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Judgment
The present appeal is directed against the impugned order dt. 21/05/2021 passed by the Principal Commissioner of Customs, Bangalore whereby the learned Principal Commissioner rejected the request of the appellant for conversion of shipping bills from duty drawback scheme to advanced authorisation scheme.
Briefly the facts of the present case are that the appellant is a limited company incorporated under the Indian Companies Act, 1913 and are engaged in the manufacture and export of linen, silk, silk blended and other fabrics for home furnishing and garments and have been allotted Import Export Code (IEC) bearing No.0788010212. Appellant has been in the business of manufacture and export of linen, silk fabrics since 1988 and has single remark for dispute either by the Customs department or DGFT department and has always maintained very clean records and never misused any of the export policies or schemes nor claimed undue benefits by causing loss to the revenue exchequer. Appellant was issued two Advance Authorisation Licences bearing No.0710110560 dt. 21.10.2016 and No.0710111843 dt. 29.06.2017 with the condition of import of CIF value of Rs.1,20,15,173/- (US $176,175.56) and Rs.6,14,682/- (US $9,413.20) respectively and export of the quantity of imported with FOB value of Rs.1,38,34,891/- (US $207,887.16) and Rs.7,09,435/- (US $11,154.64) within a period of 18 months. The Appellant accordingly, imported 100% flax woven fabrics 221 GSM for the CIF value of Rs.85,39,245/- (US $129,358) and Rs.7,09,435/- (US $11,155) respectively from Special Economic Zone against the above mentioned advance licenses and exported 100% flax woven bleached fabrics RFD, GSM-221 for the FOB value of Rs.2,52,70,400/- (US $3,82,998.05) and Rs.20,00,922/- (US $29,226.97) respectively after processing. There was an inadvertent mistake committed by the employee of the appellant who was looking after the import and export formalities and he has filed the shipping bills under the claim for duty drawback instead of advance licence and the same was noticed by the appellant only upon receipt of show-cause notice from the DGFT office during the month of March 2021. Thereafter, the appellant realised its mistake and vide letter dt. 24.03.2021 requested the Deputy Commissioner (Drawback), Devanahalli, Bangalore for amendment of shipping bills. After following the due process, the Principal Commissioner vide the impugned order rejected the request for amendment and conversion of shipping bills. Hence the present appeal.
Heard both sides and perused the records.
4.1. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the track record of the appellant who is in the business of export since 1988 and has clean record throughout and has generated a huge foreign exchange for the country by exporting its products to advanced countries like USA, UK, Germany. He further submitted that the learned Commissioner has declined the request of the appellant without issuance of show-cause notice and without following the principles of natural justice. He further submitted that in the present case, it is an undisputed fact that the appellant had imported the goods from Special Economic Zones(SEZ) and cleared all the goods for export under the claim of duty drawback and also received duty drawback. There is no dispute that entire quantity of the imported goods are processed and cleared only for export as there was no local clearances of the goods during the relevant period of dispute. Further the appellant has received foreign exchange and also received bank realisation certificate in support of the proof of export of goods. The appellant having wrongly claimed the duty drawback has also undertaken to pay back the same along with interest. He further submitted that keeping in view the clean track record of the appellant since 1988, the Customs department should have used their discretionary power vested with the officer in terms of provisions of Section 149 of the Customs Act for conversion of shipping bills. He further submitted that the appellant has exported all the goods imported from SEZ as not even a single consignment was cleared locally during the relevant period and hence there cannot be any diversion of the imported goods at all. Further the appellant has also received the export proceeds in convertible foreign exchange and also received bank realisation certificate as proof of having exported the goods which clearly proves that the imported goods are exported and the appellant is rightly eligible for conversion of shipping bills. He further referred to Section 149 of the Customs Act, 1962 which provides for amendment of document and submitted that Section 149 confers a discretionary power vested with the proper officer and the same has to be exercised judiciously and sparingly in order to deliver justice to the parties who make an application. He relied upon the following decisions wherein amendment of shipping bills / bill of entry were allowed considering the export documents:-
Metallic Bellows (I) Pvt. Ltd. vs. CC (Exports) Nhava Sheva - 2008 (228) E.L.T. 479 (Tri. - Mumbai)
Upheld by the High Court in 2009 (241) E.L.T. 181 (Bom.)
