In a significant case, the Kerala High Court held that the provisions of the Foreign Trade Policy cannot by itself authorise the levy of interest under Section 28AA of the Foreign Trade (Development and Regulation) Act, 1992, as such levy must be supported by plenary legislation.
Braddock Infotech Private Limited, the assessee was considered eligible and was granted a 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. However, on the basis of certain audit objections, the competent authority found that the assessee was not entitled to the benefit of the Scheme.
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According to the competent authority, the services rendered by the assessee could not be considered as ‘placement and supply services of personnel’. Therefore, the assessee was required to remit back the amount covered by the duty credit scrip issued to the assessee and was paid by the assessee. Later, the assessee was informed that he is also liable for interest under the provisions of Section 28AA of the Customs Act, 1962.
The assessee submitted 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 stated that when the policy clearly specifies that the provisions of Section 28AA of the 1962 Act will apply it is not open to the assessee 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.
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The single Bench of Justice Gopinath P. observed that “there is no provision of the 1992 Act under which Foreign Trade Policy has been framed has been pointed out to show that the provisions of Section 28AA of the 1962 Act have been made applicable for levying interest on any person who is found ineligible for any benefit received under the terms of any Scheme under the Foreign Trade Policy.”
The bench viewed that “ No provision of the 1992 Act under which Foreign Trade Policy has been framed has been pointed out to show that the provisions of Section 28AA of the 1962 Act have been made applicable for levying interest on any person who is found ineligible for any benefit received under the terms of any Scheme under the Foreign Trade Policy. It is true that Chapter 3 of the Foreign Trade Policy which was in operation for the period from 01-04-2015 to 31-03-2020 contemplates that if any person is found to be ineligible for the benefit under any Scheme the amount will have to be refunded along with interest under Section 28AA of the 1962 Act.
The Court while allowing the petition held that the petitioner is not liable to pay interest under Section 28AA of the 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.
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