2024 (8) TMI 1220 - AT - Customs

Application for conversion of shipping bills under NFEI scheme to drawback scheme and to the consequent duty drawback under the provisions of sec. 74 of the Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - re-export of style steel Cord S311, Steel Spools B80, Plastic Pallets, Plastic Separators - HELD THAT - There is no doubt that the formation of opinion by the Competent Authority is a purely subjective process founded on existent circumstances. The dispute here pertains to the discretionary jurisdiction of the Commissioner of Customs under the impugned section of the CA, 1962. However, there are no allegations made by the appellant that the discretion has been exercised in an illegal manner or on wholly untenable grounds or is arbitrary or perverse. Shipping Bills are eligible for conversion into drawback shipping bills under Section 149 of the CA 1962 or not - HELD THAT - A discretionary power to allow also carries with it the power not to allow, based on the facts and circumstances of the issue at hand. It is to be stated that the power under Section 149 of CA 1962 involves exercise of discretion, the scope of review during appeal in such a case is to examine if the discretion has been rightly exercised and that it is not based on irrelevant materials and is fair and reasonable in the circumstances. The Hon ble Supreme Court in its judgment in the case of STATE OF ORISSA ORS. VERSUS MD. ILLIYAS 2005 (11) TMI 469 - SUPREME COURT held that a decision is a precedent on its own facts. It is not everything said in a judgment that constitutes a precedent. The enunciation of the reason or principle on which a question before a Court has been decided is alone binding as a precedent. Section 149 is a discretionary provision which gives the power to the proper officer to authorise any document, after it has been presented in the custom house to be amended, under certain restrictions and conditions, if he so deems fit. It is not an exclusive provision for the conversion of one type of SB into another. Amendment from one SB type to another cannot be claimed as a matter of right. Further no formal request for an amendment of the SB s under section 149 of CA 1962, as is being pleaded now, appears to have been made. That technicality however need not detain us as a disqualification, but is useful in understanding the action that followed. Whether the subject goods were the same goods that were re-exported vide the impugned Shipping Bills, are not relevant for permitting the conversion of the impugned Shipping Bills? - HELD THAT - Section 149 of CA 1962 is not a section specific to the conversion of one SB type to another. When a specific request is made by an exporter for a particular amendment in the SB which has monetary implications on the exchequer any prudent officer would have to take a holistic view of the amendment being sought. This discretion has to be tempered by the mandate of section 74 which permits the payment of drawback only if the goods are identified to the satisfaction of the AC / DC of Customs as the goods which were imported. Hence the proper officer feeling that the request for amendment of the SB and to reassess it for drawback under section 74 of CA 1962 requires examining the identity of the goods, cannot be faulted. Whether the conversion of shipping bills under Section 149 cannot be rejected on the basis of Circular 36/2010-Cus dated 23.09.2010? - HELD THAT - There is no reason why when goods are being returned by way of re-export involving a payout from the exchequer, a lesser standard of verification based on documents alone is to be held sufficient. In the case of the detection of a fraud such a decision could be held as irrational and perverse, at times with consequences for the officer causing the loss. The goods can best be identified satisfactorily by physical examination, unless the proper officer for reasons known to him arrives at his satisfaction otherwise. Hence no such direction can be given curtailing the discretion of the proper officer to confine his satisfaction to a verification of documents alone - In any case the Commissioner of Customs has not leaned too heavily on Circular No.36/2010 and the order is in conformity with the existing provisions of the Act and Rules. Section 74 of the CA 1962 nowhere mentions the requirement of physical examination as the only basis on which the proper officer is satisfied regarding the goods exported - HELD THAT - Whether the subjective satisfaction by the proper officer could have been achieved only by physical examination cannot be a matter of challenge so long as the use of discretion is not perverse etc. - No such allegation is made by the appellant whose main grouse is only the use of discretion by the proper officer resulted in him wanting to examine the goods. In the case of WB. ELECTRICITY REGULATORY COMMISSION VERSUS CESC. LTD. ETC. 2002 (10) TMI 772 - SUPREME COURT the Hon ble Apex Court has held that the rule of prudence in law is that the appellate power is not to be exercised for the purpose of substituting one subjective satisfaction with another, without there being any specific reason for such substitution. Whether non-declaration of 'drawback' claim on the Shipping Bill as required under Rule 4 of Drawback Rules cannot be a basis for rejecting Appellant's request for conversion of Shipping Bills? - HELD THAT - The object and purpose of the procedure laid down is to ensure that the Customs department is made aware that the SB involves the payment of drawback and the goods can be subject to checks as felt necessary. Since the object of the rule would be defeated by non-compliance causing a loss to the exchequer, hence the said rule has to be held as mandatory - It is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. Further when a statute uses the word shall , prima facie, it is mandatory, more so for the reason that non-compliance of the rule may result in excess / undue payment of drawback causing a loss to the exchequer. It is found that the exercise of discretion by the original / proper authority is fair and reasonable. Neither has the appellant alleged or brought out any perversity or irrationality in the use of such a discretion. Hence the decision does not require any substitution just because the appellant feels that another view may be possible - the impugned order is upheld and the appeal is rejected. Appeal disposed off.

