The Kerala High Court has held that the interest under Section 28AA of the Customs Act is not payable on remitting amount covered by duty credit scrip when assessee is ineligible for Service Exports From India Scheme benefit.
The bench of Justice Gopinath P. has observed that the petitioner is not liable to pay interest under Section 28AA of the Customs Act, 1962 Act on the amounts repaid by the petitioner on the petitioner being found ineligible for the benefit of the Scheme introduced by the Foreign Trade Policy which was in force for the period from 01-04-2015 to 31-03-2020.
The petitioner/assessee is a Private Ltd. Company engaged in ‘placement and supply services of personnel’ which was entitled to duty credit scrip as rewards in terms of Chapter 3 of the Foreign Trade Policy (2015-2020) formulated for Service Exports from India in order to encourage/maximise export of certain notified services. A public notice No.3/2015-20 dated 01-04-2015 issued by the department enumerating a list of eligible services, rates and conditions for rewards under the Service Exports from India Scheme.
The petitioner was considered eligible and was granted a duty credit scrip having the value of Rs.8,91,934. However, on the basis of certain audit objections, the competent authority found that the petitioner was not entitled to the benefit of the Scheme. According to the competent authority, the services rendered by the petitioner could not be considered as ‘placement and supply services of personnel’.
Therefore, the petitioner was required to remit back the amount covered by the duty credit scrip issued to the petitioner. According to the petitioner the said amount was forthwith paid by the petitioner without raising any further dispute.
The petitioner has challenged the communication the petitioner has been informed that the petitioner is also liable for interest under the provisions of Section 28AA of the Customs Act, 1962.
The assessee contended that since the provisions of Section 28AA of the 1962 Act have not been made applicable by any provision in the Foreign Trade (Development and Regulation) Act, 1992, the demand for interest in terms of the provisions contained in Section 28AA of the 1962 Act cannot be sustained.
The department contended that the Foreign Trade Policy applicable at the relevant time (01-04-2015 – 31-03-2020) clearly provided in paragraph 3.19 (a) that if any amount is found to be payable by any person who has been granted a benefit under the Scheme such amount will have to be repaid along with applicable interest as contemplated by the provisions of Section 28AA of the 1962 Act.
The department urged that when the policy clearly specifies that the provisions of Section 28AA of the 1962 Act will apply it is not open to the petitioner to contend that the amount of benefit obtained by him is not liable to be refunded together with interest calculated in terms of the provisions of Section 28AA of the 1962 Act.
The court while allowing the petition held that the provisions of the Foreign Trade Policy cannot by itself authorise the levy of interest under Section 28AA of the 1962 Act as such levy must be supported by plenary legislation.
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Case Details
Case Title: Braddock Infotech Private Limited Versus Joint Director General Of Foreign Trade
Case No.: WP(C) NO. 16812 OF 2024
Date: 19/11/2024
Counsel For Appellant: John Varghese
Counsel For Respondent: Achuth Krishnan R.
