2013 (3) TMI 506 - HC - Customs

Conversion of Shipping Bills from Drawback and EPCG Scheme to EPCG Drawback and DEEC Scheme - Whether conversion without any proof for rejection of their request for allowing the benefit on export promotion scheme by DGFT, is appropriate in terms of Circular No.4/2004 dated 16.01.2004? - scope of Section 149 of Customs Act questioned - Held that - To claim benefit under Drawback EPCG scheme and DEEC scheme, the exporter has to file DEEC declaration to the effect what are the raw materials used in the manufacture of the final product. At the time of examination of the goods materials given in the declaration will be verified. In the present case, the same was not verified since Shipping Bills were not filed under DEEC scheme. Therefore, it is not open to the 1st Respondent to contend that there was no finding by the Commissioner of Customs that the materials were not used in the manufacture of the final export product. From the reading of Circular No.36 of 2010 dated 23.9.2010 which dilutes the earlier Circular No.4 of 2004, it is seen that the same is applicable only for the Shipping Bills filed on or after the date of issuance of the said Circular. In this case, the 1st Respondent had filed the Bill of Entry on 17.3.2010, 21.3.2010 and 22.3.2010 respectively, admittedly, prior to the issuance of the said Circular No.36 of 2010 dated 23.9.2010. Therefore, the learned counsel for 1st Respondent cannot rely on Circular No.36 of 2010 dated 23.9.2010. In the decision of M/s.Terra Films Pvt. Ltd. Versus Commissioner of Customs 2011 (4) TMI 13 - DELHI HIGH COURT considering the scope of Section 149 of Customs Act found that the discretion vested in the Proper Officer to permit amendment in any document after the same has been presented in the Customs house has to be though exercised judicially, it was qualified with the proviso that the amendment could be allowed only if it was based on the documentary evidence in existence at the time the goods were exported. It is further observed therein that the request was made for conversion from one Scheme to another is a case of request for conversion and not of an amendment inasmuch as by converting from one Scheme to another, it was not only addition of certain word, but change of entire status and character of the documents. For enabling an exporter to draw the benefits of any scheme, not only physical verification of documents would be required, but also verification of the goods of export and their examination by the Customs was necessarily required to be done. By observing so, the Delhi High Court upheld the rejection of the request of the exporter seeking for conversion of the Shipping Bill from one Scheme to another. Thus 1st Respondent s claim seeking conversion is not maintainable and the same has been rightly rejected by the Commissioner of Customs. The Tribunal has not gone into any of these aspect in detail, even though it happens to be a final fact finding authority. It has simply allowed the conversion by resorting to the provision under Section 149 of Customs Act as if, it is a simple request for amendment. Therefore, the order passed by the Tribunal cannot be sustained and accordingly, the same is set aside and the appeal filed by the Department is allowed.

Summary

Issues Involved:
1. Whether conversion of Shipping Bills without proof of rejection by DGFT is appropriate under Circular No.4/2004.
2. Whether the conversion of Shipping Bills can be allowed under Section 149 of the Customs Act, 1962.
3. Whether the request for addition of DEEC Scheme to Shipping Bills amounts to reassessment and if it can be dealt under Section 149 of the Customs Act, 1962.

Detailed Analysis:

Issue 1: Conversion of Shipping Bills without Proof of Rejection by DGFT
The primary issue is whether the conversion of Shipping Bills from one export promotion scheme to another, specifically from "Drawback and EPCG Scheme" to "EPCG, Drawback and DEEC Scheme," can be permitted without any proof of rejection by the Directorate General of Foreign Trade (DGFT) as per Circular No.4/2004 dated 16.01.2004. The respondent, engaged in the manufacture and export of Wind Operated Electricity Generators, filed five Shipping Bills under the "Drawback and EPCG Scheme" but later requested a conversion to include the DEEC Scheme, citing a clerical error. The Customs Commissioner rejected this request due to the absence of a rejection letter from DGFT, as required by Circular No.4/2004. The Tribunal allowed the conversion, but the High Court found that the respondent did not meet the conditions set out in the Circular, which mandates proof of denial by DGFT for such conversions.

Issue 2: Conversion Under Section 149 of the Customs Act, 1962
Section 149 of the Customs Act deals with the amendment of documents. The respondent argued that their request was a simple clerical correction rather than a conversion from one scheme to another, thus falling under Section 149. The High Court, however, determined that the request was indeed a conversion rather than a mere amendment. The Court emphasized that Section 149 could only be invoked for simple amendments and not for conversions that involve a change in the scheme, which has significant revenue implications.

Issue 3: Addition of DEEC Scheme and Reassessment
The respondent's request for adding the DEEC Scheme to their Shipping Bills was seen by the Department as a reassessment rather than a simple amendment. The High Court agreed with this view, stating that such a conversion involves verifying the use of imported materials and compliance with the conditions of the DEEC Scheme, which cannot be done retrospectively. The Court noted that the examination of goods and verification of documents at the time of export are crucial, and such verification was not possible in this case since the Shipping Bills were not initially filed under the DEEC Scheme.

Conclusion:
The High Court concluded that the respondent's request for conversion was not maintainable as it did not meet the conditions set out in Circular No.4/2004. The Court also clarified that Section 149 of the Customs Act could not be used for such conversions. The Tribunal's decision to allow the conversion was set aside, and the appeal by the Department was allowed. The questions of law were answered in favor of the Department, emphasizing the importance of adhering to procedural requirements and the distinction between amendments and conversions under the Customs Act.