The Supreme Court held that Circular No. 35/2010-Cus. dated 17.09.2010, which clarified the entitlement of merchant exporters to claim 1% All Industry Rate (AIR) customs duty drawback irrespective of availing CENVAT benefits, was clarificatory and declaratory in nature. Consequently, the Court ruled that the Circular must be applied retrospectively, ensuring uniform benefits from 2008 onwards. The judgment emphasized that clarificatory circulars, which resolve ambiguities in existing notifications without creating new rights, operate retrospectively to align with the legislative intent. The High Court’s order denying retrospective application was set aside.
Facts Of The Case:
The appellant, M/s Suraj Impex (India) Pvt. Ltd., a merchant exporter of Soyabean Meal (SBM), claimed All Industry Rate (AIR) duty drawback at 1% under various Customs Notifications (2006-2010). Initially, the benefit was granted, but in 2008, the authorities withheld the drawback, contending that exporters who availed rebate under Rule 18 or Rule 19(2) of the Central Excise Rules, 2002, were ineligible. The appellant argued that the drawback pertained only to the customs component, distinct from excise rebates. The Central Board of Excise and Customs (CBEC) later issued Circular No. 35/2010-Cus. on 17.09.2010, clarifying that the customs drawback was admissible even if excise rebates were claimed. However, the authorities applied the Circular prospectively, denying benefits for exports prior to 20.09.2010. The appellant challenged this before the High Court, which upheld the prospective application, prompting an appeal to the Supreme Court. The key issue was whether the Circular, being clarificatory, had retrospective effect. The Supreme Court ruled in favor of the appellant, holding that the Circular merely clarified existing provisions and thus applied retrospectively, entitling the appellant to the drawback from 2008
Procedural History:
The case originated when the appellant, M/s Suraj Impex, filed a writ petition before the High Court of Madhya Pradesh at Indore (W.P. No. 2576/2012) challenging the denial of All Industry Rate (AIR) duty drawback for exports made prior to 20.09.2010. The High Court dismissed the petition, holding that Circular No. 35/2010-Cus. operated prospectively. The appellant then filed a review petition (R.P. No. 1/2015), which was also dismissed on 01.04.2016. Aggrieved, the appellant approached the Supreme Court through a Special Leave Petition (SLP (C) Nos. 26178-79 of 2016), which was converted into Civil Appeal Nos. ______ of 2025. The Supreme Court, after hearing arguments, set aside the High Court’s judgment, ruling that the Circular was clarificatory and thus applied retrospectively, entitling the appellant to the duty drawback from 2008. The appeal was disposed of accordingly, and any pending applications were also resolved
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Court Observation:
The Supreme Court observed that Circular No. 35/2010-Cus. was clarificatory and declaratory in nature, as it merely interpreted existing customs notifications without introducing any new rights or obligations. The Court emphasized that the Circular resolved ambiguities regarding the availability of the 1% AIR customs duty drawback, irrespective of whether exporters had availed CENVAT benefits under the Central Excise Rules. It noted that the language of the Circular and prior notifications was consistent, indicating no legislative intent to restrict the drawback’s applicability prospectively. The Court rejected the High Court’s narrow interpretation, ruling that clarificatory circulars must operate retrospectively to ensure uniformity and fairness. It further held that the Department’s denial of benefits prior to 20.09.2010 was unjustified, as the Circular only reaffirmed the existing legal position rather than creating a new one. The judgment underscored that beneficial interpretations of fiscal provisions should align with legislative intent and avoid arbitrary distinctions.
Final Decision & Judgement:
The Supreme Court allowed the appeal, setting aside the High Court’s judgment and holding that Circular No. 35/2010-Cus. dated 17.09.2010 must be applied retrospectively. The Court ruled that the Circular was clarificatory in nature, merely interpreting existing customs notifications without introducing new obligations, and thus entitled the appellant to claim the 1% AIR customs duty drawback for exports made prior to 20.09.2010. The Court directed that the appellant be granted the drawback benefits from 2008 onwards, ensuring consistency with the legislative intent behind the duty drawback scheme. All pending applications, if any, were disposed of accordingly. The judgment reinforced the principle that clarificatory circulars resolving ambiguities in tax and customs laws should be given retrospective effect to prevent unjust denial of statutory benefits.
Case Details:
Case Title:M/s Suraj Impex (India) Pvt. Ltd. vs. Union of India & Ors. Citation:2025 INSC 755 Civil Appeal No.: (Arising out of SLP (C) Nos. 26178-79 of 2016) Date of Judgment:22nd May 2025 Judges/Justice Name: Justice B.V. Nagarathna & Justice Satish Chandra Sharma
Download The Judgement Here