2014 (2) TMI 446 - HC - Customs

Drawback Conversion of free shipping bills to drawback shipping bills Soya bean meal exported and drawback not claimed due to ignorance of its entitlement - entitlement to 1% All Industry Rate drawback requested for conversion of the free shipping bills into drawback shipping bills - Commissioner rejected the request for the reason that the asessees had failed to comply with the provisions of Rule 12(1)(a) of the Drawback Rules, 1995 not for reasons beyond his control - Held that - A plain reading of the Rules, particularly Rule 12(1)(a) makes it very clear that conversion of a free shipping bill can be allowed into a drawback shipping bill only if the assessee is able to satisfy the Commissioner that for reasons beyond his control , drawback was not claimed. In the instant case, there is nothing on record to suggest that the claim for duty drawback was beyond the control of the assessee. All that has been stated by the assessee is that it was not aware of the correct legal position and, therefore, it did not make the claim for duty drawback in the first instance. Assessee did not make any claim for duty drawback for as many as eight months even after the shipping bills were filed. It is quite clear that the assessee made the claim for duty drawback only as an afterthought. There were no reasons beyond its control for making the claim for duty drawback earlier - Tribunal was in error in allowing the appeal filed by the assessee and directing the conversion of the free shipping bills filed by the assessee into drawback shipping bills - Decided in favour of Revenue.

Summary

Issues:
- Conversion of free shipping bills into drawback shipping bills under Rule 12(1)(a) of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.

Analysis:
The case involved an appeal against an order passed by the Customs, Excise and Service Tax Appellate Tribunal regarding the conversion of free shipping bills into drawback shipping bills. The assessee had initially filed 14 shipping bills for export of soyabean meal without claiming any duty drawback. Subsequently, the assessee applied for conversion to drawback shipping bills citing Rule 12(1)(a) of the Rules, which allows conversion if the exporter can prove that the initial failure to claim drawback was due to reasons beyond their control.

The Commissioner of Customs rejected the claim, stating that the assessee failed to provide a satisfactory explanation for not claiming drawback initially. The Commissioner also relied on Circular No. 4/2004, which allowed individual requests to be considered based on merits and facts. The Tribunal, however, allowed the appeal, prompting the Revenue to challenge the decision.

Upon examination, the High Court found that the Tribunal erred in allowing the conversion of shipping bills. The Court emphasized that Rule 12(1)(a) clearly states that conversion can only be permitted if the exporter can demonstrate that the initial failure to claim drawback was due to reasons beyond their control. In this case, the Court noted that the assessee's explanation of not being aware of the legal position was unsatisfactory, especially considering the delay of eight months in making the claim. The Court concluded that the conversion was sought as an afterthought and not due to reasons beyond the assessee's control.

The Court rejected the argument that the assessee had a right to convert the bills, reiterating that Rule 12(1)(a) mandates satisfactory reasons for the initial failure to claim drawback. Since the assessee failed to provide such reasons, the Court set aside the Tribunal's order and allowed the appeal filed by the Revenue. The judgment emphasized the importance of complying with the rules and providing valid justifications for seeking conversions under the applicable regulations.

In conclusion, the High Court ruled against the conversion of free shipping bills into drawback shipping bills, highlighting the necessity for exporters to adhere to the prescribed rules and demonstrate valid reasons for any deviations from the standard procedures outlined in the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.