482/2016 JUDGMENT
1. Petitioner has filed this petition challenging the action of the respondent authorities in not granting interest on the benefits of DEPB scheme released belatedly.
2. Brief facts are as under. Petitioner is a proprietary concern and is engaged in the business of manufacturing of textile articles. The petitioner has a manufacturing unit situated at Kandla SEZ. On the exports made by the petitioner of such goods, the Government of India grants export incentives. Such incentives could be in the nature of duty draw back or at the option of the exporter be in the nature of Duty Entitlement Passbook Scheme ('DEPB' for short). The petitioner opted for DEPB scheme. In the course of activities, the petitioner had supplied certain goods to other units situated in SEZ area and claimed that the sales were in the nature of deemed export under the Foreign Trade Policy and the petitioner was therefore entitled to benefits of DEPB in relation to such sales also. For the period between 05.06.2002 to 01.04.2003 on such supplies to the other SEZ units, the petitioner's DEPB scrip entitlement came to Rs.42,39,445/. The petitioner therefore applied Page 2 of 18 C/SCA/16482/2016 JUDGMENT to the competent authority on 26.05.2003 for grant of such DEBP benefits. Such application was rejected on the ground that the circular laying down the procedure to be followed for supplying the goods for claiming DEPB was issued only on 01.04.2003. Therefore, according to the authorities, supplies made by the petitioner before 01.04.2003 did not qualify for DEPB benefits.
3. The petitioner challenged such stand of the department before the High Court by filing Special Civil Application No.11755 of 2003. The petition was dismissed by the Division Bench of this Court by judgment dated 03.11.2004. The petitioner challenged such judgment before the Supreme Court. Supreme Court allowed the SLP by judgment reported in case of Shell Exports (Kandla) v. Union of India reported in 2016 (336) E.L.T. 10 (S.C.), by making following observations:
"6. We have already reproduced the language of Notification dated 05.06.2002. It categorically uses the expression that the Central Government hereby amends/corrects the Export and Import Policy 20022007. It is, thus, very clear that insofar as the amendment is concerned, that was made effective by the issuance of this notification. Further, as is clear from the Page 3 of 18 C/SCA/16482/2016 JUDGMENT said notification, it was issued in exercise of the powers conferred upon the Central Government by Section 5 of the Act. It is, thus, a statutory notification whereby the EXIM Policy 20022007 was amended. With the issuance of such a notification, amendment came into effect from the date of issuance of the notification, i.e., 05.06.2002 and this notification, inter alia, made the exporters who make supplies from DTA to SEZ eligible to claim benefit of DEPB in lieu of drawback for supplies made to SEZ or unit in SEZ. Insofar as the circular dated 01.04.2003 is concerned, it is only administrative in nature. It prescribed the procedure/requirements that were to be fulfilled for claiming the benefit of DEPB in lieu of drawback. By administrative circular, notification dated 05.06.2002 which was passed under Section 5 of the Act, could not be altered as that would amount to amendment of the notification and it was not within the powers of the Customs Authorities to alter the said date. Moreover, as mentioned above, this is only a procedural circular which stipulates the conditions/ procedure that had to be followed for claiming the benefit of DEPB.
7. No doubt, the respondentauthorities could, insofar as this procedure is concerned, put conditions for claiming the benefit of DEPB for the period in question but could not say that the exporters would not be entitled to such a benefit from 05.06.2002 but would be entitled only from 01.04.2003.
8. We, thus, allow this appeal and set aside the order passed by the High Court as well as the impugned order passed by the respondents and hold that the appellant shall be entitled to the benefit of DEPB benefit in lieu of drawback as claimed by him. The Page 4 of 18 C/SCA/16482/2016 JUDGMENT application of the appellant shall be proceeded with within a period of two months from today and the benefit under the said circular subject to the fulfillment of the required conditions, shall be accorded."
4. After the judgment of the Supreme Court, the petitioner applied to the Development Commissioner, Kandla SEZ on 11.05.2016 and requested that the credit in the DEPB may be granted. In response to said letter, the said authority wrote to the petitioner on 08.06.2016 pointing out that in the documents supplied by the petitioner for making such claim, there were certain deficiencies. He requested the petitioner to supply the deficient documents. After some further correspondences between the petitioner and Kandla SEZ, on 01.07.2016, Foreign Trade Development Officer, Kandla SEZ, forward to the petitioner DEPB license dated 01.07.2016 for a sum of Rs.42,39,445/.
