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2021 (3) TMI 240 - HC - CustomsMEIS scheme - conversion of the EPCG shipping bill into the EPCG cum Drawback shipping bill - Striking down circular No.36/2010 Cus dated 23.9.2010 (i.e. para 3(a) of this Circular) as ultra vires Section 149 of the Customs Act 1962 and also ultra vires Articles 14 and 19(1)(g) of the Constitution of India - whether the Principal Commissioner committed any error in passing the impugned order? - HELD THAT - There is no merit in the principal argument of Mr. Dave that in Section 149 of the Act no time period has been prescribed and if in a substantive statutory provision of law if no time period has been prescribed then the CBEC could not have issued the circular providing for three months time period to make a request for conversion from the date of the LEO. Under Rule 3 of the Drawback Rules a Drawback is allowed on the export of goods at such amount or at such rates as may be determined by the Central Government. Such rates determined by the Central Government are called All industry rate because Drawback at such rates is allowed to all the exporters in the country without any conditions. This is because all the industry rates are determined by the Central Government on the basis of the general data collected from the industry about utilization of duty paid inputs input services etc. While allowing such All industry rate of Drawback no verification of the exported goods is required and hence no verification is undertaken also by the Custom authorities. But there may be cases where the rate of Drawback has not been determined and such cases are covered under Rule 6 - Where no All India rate of Drawback is determined in respect of any goods the manufacturer/exporter has to apply within 3 months from the relevant date for fixation of Drawback rate in his individual case and all the relevant facts including the proportion in which the materials or components or input services are used in the production or manufacture of goods and the duties paid on such materials or components or the tax paid on input services have to be submitted with such application as mandated under Sub Rule (1) of Rule 6. Thereafter as laid down under Clause (b) of Rule 6(1) the proper Revenue Officer would make an enquiry and determine the amount or rate of Drawback in respect of such goods; which is the brand rate for that particular case. In the present case no verification whatsoever of the goods or any examination of the exported goods is required because the claim for Drawback is at the All industry rate which is the common and general rate fixed by the Central Government for all exporters of the goods in the country. If the writ applicant herein had been claiming Drawback at the special brand rate then the amendment of shipping bills by allowing conversion into Drawback shipping bill may not be possible only on the basis of the documentary evidence which was in existence at the time the goods were cleared for export. For fixing brand rate examination of the goods and also verification of the goods as well as inputs raw materials input services etc. used for such goods would be necessary; and such verification would be impossible once the goods have been exported - On the value so assessed by the Custom officers the calculation of Drawback at All industry rate is only an arithmetical exercise which could be easily done on the basis of the documentary evidence (i.e. the export documents like shipping bill and export invoice) which was in existence when the goods were cleared for export. Since in the present case the amendment of shipping bills by converting them into Drawback shipping bills is possible on the basis of the documentary evidence which was in existence at the time the goods were cleared for export and the benefit of Drawback at All industry rate of 1.5% of value of the exported goods is also possible to be allowed - the impugned circular to the extent of para 3(a) is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as also ultra vires Section 149 of the Customs Act 1962. The impugned order passed by the Principal Commissioner of Customs Ahmedabad is hereby quashed and set aside - It is declared that the writ applicant is entitled to the drawback of Rs. 11, 18, 458/ being the principal amount with statutory interest as provided in Rule 14 of the Drawback Rules - application allowed.
Issues Involved:
1. Validity of Circular No. 36/2010-Cus dated 23.09.2010. 2. Denial of duty drawback claim and interest thereon. 3. Amendment of shipping bills under Section 149 of the Customs Act, 1962. 4. Legality of time limit prescribed by CBEC for conversion of shipping bills. Issue-wise Detailed Analysis: 1. Validity of Circular No. 36/2010-Cus dated 23.09.2010: The writ applicant challenged the validity of Circular No. 36/2010-Cus, specifically para 3(a), on the grounds that it is ultra vires Section 149 of the Customs Act, 1962, and Articles 14 and 19(1)(g) of the Constitution of India. The applicant argued that Section 149 does not prescribe any time limit for the amendment of documents, and thus, the CBEC could not impose a three-month time limit for requesting the conversion of shipping bills. The court found merit in this argument, holding that the CBEC could only prescribe such a time limit through regulations made under the Act, which was not done. Therefore, para 3(a) of the circular was declared ultra vires and invalid. 2. Denial of Duty Drawback Claim and Interest Thereon: The applicant sought the quashing of the order denying the duty drawback claim of Rs. 11,18,458/- and requested the court to direct the respondent to pay this amount along with interest under Rule 14 of the Drawback Rules. The court examined the facts and found that the applicant's claim for duty drawback was legitimate and supported by documentary evidence existing at the time of export. The court held that the denial of the drawback claim based on the circular was unjustified and ordered the payment of the principal amount along with statutory interest. 3. Amendment of Shipping Bills under Section 149 of the Customs Act, 1962: The applicant argued that Section 149 allows for the amendment of shipping bills without any time restriction, provided the amendment is based on documentary evidence existing at the time of export. The court agreed, stating that the purpose of Section 149 is to avoid undue hardship caused by inadvertent errors in documents. The court emphasized that the CBEC's circular, which imposed a three-month time limit for amendments, was beyond the scope of Section 149 and thus invalid. The court directed the amendment of the shipping bills to reflect the duty drawback claim. 4. Legality of Time Limit Prescribed by CBEC for Conversion of Shipping Bills: The court examined the legality of the three-month time limit imposed by the CBEC for the conversion of shipping bills. The court noted that the Customs Act does not confer any power on the CBEC to prescribe such a time limit for amendments under Section 149. The court referred to previous judgments, including those of the Delhi High Court and its own, which supported the view that no such time limit should be imposed. Consequently, the court held that the time limit prescribed by the CBEC was ultra vires and not enforceable. Conclusion: The court allowed the writ application, quashing the impugned order and declaring para 3(a) of Circular No. 36/2010-Cus ultra vires. The court ordered the payment of the duty drawback amount along with statutory interest to the applicant within four weeks.
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