Polydrug Laboratories Pvt. Ltd. vs. CC (General) Mumbai - 2015 (317) E.L.T. 271 (Tri. -Mumbai)
Diamond Engineering (Chennai) Pvt. Ltd. vs. CC (Seaport-Export), Chennai - 2013 (288) E.L.T. 265 (Tri. - Chennai)
VRA Cotton Mills Pvt. Ltd. vs. CC., Jamnagar (Prev.) - 2014 (309) E.L.T. 100 (Tri.-Ahmd.)
Fantansey Engg. Exports Pvt. Ltd. vs. CC (Exports), Mumbai - 2008 (232) E.L.T. 100 (Tri. - Mumbai)
Parle Products Pvt. Ltd. vs. CC., Nhava Sheva - 2017 (358) E.L.T. 341 (Tri. - Mumbai)
CC Exports), Chennai vs. Suraj Agro Products - 2018 (361) E.L.T. 651 (Mad.)
CC., Tuticorin vs. Thiru Arooran Sugars Ltd. - 2014 (307) E.L.T. 248 (Mad.)
CC vs. Man Industris (I) Ltd. - 2007 (216) E.L.T. 15 (Bom.)
Essar Oil Ltd. vs. CC., Kandla - 2014 (309) E.L.T. 344 (Tri. - Ahmd.)
Karl Zeiss India Pvt. Ltd. vs. CC & ST., Bangalore - 2018 (359) E.L.T. 388 (Tri. - Bang.)
4.2. He also submitted that the provisions of Section 149 of Customs Act, 1962 or the rules/notifications issued thereunder did not prescribe any time limit for amendment / conversion of documents and hence, the Circular issued by the CBEC cannot override the statutory provisions. In support of this submission, he relied upon the following decisions:-
Parayil Food Products Pvt. Ltd. vs. UOI - 2021 (375) E.L.T. 486 (Ker.)
Mohit Overseas vs. CC - 2016 (335) E.L.T. 18 (Del.)
4.3. He also submitted that it is a settled legal position of law that the time limit prescribed by CBEC through the Circular is not binding on the court as well as tax payers. For this, he relied upon the following decisions:-
CCE., Bolpur vs. Ratan Melting & Wires Limited - 2008 (231) ELT 22 (SC)
BGR Energy Systems Ltd. vs. Addl. Commr. of GST & Central Excise, Chennai - 2020 (32) G.S.T.L. 186 (Mad.)
Arvind Mills Ltd. vs.. CCE., Ahmedabad-III - 2007 (220) ELT 981 (Tri.-Ahmd.)
CCE vs. Eswaran & Sons Engineers Ltd. - 2005 (179) E.L.T. 272 (S.C.)
CC., Chennai-I vs. Avenue Impex - 2014 (306) E.L.T. 69 (Mad.)
Amit Cotton Industries vs. Principal Commissioner of Customs - 2019 (29) G.S.T.L. 200 (Guj.)
4.4. He further submitted that the time limit requesting for amendment/conversion of shipping bills will start from the date of knowledge and not from the date of export itself as it is well settled law that if the inadvertent mistake was not within the knowledge of the exporter, then one cannot expect the exporter to make request for conversion of shipping bills within three months from the export. He also submitted that the export of goods in the present case spread over a period of three years starting from January 2017 to March 2019 and therefore, the fixing of time limit of three months is illogical, unfair and highly unsustainable in law. Learned counsel produced documents in Volume-I and Volume-II of the appeal paper book to prove that the imported goods are fully utilised for export and not even a single consignment was cleared locally during the relevant period in order to claim undue benefit by misusing the provisions of Customs Act. Further from the receipt of realisation certificate, the appellant has proved the export of goods and the Customs department has never disputed the sanction of duty drawback at any time till date. He also submitted that the observation in the impugned order that the shipping bills are not open for physical examination by Customs cannot be the basis to decide the issue against the appellant. In rare cases, the goods are physically examined and especially in the present case, considering the track record of the appellant, the Customs Department could have been ordered for export without any such physical examination. He further submitted that the observation in the impugned order that there is no examination report and other endorsement made on the shipping bills by the Customs to prove that the export product is clearly covered under the relevant advance authorisation is totally misplaced as the goods were meant for export and are permitted to clear for export only upon verification of documents and on the basis of endorsement on the shipping bills. The Customs officer has clearly endorsed the shipping bills and ordered for export of goods only upon verification of documents. He also submitted that benefit of drawback claimed by the appellant is only Rs.1,11,583/- whereas the duty foregone on the imported goods was more than Rs.1 crore and under these circumstances, no one can even imagine that the imported goods can be diverted or misused by claiming duty drawback.