5. Thus, the controversy regarding non granting of DEPB benefits came to rest. However, the dispute between the petitioner and the department refused to die down. The petitioner insisted on such benefits being released with interest. On 18.07.2016, the Page 5 of 18 C/SCA/16482/2016 JUDGMENT petitioner wrote to the Development Commissioner and pointed out that the DEPB scrip issued was only for the principal sum without interest for long period of delay between 2003 to 2016. He requested the interest be paid at the prescribed rates. On 26.07.2016, the Foreign Trade Development Officer conveyed to the petitioner that there is no provision under the DEPB scheme for grant of interest and therefore the petitioner's request for interest cannot be allowed. This was reiterated in a letter communication by the said authority dated 07.09.2016 made to the petitioner. In this letter, he also pointed out that the Supreme Court has also not issued any direction for grant of interest, at which stage, the petitioner filed the present petition. The prayers made in the petition are for setting aside said two communications dated 26.07.2016 and 07.09.2016 and for payment of interest at the rate of 10% on such face value of Rs.42,39,445/ of DEPB benefits for the period between 26.05.2003 to 01.07.2016.
6. Appearing for the petitioner, learned counsel Shri Aditya Tripathi submitted that the petitioner Page 6 of 18 C/SCA/16482/2016 JUDGMENT was deprived of its rightful claim of DEPB benefits by the department's incorrect interpretation of the relevant provisions. This was corrected by Supreme Court, upon which, the DEPB benefits were granted. In the process, there was a delay of nearly 13 years. If such benefits were granted at the relevant time, the petitioner could have utilized the same for discharging its customs duty obligations or could have sold the scrip in the market since the DEPB scrips are freely transferable. Counsel pointed out that the DEPB benefits in question were in lieu of duty drawback. Section 75A of the Customs Act, 1962, provides for grant of interest on delayed payment of duty drawback at the rates specified under section 27A of the Act. The petitioner was therefore entitled to receive the DEPB benefits with interest.
7. In support of his contentions, counsel relied on following judgments:
I. In case of Shri Jagdamba Polymers Ltd. v.
Union of India reported in 2013 (289) ELT 429 (Guj), in which, considering the conduct of the department, the Court granted interest on interest.Page 7 of 18
C/SCA/16482/2016 JUDGMENT
II. In case of State of Gujarat v. Unjha
Pharmacy reported in 2016 (341) E.L.T. 211 (Guj), the Court in the context of Gujarat Sales Tax Act, held that interest would be available to a person whose appeal is allowed by the Appellate Authority since appeal is merely extension of the original proceedings.
III. In case of HRMM Agro Overseas Pvt. Ltd. v. Union of India reported in 2018 (359) E.L.T. 281 (Guj), in which, Division Bench ordered refund of redemption fine with interest where the Tribunal had allowed the assessee's case. Though the department had approached the High Court, it was noticed that no stay was granted against the judgment of the Tribunal.
IV. In case of Dindayal Gupta v. Union of India reported in 2010 (255) E.L.T. 506 (Cal.) decided by learned Single Judge of Calcutta High Court, wherein, in the context of DEPB benefits, the Court directed the department to pay a sum of Rs.9,47,615/ which was equivalent to the DEPB benefits with interest at the rate of 10% per Page 8 of 18 C/SCA/16482/2016 JUDGMENT annum.
V. In case of Texas Wollen Mills (P) Ltd. v. Union of India reported in 2015 (316) E.L.T. 577 (P & H) where the Division Bench of Punjab and Haryana High Court while directing the department to recredit the benefits of DEPB, further directed that the same be paid with the statutory interest for the delayed period.
8. On the other hand, learned counsel Ms.Maithili Mehta opposed the petition contending that the DEPB scheme did not envisage grant of interest. The Supreme Court in the judgment in case of the present petitioner while allowing the benefits of DEPB did not provide for any such interest. This writ petition which is filed solely for the purpose of claiming interest is not maintainable. In this context, counsel relied on the judgment in case of Union of India and others v. Orient Enterprises and Another reported in (1998) 3 SCC 501.
9. Facts are simple. The Government of India at the relevant time, granted export incentives which could either be in the nature of duty drawback or Page 9 of 18 C/SCA/16482/2016 JUDGMENT DEPB. The petitioner was covered under the DEPB scheme. With respect to the petitioner's actual exports, there was no dispute. On 05.06.2002, Government of India amended its EXIM policy making following amendments:
"(1) A new sub para {numbered as (iii)} shall be added to paragraph 7.9(1). The text of the new sub paragraph would be :
(iv) Benefit of DEPB in lieu of Drawback for supplies made to SEZ or unit in SEZ.
