2020 (9) TMI 950 - AT - Customs

Conversion of shipping Bills - conversion of free shipping bills into drawback shipping bills - duty drawback - rejection on the ground of non-fulfillment of conditions of Notification No. 158/95 dated 14.11.1995 - HELD THAT - The appellant initially exported Phycocyanin and a part quantity of the same was rejected for quality reasons which was re-imported by him without payment of duty in terms of Notification No. 158/95-Cus dated 14.11.1995 on executing Bond with Bank Guarantee. Also the appellant have re-exported the said goods after rectifying the defect and the identification of the re-exported goods is not disputed by the Department. Further, we find that the appellant also paid an amount of ₹ 13,81,543/- as demanded by the Department. Further, it is found that after payment of the duty along with interest, the appellant sought suitable amendment to the re-exported shipping documents to enable the appellant to claim drawback in terms of Section 74 but the same was not considered and his request was rejected without affording him an opportunity of hearing which is in violation of the principles of natural justice. Also, it is substantive right of the exporter to claim drawback and it has been consistently held by various High Courts that substantive right should not be denied on account of procedural irregularities. CBEC issued Circular No. 1063/2/2018-CX dated 16.02.2018 whereby they have compiled orders of Hon ble Supreme Court High Courts and CESTAT which have been accepted by the Department on which no review petitions have been filed by the Department. The Communication dated 12.03.2019 is set aside and the matter remanded back to the Commissioner to consider the claim of the appellant for conversion of free shipping bills into drawback shipping bills, after following the principles of natural justice and after affording an opportunity of hearing to the appellant - appeal allowed by way of remand.

Summary

Issues:
Request to convert free shipping bills into drawback shipping bills based on Notification No. 158/95 dated 14.11.1995.

Analysis:
The appellant exported Phycocyanin, faced rejection of part of the goods due to quality issues, re-imported the rejected goods under a bond, rectified the defects, and re-exported the goods. The Customs Department demanded payment of import duties and interest for re-imports beyond the permissible period. The appellant paid the amount demanded and sought amendment to the shipping documents for claiming drawback under Section 74. The Department rejected the request for conversion of free shipping bills into drawback bills, citing violation of the Notification No. 158/95 dated 14.11.1995.

The appellant argued that the rejection lacked natural justice principles, and the Department should have allowed the conversion of shipping bills into drawback bills as per Section 74 and the Duty Drawback Rules of 1995. The appellant emphasized that procedural irregularities should not deny substantive benefits like drawback. The appellant cited various decisions supporting their claim.

The Authorized Representative defended the Department's decision, highlighting the appellant's violation of the conditions of Notification No. 158/95 by re-exporting beyond the time limit, albeit with a minor delay. The AR acknowledged that drawback is a substantive right but emphasized the need to fulfill conditions for conversion.

After considering both parties' submissions and the record, the Tribunal found that the appellant fulfilled the necessary steps for claiming drawback. The Tribunal noted the payment made by the appellant, the rectification of defects, and the lack of opportunity for the appellant to present their case before rejection. Referring to Circular No. 1063/2/2018-CX, the Tribunal emphasized that substantive benefits should not be denied due to procedural irregularities. Citing relevant judgments and circulars, the Tribunal set aside the Department's decision and remanded the matter back to the Commissioner for reconsideration while ensuring natural justice principles are followed.

In conclusion, the Tribunal allowed the appeal by way of remand, instructing the Commissioner to review the appellant's claim for converting free shipping bills into drawback bills within two months of receiving the order copy.