On the other hand, the learned AR defended the impugned order and submitted that the appellant has not complied with the requirement of circular No.36/2010-Cus. Dt. 23/09/2010. He further submitted that amendment of the shipping bills is within the discretionary power of the Customs officer and Customs officer will exercise his discretionary power only on fulfilment of certain conditions viz. time limit as well as proof of exports and endorsement on the shipping bill by the Customs officer. In support of his submission, he relied upon the decision of the Hon'ble Delhi High Court in the case of Terra Films Pvt. Ltd. Vs. CC [2011(268) ELT 443 (Del.)].
6.1. After considering the submissions of both the parties and perusal of the material on record and after considering the various judgments relied upon by both sides, I find that it is an undisputed fact that the appellant is a manufacturer and exporter of linen and silk fabrics since 1988 and there has not even a single remark or dispute either with the Customs Department or DGFT which has been approved by the respondent. Further I find that the mistake in the shipping bills occurred on account of change of the employee who was looking after the import and export of the appellant and as soon as the appellant came to know about the fact of filing of shipping bill under duty drawback in stead of advance authorisation scheme, they immediately reported to Deputy Commissioner seeking amendment of the shipping bill but the same was declined by the Principal Commissioner on the ground that there is a delay in filing the application and secondly export documents were not endorsed by the Customs officer and thirdly that the appellant has not been able to establish the foreign exchange receipt against these exports. In order to examine stand of the appellant, it is necessary to reproduce Section 149 of the Customs Act which is reproduced herein below:-
SECTION 149. Amendment of documents. - Save as otherwise provided in sections 30 and 41, the proper officer may, in his discretion, authorise any document, after it has been presented in the custom house to be amended:
Provided that no amendment of a bill of entry or a shipping bill or bill of export shall be so authorised to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the export goods have been exported, except on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported, as the case may be.
Further proviso to Section 149 provides that no amendment of Bill of Entry or shipping bill or bill of export shall be so authorised to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the goods have been exported, except on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported, as the case may be. Further I find that Section 149 confers discretionary power to the proper officer to amend the document but that discretion has to be exercised judiciously in order to deliver justice to the parties who makes an application before him. Appellant has produced documents in Volume-I and volume-II along with appeal papers which clearly proves that the goods were exported and the bank realisation certificate are produced evidencing the proof of export to the developed countries like USA, UK, Germany where stringent export laws are followed.
6.2. As far as limitation of time provided under the circular is concerned, I find that the provision of Section 149 of the Customs Act, 1962 or the rules or notifications made thereunder does not provide any time limit for amendment or conversion of the documents and it is only through the circular issued by CBEC a period of three months have been prescribed. It has been consistently held by the Tribunal that the time limit prescribed by the CBEC is not binding on the court if the Circular is contrary to the statutory provision, then the statutory provision would prevail. In this regard, the decision of the Tribunal in the case of Gennex Laboratories Ltd. Vs. CC, Hyderabad cited supra is referred wherein in para 4, the Tribunal has held as under:-
We have considered the submissions made by both sides. We find that, as submitted by the learned counsel, the description of the goods, value and the fact that export was being made to fulfill the export obligation have been made in the ARE-1 form and the certification by Central Excise officers based on which the goods were allowed to be exported without examination would make it clear that in this case, there is no dispute as regards description, value and fact that goods were being exported for fulfillment of export obligation. There is no allegation of fraud against the assessee and there is no allegation of manipulation also. In fact, the decision does not indicate as to why the request has been refused. We find that the essential requirements in the Board's Circular for conversion of Shipping Bills from one scheme to another have been fulfilled by the appellant. Further, we also find that a similar issue had come up before the Tribunal in the case of Kiran Pondy Chems Ltd. v. Commissioner of Customs, Chennai [2006 (203) E.L.T. 588 (Tri.-Chennai)] and in that case also, the conversion was allowed by the Tribunal on the ground that in the ARE-1 form, there was a certification from the Superintendent certifying that the export took place under his supervision and the documents were existing at the time of export. It is to be noted that when this decision was rendered the Board's Circular which is much more liberal with regard to conversion of Free Shipping Bill to Export Promotion Shipping Bill was not here and circular issued in 2004 had laid down much stricter norms. In view of the discussion above, the issue in the present case is covered by decision in the case of Kiran Pondy Chems Ltd. (supra). Therefore, we allow the appeal and direct the Commissioner of Customs to allow conversion of the Free Shipping Bills to the Export Promotion Scheme Shipping Bills as requested.