Accordingly the amended para 7.9(a)(1) would read as under:
7.9(a) Supplies from DTA to SEZ units shall be eligible for the following:
(I) DTA supplier shall be entitled for :
(i)Relevant entitlements under paragraph 8.3 of the policy.
(ii) Discharge of export performance, if any, on the supplier;
(iii) Benefit of DEPB in lieu of Drawback for supplies made to SEZ or unit in SEZ.
This issues in public interest."
10. Through this amendment, for the first time, the benefit of DEPB in lieu of drawback for supplies made to a SEZ unit or unit situated in SEZ would be granted. However, the procedure for granting such benefits was published only under the circular no.25 of 2003 dated 01.04.2003. When the department Page 10 of 18 C/SCA/16482/2016 JUDGMENT therefore contended that such benefits could be availed only after 01.04.2003, the Supreme Court in case of the present petitioner by reversing the judgment of the High Court, held that the stand of the department was not correct. It was held that for the supplies by the petitioner to SEZ units after 05.06.2002 till 01.04.2003, the petitioner would be entitled to such DEPB benefits. While therefore so directing, the Supreme Court directed that the application of the petitioner for such purpose be proceeded and the benefit supplied to fulfillment of the required conditions be granted. After examination of relevant aspects, the benefits were actually granted on 01.07.2016 but only for the principal sum of Rs.42,39,445/ without interest.
11. The fact that the petitioner suffered considerable monetary loss on account of delay in realizing such DEPB benefits is undeniable. The petitioner's entitlement for such benefits arose in the year 2003 when the petitioner actually applied for the same on 26.05.2003. Had the department correctly interpreted the circulars and granted the benefits, the petitioner would have earned DEPB Page 11 of 18 C/SCA/16482/2016 JUDGMENT scrips worth of Rs.42,39,445/ shortly thereafter. This would have enabled the petitioner to utilize such amount for payment of customs duty on its imports or if the petitioner did not require to pay such customs duties, could have trade it in the market since the DEPB scrips are freely transferable. In either case, the petitioner's monetary gain would have been equivalent to Rs.42,39,445/ in the year 2003. Such amount was released in form of DEPB scrips to the petitioner on 01.07.2016. There was thus a gap of 13 years. With passage of time, inflation and diminishing purchasing power of rupee, sum of Rs.42,39,445/ as on 01.07.2016 would have a substantially reduced value. The petitioner's claim for interest is therefore undoubtedly justified. Present one may not be a case where the department had acted arbitrarily or in a highhanded manner and withheld the benefits of the petitioner. Nevertheless, when the Supreme Court declared that the petitioner was entitled to the DEPB benefits, in effect, the Court merely declared the correct legal position which if it was so understood by the department at the outset, the petitioner would have Page 12 of 18 C/SCA/16482/2016 JUDGMENT got the benefit in time and utilized it timely as well.
12. As pointed out by the counsel for the petitioner, two High Courts; Culcutta and Punjab and Haryana High Courts, while ordering release of DEPB benefits provided for interest thereon. In context of different taxing statutes, this Court also whenever facts so justify, has provided for the release of the benefits with interest to the extent of delay.
13. In case of HRMM Agro Overseas Pvt. Ltd. (supra), Division Bench of this Court had observed as under:
"5. Merely because the Customs Act, 1962 does not make any provision for granting interest under such eventuality, would not mean that the Court, in exercise of writ jurisdiction, cannot direct the Department to pay the same. When the facts are gross, to ensure refund of the amount years later without interest would be doing injustice. The judgment of the Supreme Court in case of E.Merck (India) supra, was rendered in entirely different fact situation. It was a case where the refund claim was covered under Section 11B of the Central Excise Act. Section 11B makes specific provision for grant of refund under the situations covered therein. The assessee had approached the High Court directly, which had granted refund with interest. The Supreme Court noticed that no foundation for such direction was led and no statutory provision Page 13 of 18 C/SCA/16482/2016 JUDGMENT was pointed out for granting refund with interest.
6. In the result, the petition is disposed of with a direction to the respondent to pay interest at the rate of 8% per annum upon completion of period of three months from the date of judgment of the Tribunal till actual payment of refund. There shall be no interest on the Bank Guarantee component. This exercise shall be carried out latest by 31.12.2017."
