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Union of India vs. M/s. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd.

Not available · 2024 INSC 83Decided 5 Feb 2024
Not available
Justice Abhay S. Oka · Justice Ujjal Bhuyan

Background

The respondent, a civil contractor, executed sub-contract works on the World Bank-funded Koyna Hydro Electric Power Project. It later claimed duty drawback benefits under the "deemed export" scheme of the government's Exim Policy. The Director General of Foreign Trade (DGFT) initially rejected the claim on the ground that civil construction supplies were not eligible, and the respondent's representations were rejected multiple times over several years. Eventually a Policy Interpretation Committee decided in the respondent's favour, and DGFT sanctioned a duty drawback of over Rs. 2 crore, paid in instalments, but the respondent then sought interest for the years of delay in payment. The High Court awarded interest at 15% per annum, and the Union of India appealed to the Supreme Court.

Decision Breakdown

The Supreme Court agreed that the respondent was entitled to interest on the belated refund, since the department itself had ultimately accepted the claim was valid but delayed payment for years. However, it found the High Court's 15% interest rate was fixed without any reasoned basis or reference to the applicable government notification. The Court held the correct rate should be the rate fixed by the Central Government for duty drawback delays at the relevant time and, finding no other infirmity, dismissed the Union of India's appeal, upholding the respondent's entitlement to refund with interest at the government-notified rate.

Lesson Learnt

When a government authority unreasonably delays refunding money it eventually admits is due, the affected party is entitled to interest for the delay, but the interest rate awarded by courts must be tied to a specific legal or notified basis, not fixed arbitrarily.

Official source (sci.gov.in)View Judgment (PDF)

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