Summary

Issues Involved:
1. Eligibility for conversion of shipping bills under Section 149 of the Customs Act, 1962.
2. Relevance of the identity of re-exported goods for permitting conversion of shipping bills.
3. Validity of rejecting conversion based on Circular 36/2010-Cus dated 23.09.2010.
4. Requirement of physical examination under Section 74 of the Customs Act, 1962.
5. Basis for rejecting conversion due to non-declaration of 'drawback' claim on the Shipping Bill.
6. Inadvertent omission of declaration claiming drawback.
7. Application for refund under Section 27 of the Customs Act, 1962.

Detailed Analysis:

1. Eligibility for conversion of shipping bills under Section 149 of the Customs Act, 1962:
The appellant argued that the impugned shipping bills are eligible for conversion into drawback shipping bills under Section 149, subject to the condition that the documentary evidence was in existence at the time of import or export of the goods. They cited various judgments to support that conversion is permissible even without physical examination of goods. However, the Tribunal emphasized that Section 149 is discretionary and not an exclusive provision for converting one type of shipping bill to another. The Tribunal noted that no formal request for amendment under Section 149 was made, and the discretion exercised by the Commissioner was based on relevant facts and circumstances.

2. Relevance of the identity of re-exported goods for permitting conversion of shipping bills:
The appellant claimed that the identity of the re-exported goods is not relevant for permitting conversion of shipping bills. The Tribunal disagreed, stating that Section 74 requires the goods to be identified to the satisfaction of the Assistant/Deputy Commissioner of Customs. The proper officer's discretion to examine the identity of the goods before allowing conversion cannot be faulted.

3. Validity of rejecting conversion based on Circular 36/2010-Cus dated 23.09.2010:
The appellant argued that the impugned order incorrectly relied on Circular 36/2010, which they claimed cannot prescribe restrictions/conditions not mentioned in the Customs Act. The Tribunal found that the Circular did not impose additional conditions but reiterated the statutory requirement of identifying goods for drawback claims. The Tribunal upheld the Commissioner's decision, noting that the Circular provided necessary guidelines for uniform application of discretion.

4. Requirement of physical examination under Section 74 of the Customs Act, 1962:
The appellant contended that Section 74 does not mandate physical examination as the only basis for the proper officer's satisfaction. The Tribunal emphasized that the discretion to require physical examination is inherent in the proper officer's duty to ensure the identity and condition of the goods. The Tribunal cited relevant case law to support that the proper officer's satisfaction, based on physical examination, is within legal bounds and not perverse or irrational.

5. Basis for rejecting conversion due to non-declaration of 'drawback' claim on the Shipping Bill:
The appellant argued that non-declaration of the drawback claim should not be a basis for rejecting conversion. The Tribunal referred to Rule 4 of the Drawback Rules, which mandates specific declarations at the time of export. The Tribunal held that the rule is mandatory to prevent loss to the exchequer and ensure proper verification. The Tribunal found that the appellant's repeated non-compliance indicated negligence rather than inadvertence.

6. Inadvertent omission of declaration claiming drawback:
The appellant claimed the omission was inadvertent and could be cured. The Tribunal noted that the Commissioner has the discretion to exempt compliance for reasons beyond the exporter's control, but no such reasons were provided by the appellant. The Tribunal found that the repeated omission over multiple shipping bills indicated a lack of diligence, and the Commissioner's refusal to allow conversion was justified.

7. Application for refund under Section 27 of the Customs Act, 1962:
The appellant argued that their application for conversion should be treated as a refund claim under Section 27. The Tribunal clarified that refund claims must be made as per the specific provisions of Section 27, which involves statutory procedures and restrictions. The Tribunal cited relevant case law to affirm that refund is a statutory right subject to conditions and limitations.

Conclusion:
The Tribunal upheld the impugned order, finding that the proper officer's discretion was exercised fairly and reasonably. The appellant's failure to comply with mandatory requirements and the lack of any perverse or irrational use of discretion by the Commissioner led to the rejection of the appeal. The appeal was disposed of accordingly.