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In a significant legal development, recent ruling by the High Court upheld the entitlement of  the party to receive a refund of duty drawback, shedding light on the intricacies of customs,  central excise, and service tax regulations. 

The case involves a dispute over the entitlement of the respondent (a class-I contractor) to  duty drawback under the ‘deemed export’ scheme in connection with its civil construction  work for the Koyna Hydro Electric Power Project.  

The respondent M/S. B. T. Patil claimed duty drawback for the construction work under the  Exim Policy, 1992-1997. 

The Director General of Foreign Trade (DGFT) initially rejected the duty drawback  applications, stating that civil construction work did not qualify for ‘deemed export’ benefit. 

Despite rejections, the respondent made representations for reconsideration, and a Policy  Interpretation Committee, constituted on 07.10.2002, decided to extend the duty drawback  benefit to the respondent as a special case. 

DGFT, on 01.11.2002, permitted duty drawback of Rs.2,05,79,740.00 to the respondent,  stating that it would not be treated as a precedent. 

The respondent sought interest on the duty drawback amount, citing delayed payment, but  DGFT rejected the request. 

The respondent filed a writ petition, and the learned Single Judge, in 22.09.2005, held in  favor of the respondent, stating that they were entitled to duty drawback and interest on  delayed payment. 

1. The case revolves around the concept of “drawback,” referring to the rebate of duty or  tax on imported or excisable materials used in the manufacturing of goods intended  for export. 

2. Deemed Export Benefit: The court clarified that the supply of goods to certain  projects, termed “deemed export,” is eligible for the duty drawback scheme. This  includes projects financed by multilateral or bilateral agencies. 

3. Interest on Delayed Refund: A major contention was the delay in refunding the duty  drawback. The court ruled that the party is entitled to interest on the delayed refund at  a rate determined by the Central Government. 

Relevant Rules and Regulations: 

1. Customs, Central Excise Duties and Service Tax Drawback Rules, 1995: The  rules define terms like “drawback,” “excisable material,” and “imported material,”  providing the legal framework for claiming duty drawbacks. 

2. Rule 3: Outlines the allowance of drawback, allowing the Central Government to  determine the amount or rates for the export of goods.

3. Rule 14: Governs the payment of drawback and interest, specifying the proper  officer’s role in disbursing amounts and addressing the combination of multiple  claims. 

Application of Ruling: The ruling clarifies the entitlement to duty drawback for deemed  exports, emphasizing that it is not a concession but a legal right. It also underscores the  obligation of timely refund, with interest at a rate set by the government for delayed  payments. 


The conclusion reached by the Court is that the respondent is entitled to both a refund of duty  drawback and interest at a rate of fifteen percent, resulting in the dismissal of the appeal by  the Union of India. This legal precedent carries significance for businesses engaged in  exports and provides clarity on the intricate rules governing duty drawbacks, fostering a more  transparent and predictable business environment. 



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1 Comment

Ganeesha Khurana · February 7, 2024 at 1:17 pm

Thank you so much for publishing it

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