6.3. Further I also refer the decision in the case of Essar Oil Ltd. Vs. CC Kandla, cited supra, wherein the Division Bench of the Tribunal in para 8.1 and 8.2. have observed as under:-
8.1 Firstly, we find that the documents like ARE-1, Bills of Lading, shipping bills specifically were signed by the Customs officers clearly indicate that the goods which were cleared for export was furnace oil. We do agree with the ld. Departmental Representative's submissions that the no samples were drawn for the consignments which were exported to ascertain whether they were furnace oil or otherwise. This would not be a cause for non-conversion of the application of the appellant, for the simple reason that M/s Geochem Laboratory, an independent analytical laboratory had analysed specific consignments which were exported; said reports indicate that the goods were "furnace oil". The mere perusal of the analytical certificate given by M/s. Geochem Laboratory seems to co-relate the goods in the shipping bills wherein the description was given as "furnace oil".
8.2 Secondly, we do find that C.B.E. & C. vide Circular No. 25/2005-Cus., has specifically accepted the representation of the Trade and the recommendations of the Conference of the Chief Commissioners that the manufacturer/exporter's in-house quality control results can be relied upon if the said manufacturers/exporters are awarded with ISO 9000 series certificate. In our view, non-production of appellant's in-house certificate, may not have any bearing on the outcome of the case inasmuch as there is no contest to the certificate issued by M/s. Geochem Laboratory who are one of the Government of India's recommended and authorized analytical laboratories. We do not find any reason why the benefit of said circular be not extended to cover the case of the appellant in seeking conversion of free shipping bills into drawback shipping bills, when there is a unimpeachable evidence of export of the furnace oil.
Further in para 10, the Tribunal has distinguished the judgment of Terra Films Pvt. Ltd. case relied upon by the learned AR and held that the said judgment is not applicable in the facts and circumstances of the case. Further I also find that in the impugned order, the learned Commissioner has wrongly observed that shipping bills have not been endorsed whereas the appellant has proved on record, all the documents including shipping bills which have been endorsed by the Customs department upon verification of documents. Further the appellant has established on record by proof of invoices and shipping bills supported by bank realisation certificate which are sufficient proof of export of the goods and shipping bills filed by the appellant are also endorsed by the Superintendent of Customs.
6.4. The allegation of the Department that appellant has taken the benefit of drawback and has wrongly filed shipping bills under duty drawback scheme. In this regard, I find that the appellant has only claimed an amount of Rs.1,11,583/- whereas the duty foregone on the imported goods was more than Rs.1 crore and under these circumstances, I do not think that the appellant will indulge in diverting or misuse by claiming drawback, when the appellant is into the export business and exports goods worth hundreds of crores. The appellant has given the undertaking before the Principal Commissioner stating that the duty drawback was claimed by them due to inadvertent mistake and that will be paid back along with interest.
In view of my discussion above, keeping in view the ratios of the various decisions cited supra, I am of the considered view that the impugned order is not sustainable in law and I set aside the same by allowing the appeal of the appellant. The concerned Customs officer is directed to allow the amendment in the shipping bills but before that the appellant would pay back the duty drawback claimed by them along with interest which will be quantified by the Departmental officer and after the payment of the said amount, the concerned officer allow the amendment in the shipping bills as prayed by the appellant. Appeal is accordingly disposed of in above terms.
(Order was pronounced in Open Court on 18/08/2021)