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2025 (4) TMI 1076 - HC - CustomsRejection of conversion of 698 shipping bills from Advance Authorisation Scheme to Draw Back Scheme - reason for rejection is that respondent applied for conversion beyond the period of three months from the date of Let Export Order (LEO) - HELD THAT - Since the Gujarat High Court in MESSRS MAHALAXMI RUBTECH LTD. VERSUS UNION OF INDIA 2021 (3) TMI 240 - GUJARAT HIGH COURT has held that the impugned circular to the extent of paragraph 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 question of the Commissioner or the Original Authority relying on the said provision in the circular does not arise. The remaining 104 shipping bills shall be reconsidered by the Original Authority and an order shall be passed on merits and in accordance with law within 12 weeks from today. Before passing an order personal hearing be also given to IOCL - appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
- Whether the Circular No.36/2010-Cus dated 23.9.2010, specifically paragraph 3(a) prescribing a three-month time limit from the date of Let Export Order (LEO) for conversion of shipping bills under export promotion schemes, is legally valid or ultra vires the Customs Act, 1962 and the Constitution of India. - Whether the Commissioner of Customs was justified in rejecting the conversion of 104 shipping bills on the ground that the application for conversion was made beyond the prescribed three-month period under the said Circular. - The applicability and binding nature of the Gujarat High Court's judgment in Mahalakshmi Rubtech Ltd, which held the relevant provision of the Circular ultra vires and invalid. - The scope and effect of the Customs, Excise and Service Tax Appellate Tribunal's (CESTAT) order setting aside the Commissioner's order and remanding the matter for fresh consideration. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Circular No.36/2010-Cus dated 23.9.2010, paragraph 3(a) Relevant legal framework and precedents: Section 149 of the Customs Act, 1962 governs the conversion of shipping bills from one export promotion scheme to another. The Circular No.36/2010-Cus attempts to regulate the procedure for such conversions, including imposing a three-month time limit from the date of LEO for making conversion requests. The Gujarat High Court in Mahalakshmi Rubtech Ltd examined the validity of this time limit under the Circular, considering the statutory provisions and constitutional guarantees under Articles 14 (equality before law) and 19(1)(g) (right to practice any profession or to carry on any occupation, trade or business). Court's interpretation and reasoning: The Gujarat High Court held that Section 149 of the Customs Act does not prescribe any time limit for conversion applications. Therefore, the imposition of a three-month time limit by the Circular was an unauthorized delegation and was ultra vires the statute. Furthermore, the Court found that the time restriction violated Articles 14 and 19(1)(g) of the Constitution by arbitrarily restricting the right of exporters without statutory backing. Key evidence and findings: The Circular's paragraph 3(a) explicitly required that the request for conversion be made within three months from the date of LEO. The Court analyzed the statutory text of Section 149 and found no such limitation. The absence of any legislative provision for such a time bar was critical to the finding of ultra vires. Application of law to facts: Since the Circular's time limit was not supported by the statute and infringed constitutional rights, it was declared invalid to the extent it imposed the three-month limitation. Treatment of competing arguments: The department contended that the Circular was a valid executive instruction to streamline procedures and prevent misuse. However, the Court emphasized that executive instructions cannot override or add substantive conditions absent in the statute. The dismissal of the Special Leave Petition (SLP) filed by the department against the Gujarat High Court's decision was on procedural grounds (delay), not on merits, thus leaving the High Court's ruling intact. Conclusion: Paragraph 3(a) of Circular No.36/2010-Cus is ultra vires Section 149 of the Customs Act and unconstitutional under Articles 14 and 19(1)(g). Therefore, any rejection of conversion applications based solely on delay beyond three months from LEO as per this Circular is legally unsustainable. Issue 2: Validity of Commissioner of Customs' rejection of 104 shipping bills Relevant legal framework and precedents: The Commissioner rejected 104 shipping bills for conversion on the ground that the applications were made beyond the three-month period prescribed by Circular No.36/2010. The CESTAT, relying on the Gujarat High Court's judgment, set aside this rejection and remanded the matter for fresh consideration. Court's interpretation and reasoning: Given the invalidity of the Circular's time bar, the Commissioner's reliance on the same for rejecting the applications was misplaced. The Court held that the Commissioner ought not to have rejected the applications on this ground and must reconsider them on merits and in accordance with law. Key evidence and findings: The record showed that the respondent had applied for conversion beyond the three-month period. However, since the Circular's time limit was invalid, the delay alone could not justify rejection. Application of law to facts: The Court directed the Original Authority to reconsider the 104 shipping bills without reference to the three-month limitation, applying the statutory provisions and relevant legal principles. Treatment of competing arguments: The department argued that the Circular was binding and the rejection was lawful. The Court rejected this argument based on the authoritative ruling of the Gujarat High Court and the absence of any statutory time bar. Conclusion: The rejection of the 104 shipping bills on the ground of delay beyond three months was not sustainable. The matter must be reconsidered on merits. Issue 3: Effect of CESTAT's order and procedural directions Relevant legal framework and precedents: The CESTAT set aside the Commissioner's order and remanded the matter for fresh disposal. The High Court upheld this approach. Court's interpretation and reasoning: The Court affirmed that the CESTAT's order to remand the matter was appropriate in light of the legal invalidity of the Circular's time bar. The Court further directed that the Original Authority must provide personal hearing to the respondent before passing any fresh order. Key evidence and findings: The procedural fairness and statutory compliance require that the respondent be heard and the matter decided on merits. Application of law to facts: The Court mandated a fresh adjudication within 12 weeks, ensuring due process and adherence to law. Treatment of competing arguments: No contrary argument was found persuasive against the procedural directions issued. Conclusion: The remand and procedural directions were justified and necessary to ensure lawful and fair adjudication. 3. SIGNIFICANT HOLDINGS "We find merit in the principal argument ... 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." "In view of the aforesaid discussion, we hold that 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." Core principles established include:
Final determinations:
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