2009 (4) TMI 235 - AT - Customs

Conversion of free shipping bills to DEEC shipping bills - finding of the Commissioner that the examination norms applicable to DEEC shipping bills were not followed for export products is not sufficient for rejection of the prayer for conversion for the reason that the export products are transformers which are so huge that they are never shipped in container but as break bulk exported in open condition and the relevant column of the ARE-1 shows that the transformers were sent in loose condition - there is no requirement of physical incorporation of the imported duty-free materials in the export product as contended by the Revenue. - we accept the submission of the appellants for conversion of free shipping bills to DEEC shipping bills

Summary

Issues:
Conversion of free shipping bills to DEEC shipping bills under the Customs Act, 1962.

Analysis:
The appellants obtained three DEEC licenses in 2002 for importing parts and materials for manufacturing transformers for export. They exported transformers and spares to Morocco, Algeria, and Ethiopia under free shipping bills instead of DEEC shipping bills. Their request for conversion was initially rejected based on a CBEC Circular but was later allowed by the Tribunal. The appellants provided various documents to prove exports under the DEEC scheme, which were rejected again by the adjudicating authority, leading to the current appeal.

The appellants presented a certificate from a Chartered Engineer and documents showing consumption of imported goods in the export products. They established a clear link between the imported goods like CRGO Steel Sheet, Copper Wire Rods, etc., and the exported transformers with unique serial numbers tailored to specific customer requirements. The documents submitted, including purchase orders, export invoices, and shipping bills, demonstrated the connection between imported inputs and export products.

The adjudicating authority noted discrepancies in correlation for some shipping bills related to export of transformer spares but failed to provide sufficient grounds for rejection. The Commissioner's argument regarding examination norms for DEEC shipping bills not being followed was countered by the unique nature of transformer exports, which are not containerized but shipped in break bulk. The Foreign Trade Policy allows flexibility in utilizing duty-free materials after meeting export obligations, as supported by precedent in Kit Ply Industries Ltd. v. Commissioner of Customs, Mumbai. The requirement of physical incorporation of imported materials in export products was deemed unnecessary.

Based on the established link between imported inputs and export products, the Tribunal accepted the appellants' request for conversion of free shipping bills to DEEC shipping bills, overturning the impugned order and allowing the appeal. The operative part of the order was pronounced on 15-4-2009.