The Gujarat High Court addressed a dispute involving M/s Patanjali Foods Limited, which challenged a Customs Department order denying them customs duty drawback benefits. This denial was based on the non-retrospective application of CBEC Circular No. 35/2010. The petitioner argued that the Supreme Court's decision in M/s Suraj Impex (India) Pvt. Ltd. had already clarified that the circular was merely clarificatory and should apply retrospectively. The respondents acknowledged that the Supreme Court's judgment applied to the issue and that the petitioner's duty drawback claim had been allowed in appeal.
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The central issue was whether the circular should be applied retrospectively to grant duty drawback benefits and whether the petitioner was entitled to interest on the delayed refund. The High Court relied on the Supreme Court's decision, affirming that Circular No. 35/2010 clarified existing notifications rather than introducing new benefits, thus warranting retrospective application. It confirmed that merchant exporters were entitled to the All Industry Rate (AIR) customs duty drawback even when CENVAT credit had been availed, as per the previous notification framework.
Consequently, the High Court quashed the impugned order, stating that the recovery of the drawback amount could not stand after the Supreme Court's conclusive declaration. Addressing the interest issue, the Court acknowledged the prolonged litigation faced by the petitioner and directed the refund of the drawback amount with 12% interest from the date of the writ petition filing until actual payment, to be completed within twelve weeks.
Order Date - 14 July 2026
Parties: M/s Patanjali Foods Limited & Another Vs Union of India & Others
Facts -
- Petitioner M/s Patanjali Foods Limited challenged the Customs Department's order dated 11.09.2020, which denied the benefit of customs duty drawback by refusing to apply CBEC Circular No. 35/2010 - Customs dated 17.09.2010 retrospectively.
- The petitioner argued that the dispute had already been settled by the Supreme Court in M/s Suraj Impex (India) Pvt. Ltd., which held that the circular only clarified the existing notifications and therefore had retrospective effect.
- The respondents did not dispute that the Supreme Court judgment governed the issue and also accepted that the petitioner's duty drawback claim had earlier been allowed in appeal.
- The remaining controversy before the High Court was whether the petitioner should also receive interest on the refunded drawback amount due to the prolonged litigation and delayed payment.
Issue -
- Whether CBEC Circular No. 35/2010 should operate retrospectively to grant customs duty drawback benefits and whether the petitioner was entitled to interest on the delayed refund.
Order -
- The Court relied entirely on the Supreme Court's decision in M/s Suraj Impex (India) Pvt. Ltd., holding that the controversy had already been settled. It observed that Circular No. 35/2010 did not introduce a new benefit but merely clarified the scope of the earlier drawback notifications, making retrospective application appropriate.
- The Court noted that the circular neither amended nor expanded the previous notifications. Instead, it confirmed that merchant exporters were entitled to the All Industry Rate (AIR) customs duty drawback even where CENVAT credit had been availed, as this benefit already existed under the earlier notification framework.
- Since the respondents themselves did not dispute the petitioner's entitlement after the Supreme Court ruling, the High Court quashed the impugned order dated 11.09.2020. It held that the recovery of the drawback amount could not survive once the law had been conclusively declared by the Supreme Court.
- On the issue of interest, the Court found that the petitioner had been compelled to litigate to recover a benefit that was legally due. In the interest of justice, it directed payment of the refund along with 12% interest from the date of filing of the writ petition until actual payment, to be released within twelve weeks.