14. Had this been a case where the petitioner had prayed for release of DEPB with interest, we would have without any further discussion accepted the prayer. However, as pointed out by the counsel for the Government, in the present petition, prayers are made only for interest and in the judgment of the Supreme Court in case of the petitioner, no such directions were issued. It was in this context, that she had relied on the decision in case of Orient Enterprises (supra), in which the Supreme Court had observed as under:
"8. In the present case also till the insertion of Section 27A in the Act by Act 22 of 1995 there was no right entitling payment of interest on delayed refund under the Act, Such a right was conferred for the first time by the said provision. Act 22 of 1995 also inserted Section 28AA which provides for payment of interest on delayed payment of duty by a person who is liable to pay the duty. Thus at relevant time there Page 14 of 18 C/SCA/16482/2016 JUDGMENT was no statutory right entitling the respondents to payment of interest on delayed refund and the writ petition foiled by them was not for the enforcement of a legal right av available to them under any statute. The claim for interest was in the nature of compensation for wrongful retention by the appellants of money the at collected from the respondents by way of customs duty, redemption fine and penalty. In view of the law laid down by this Court in suganmal (supra) a writ petition seeking the relief of payment of interest on delayed refund of the amount so collected could not, in our opinion, be maintained., The decision on which reliance has been placed by Shri Rawal were cases where the legality of the orders requiring payment of tax or duty were challenged and the High Court in exercise of its jurisdiction under Article 225 of the Constitution, while setting aside the said orders, has directed the refund of the amount so collected with interest. The direction for payment of interest in theres cases was by was of consequential relief along with the main relief of setting aside the order imposing the tax or duty. Those cases stand on a different footing and have no application to the present case. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the writ petition filed by the respondents before the High Court is dismissed. No order as to costs."
15. In the present case, we may recall, by the amendment in the EXIM policy with effect from 05.06.2002, the DEPB benefits on supplies made to SEZ units were made available in lieu of drawback. This was highlighted by the Supreme Court in the operative Page 15 of 18 C/SCA/16482/2016 JUDGMENT portion of the judgment which we have reproduced. Section 75A of the Customs Act provides for interest and drawback. Subsection (1) thereof reads as under:
Subsection (1) of section 75A (1) Where any drawback payable to a claimant under section 74 or section 75 is 177 178 not paid within a [period of [one month]] from the date of filing a claim 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 27A from the date after the expiry of the said [period of [one month]] till the date of payment of such drawback."
16. Under this provision thus, on a drawback payable to a claimant which is paid within one month from the date of filing of the claim, the same would carry interest at the rate provided under section 27A of the Customs Act. Section 27A of the Customs Act in turn pertains to interest on delayed refund and envisages payment of interest on refund not made within three months from the date of receipt of application. The rate of interest would be as notified by the Government in the official gazette. Thus, it cannot be stated that in the present case, the petitioner's prayer for interest is not backed by any statutory provision, important element which weighed with the Supreme Court in case of Orient Page 16 of 18 C/SCA/16482/2016 JUDGMENT Enterprise (supra) while holding that the writ petition claiming interest was not maintainable. Further, in case of this petitioner before the Supreme Court the question of grant of interest was probably premature. The Supreme Court made a declaration that the stand of the department that the petitioner's supplies of the goods of SEZ units before 01.04.2003 do not qualify for DEPB benefits was wrong. The Supreme Court did not direct grant of such benefits without any further scrutiny since the question whether the petitioner had fulfilled other conditions for grant of DEPB benefits was not examined by the department. The Court therefore directed processing of the petitioner's application in light of the declaration already made. The benefits would be granted only subject to fulfillment of the conditions. The petitioner's claim of interest would ripen only once the petitioner's right to seek principal amount gets crystallized. It is true that the petitioner could have made a prayer before the Supreme Court that if such DEPB benefits were eventually granted, the same should carry interest. However, by not making such a specific Page 17 of 18 C/SCA/16482/2016 JUDGMENT prayer, the petitioner has not disentitle itself from claiming the same before the department or perusing such a claim at a later stage before the Court of law.
17. Under the circumstances, the respondents shall pay interest at the statutory rate provided under section 27A of the Customs Act on the said amount of Rs.42,39,445/ from 01.09.2003 i.e. three clear months after the petitioner applied for the same till 01.07.2016 i.e. the date when such benefits were granted. This shall be done latest by 30.06.2018.
18. Petition is disposed of accordingly.
(AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 18 of 18