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Dated: 31.03.2025

Delhi High court ruled that the rejection of duty drawback order passed by CBIC was cryptic and unreasoned

In a significant order dated 26th March 2025, the Delhi High Court directed the Central Board of Indirect Taxes and Customs (CBIC) to pass a reasoned decision on Vedanta Limited’s request for duty drawback that includes Clean Energy Cess, as clarified in CBIC Instruction No. 4/2019.

Case Background:

• Petitioner: Vedanta Limited
• Issue: Rejection of duty drawback claims including Clean Energy Cess paid on coal used in aluminium production.
• Relevant Period: Exports made between 2010 and 2017.
• Legal Reference: CBIC Instruction No. 4/2019 clarified that Clean Energy Cess should be included in brand rate calculations for duty drawback.

Vedanta’s Arguments:

• Clean Energy Cess is a form of additional customs duty and should be part of drawback.
• The company was unaware of eligibility for such drawback until Instruction No. 4/2019 was issued on 11th October 2019.
• Cited Rule 17 of the Customs & Central Excise Duties Drawback Rules, 1995, which allows CBIC to relax time limits for claims in exceptional cases.

CBIC’s Response:

• Claimed Vedanta’s applications were barred by limitation (only three months allowed, extendable by another three months).
• Denied the claims without detailed reasoning, merely stating they were “not considered favourably”.

Court’s Observations:

• The rejection order by CBIC was cryptic and unreasoned.
• Instruction No. 4/2019 clearly applied to pending applications.
• Vedanta made its application within three months of the instruction, showing prompt action.

Court’s Directions:

• Treated the writ petition as a formal representation to CBIC.
• Directed CBIC to pass a reasoned order on Vedanta’s claim within three months.
• Clarified that all legal remedies remain open for Vedanta.

Significance of the Ruling:

• Reinforces the requirement of reasoned administrative decisions.
• Highlights the scope of Instruction No. 4/2019 as not just prospective but applicable to past claims.
• Protects exporters’ rights where policy clarifications emerge post-facto.

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Source: Delhi High Court

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