Clarificatory Circular aiding Parent Provision can be Retrospective: Supreme Court sustains 1% AIR Customs Duty on Soyabean Meal [Read Order]

The Supreme Court of India recently clarified the retrospective applicability of clarificatory circulars issued against a statute, while proceeding to sustain the 1% All Industry Rate (AIR) Customs Duty Drawback on soyabean meal exports prayed for by the Appellant.

The appellant, Suraj Impex (India) Pvt. Ltd., a merchant exporter engaged in the export of Soyabean Meal, had been routinely availing the 1% AIR duty drawback under a series of customs notifications from 2006 onwards.

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The First Schedule to the Customs Tariff Act, 1975 permitted the appellant to avail 1% AIR duty drawback on the export of SBM, regardless of whether the CENVAT facility was availed or not. This practice was continued till 2008, when the Director General of Central Excise, Indore formed the opinion that exporters who had already availed the rebate of central excise duty under Rule 18 or Rule 19(2) of the Central Excise Rules, 2002, were not entitled to the AIR drawback.

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Consequently, the appellant and other similar exporters were prevented from availing the duty drawback. When representations were made by exporters before the Central Board of Excise and Customs, New Delhi (CBEC), it issued Circular No. 35/2010-Cus dated 17.09.2010, expressly clarifying that both the customs component of AIR drawback and the excise duty rebate could be availed simultaneously.

However, the customs maintained that the circular was effective only prospectively; both the Commissioner (Customs) at Kandla and the Drawback Division of the CBEC reiterated that the revised AIR drawback rates and the clarificatory benefits may be applicable solely from 20.09.2010, the date specified in the notification.

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The appellant then unsuccessfully approached the Madhya Pradesh High Court praying that the Circular No. 35/2010-Cus. may be attributed retrospective effect and that the benefits under the scheme be accorded for the earlier period as well.

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In the present matter, Senior Advocate Arvind P. Datar, appearing for the appellant, argued that the 2010 circular was clarificatory and declaratory in nature, merely explaining the intent of previous notifications and not creating any fresh benefit or burden.

The Bench of Justice B.V. Nagarathna and Justice Satish Chandra Sharma alluded to the apex court’s decision in Sree Sankaracharya University of Sanskrit & Ors. Vs Dr. Manu & Anr. (2023) among others where it was held that the circular should be assessed on the basis of its credence and not merely its form.

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The Bench observed that the Circular does not expand or alter the scope of the previous notifications, but merely resolved certain ambiguities that remained following the promulgation of the concerned Notification. Since no new right or benefit was created, the Supreme Court held that the benefit of 1% customs duty drawback as indicated under the notification was always existent, and Soyabean Meal exporters, even if they had availed CENVAT, from 2008 onwards.

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Accordingly, the Supreme Court set aside the judgment of the Madhya Pradesh High Court and directed that Suraj Impex be granted the benefit of 1% AIR Customs Duty Drawback on its exports of Soyabean Meal from 2008 onwards, in accordance with the retrospective operation of Circular No. 35/2010-Cus.

To Read the full text of the Order CLICK HERE

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