2020 (12) TMI 1229 - AT - Customs

Application for conversion of shipping bills - time limitation - claim for conversion of drawback to that of entitlement to benefits under the duty-free import authorisation (DFIA) scheme of the Foreign Trade Policy - rejection solely on the ground that conversion had not been sought within the period prescribed in circular no. 36/2010 dated 23rd September 2010 of Central Board of Excise Customs - HELD THAT - The imperative of implementing schemes of export promotion under the Foreign Trade Policy even at the cost of foregoing revenue mandates facilitation that may seemingly be in conflict with the remit of the taxing authority; a post-exportation conferment of that escapement is even less likely to facilitated and circular no.36/2010- Cus dated 23rd September 2010 is but a pathway to the larger objectives of governance. It is moot, therefore, if the intent of the circular is to be perceived in its letter, as held by the proper officer , rather than in its spirit as claimed by the appellant. Circular no. 36/2010-Cus dated 23rd September 2010 was preceded by circular no. 4/2004-Cus dated 16th January 2004 of Central Board of Excise Customs which it also superseded. The impetus for the original circular was the disadvantage at which an exporter was placed on disallowance of eligibility for a particular scheme by the Director General of Foreign Trade and consequent inability to seek the privileges of another scheme owing to the absence of any authority that customs formations could take recourse to. Several years later, the facility of migration, contingent only upon such rejection, was, upon representation by the exporting community, considered to be ripe for availment as a commercial option to be exercised by the exporter. The timeframe of one month, in the first of the circulars, kicking in from rejection by the Directorate General of Foreign Trade, could no longer be the benchmark and a longer span of three months from the date of let export order (LEO) was considered to suffice for the exercise of such option. Hence, it is apparent that the more recent circular was intended to liberalise the migration from one scheme of the Foreign Trade Policy to another. The bar of limitation could be invoked only in the absence of any mitigating circumstances offered up in response to clarification sought by the proper officer from the appellant for an appropriate decision - It is evident that the impugned order is bereft of a comprehensive appreciation of the schema of amendment to, and conversion of, shipping bills. The cryptic, and even peremptory, disposal of the request, without conforming to the reasonableness and judiciousness, mandated by section 149 of Customs Act, 1962 and disregarding the spirit in which the guidance was offered in the circular of Central Board of Excise Customs, is not an outcome of responsible discharge of authority devolving upon the Commissioner of Customs. The applicant was not informed of the deficiencies, if any, that precluded them from being eligible for conversion; nor were they afforded an opportunity to demonstrate that their eligibility for coverage under the intended scheme was unimpeachable. The impugned order is set aside for the application to be returned to the Commissioner of Customs for fresh determination of eligibility for conversion - Appeal allowed by way of remand.

Issues Involved:
1. Rejection of application for conversion of shipping bills from drawback to DFIA scheme.
2. Applicability and interpretation of Circular No. 36/2010 dated 23rd September 2010.
3. Legal provisions under Section 149 of the Customs Act, 1962.
4. Judicial precedents and their relevance to the case.
5. Procedural fairness and the role of the proper officer.

Detailed Analysis:

1. Rejection of Application for Conversion of Shipping Bills from Drawback to DFIA Scheme
The appellant, M/s Haldiram Foods International Pvt Ltd, challenged the rejection of their application to convert shipping bills from a claim for drawback to entitlement under the Duty-Free Import Authorisation (DFIA) scheme. The rejection was based on the failure to seek conversion within the prescribed period as per Circular No. 36/2010 dated 23rd September 2010 issued by the Central Board of Excise & Customs. The Joint Commissioner of Customs cited the lapse of more than three months beyond the date of the 'let export order' as the reason for ineligibility.

2. Applicability and Interpretation of Circular No. 36/2010
The appellant argued that the circular's time limit was not in consonance with the parent provision, i.e., Section 149 of the Customs Act, 1962. The Tribunal considered this argument in light of previous decisions, including Parle Products Pvt Ltd v. Commissioner of Customs, Nhava Sheva, and others. It was noted that while the circular prescribed a three-month limit for seeking conversion, this restriction was not envisaged in Section 149 of the Customs Act, 1962. The Tribunal emphasized that the circular should be interpreted in a liberal manner to facilitate trade, as intended by the policy.

3. Legal Provisions Under Section 149 of the Customs Act, 1962
Section 149 allows amendments to documents presented in the customs house, provided such amendments are based on documentary evidence existing at the time of export. The Tribunal noted that this section does not prescribe a time limit for such amendments, and any restriction imposed by the circular was beyond the mandate of the law. The Tribunal highlighted that the discretion to permit amendments lies with the 'proper officer' and must be exercised judiciously, considering the facts and circumstances of each case.

4. Judicial Precedents and Their Relevance to the Case
The Tribunal referred to several precedents, including decisions in Parle Products Pvt Ltd, Mrs Bectors Food Specialities Ltd, and Lykis Limited, where similar conversions were allowed despite the time limits prescribed in circulars. These decisions emphasized that the substantive issues and the eligibility for conversion should take precedence over procedural limitations. The Tribunal also discussed the decisions of the High Courts in Terra Films Pvt Ltd and Suzlon Energy Ltd, which distinguished between amendments and conversions, and the applicability of circulars in such contexts.

5. Procedural Fairness and the Role of the Proper Officer
The Tribunal criticized the cryptic and peremptory disposal of the appellant's request by the Commissioner of Customs. It was noted that the appellant was not informed of any deficiencies in their application nor given an opportunity to demonstrate their eligibility for conversion. The Tribunal emphasized that the proper officer must exercise discretion reasonably and judiciously, providing a reasoned order in the event of rejection.

Conclusion:
The Tribunal set aside the impugned order and remanded the application to the Commissioner of Customs for fresh determination of eligibility for conversion. The Tribunal directed that the application be reconsidered in light of the observations made, ensuring procedural fairness and adherence to the spirit of trade facilitation intended by the relevant circulars and legal provisions.

Operative Portion:
The appeal was allowed by way of remand, and the operative portion of the order was pronounced in open court on 16th December 2020.

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