CONVERSION OF DFIA SHIPPING BILLS TO DRAWBACK SCHEME

[Mr. M. GOVINDARAJAN]

Section 149 of the Customs Act, 1962 (‘Act’ for short) provides for amendment of documents.  The said section provides that save as otherwise provided in Sections 30 and 41 the proper officer may, in his discretion, authorize any document, after it has been presented in the Customs house to be amended.   No amendment of a bill of entry or a shipping bill or bill of export shall be so authorized to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the export goods have been exported, except on the basis of documentary evidence which was in existence of the time the goods were cleared, deposited or exported, as the case may be.

Rule 12(1)(a) of Drawback Rules require an exporter to declare on the shipping bill, the description, quantity and such other particulars as are necessary for deciding whether the goods are entitled to drawback, and it if so, at what rate and make a declaration on the relevant shipping bill that a claim for drawback is being made and in respect of duties paid on containers packing materials service tax, etc., no separate claim for rebate of duty has been made.  The Commissioner is empowered to allow draw back on shipping bills which may not contain any of these details.   The proviso to the Rule 12(1) provides that the Commissioner may condone non observance of provisions of Rule 12 and allow draw back.

The Circular No. 36/2010-Cus, dated 23.09.2010 permitted such conversion within three months from the date of ‘Let Export Order’.

In ‘V.R.A. Cotton Mills Private Limited V. Commissioner of Customs, Jamnagar (Prev)’ – 2014 (8) TMI 772 - CESTAT AHMEDABAD  the appellant is an exporter.   He applied for DFIA (Duty Free Import Authorization) to DGFT and he was issued DFIA No. 0510306798, dated 31.10.2011 with export obligation of ₹ 25 crores.  The appellant exported 10 consignments of taw cotton of CTH 5201 for ₹ 13.51 crores under DFIA shipping bills.  The appellant’s export was to China and such exports were on ‘quota basis’ and therefore he could not meet out the export obligation.   As such he applied for cancellation of DFIA in terms of 4.28 (e) of HBP Vol. I – 2009 – 14 on 28.06.2013.  The same has been cancelled on 10.07.2013.   After cancellation the appellant requested the Commissioner of Customs for conversion of shipping bills from DFIA to Drawback scheme on 20.07.2013.  The same was rejected by the Commissioner on the ground that the request was not made within three months from the date of the Let Export Order.

Against this order the appellant filed the present appeal before the Tribunal.  The appellant contended the following before the Tribunal:

• The documents like contracts, test analysis reports by Cotton Association of India are existing and available on record for perusal;
• Concerned shipping bills were presented for allowing exports under DFIA were signed by customs officers;
• Bills of lading, shipping bills, BRC showing realization of sale proceed of exported goods, etc., indicate that the goods which were cleared the export was Indian Raw Cotton Shankar-6 of CTH – 5201;
• Under DFIA the appellant had benefits of about 1.5% whereas under Drawback Scheme, appellant eligible for benefit of 1% only;
• There is no reason why the benefit of Test reports made by Cotton Association of India, one of the Government of India’s recommended and authorized analytical laboratories, should not be extended to cover the case of appellant in seeking conversion of DFIA shipping bills into Drawback Shipping Bills, when there  is a unimpeachable evidence of export of the Indian Raw Cotton of CTD 5201;
• If the duty of drawback is not allowed to the appellant, the appellant is perforce required to export the taxes, which gets included in the FOB value.   This being not the intention, conversion of DFIA shipping bills into Drawback Shipping bills need to be allowed;
• When the export is not in any dispute, substantial benefit attached to export cannot go away on procedural aspects;
• Rule 12(1) of Customs & Central Excise Duties Draw Back Rules, 1995 and proviso empowers the Commissioner to condone non observance of provisions of Rule 12 and allow drawback.
• Non observance of condition was beyond the appellant’s control;
• The appellant’s export was only to China and such exports were on quota basis and that when such quota for export to China was already exhausted by other  such exporters, there was no possibility for the appellant to export further quantity to China;
• After exports against DFIA scheme, there was no imports made by the appellant and as such the appellant has not received any benefits on such exports;
• The time limit of 3 months had been made only by the CBEC by circular without authority of law such time limitation by circular is not supported by the Act or Rule or the law established;
• This is nothing but an amendment of the shipping bill filed on conversion;
• As per Section 149 shipping bill can be permitted even after the goods have left the country if the basis for amendment is documentary evidence;
• The Commissioner has failed to consider the provisions of Section 149 to consider the amendment and if the amendment was to be made on the basis of the document, the applicant would have been benefits.

The Department contended the following:

• Section 149 cannot be interpreted to hold that an applicant can file applicant for conversion of the shipping bills at any point of time;
• The Adjudicating Authority has correctly come to the conclusion that the appellant had not justified the conversion when the appellant has submitted requested after 3 months of LEO;
• The appellant has not filed the shipping bills under Draw Back Scheme at the time of export and hence they are not eligible for such a request for conversion of Shipping Bill from one scheme to other scheme after three months of LEO;
• Although Section 149 of the Customs Act provides for amendment of documents, it does not envisage conversion of shipping bills from one export promotion to the other.

The Tribunal found that the undisputed facts are that documents relating to the exports clearly indicate that the goods were exported and said goods were described in documents as ‘Indian Raw Cotton Shankar-6 of CTH – 5201’.  The appellant has exported the said goods and subsequently not imported any goods as per the DFIA, which has been cancelled by DGFT.  Thus there would be no imports under the said DFIA.

Documents like contracts for exports, test analysis reports by Cotton Association of India, Shipping Bills were signed and cleared by proper customs officers and bills of lading, BRC for realization of currency etc., specifically indicate that the good which were cleared for export were ‘Indian Raw Cotton Shankar-6 of CTH – 5201’.  Non observance of the provisions of Rule 12(1) could be treated beyond their control, when export as claimed by the appellant, was only to China on quota basis and when such quota for export to China had been exhausted by other such exporters, there was no possibility for appellant to export any other quantity to China.  After export, there was no import by the appellant.  Since the appellant could not fulfill the export obligations he applied for cancellation of the certificate, which was duly cancelled by the authorities.  Thus, in such facts, the appellant could have applied for conversion only after getting cancellation of the said DFIA.  The appellant applied for such conversion immediately on 20.07.2013 which is within 10 days of such cancellation of DFIA by DGFT.

The Tribunal set aside the impugned order and directed the lower authorities to convert DFIA Shipping Bills in this appeal to drawback shipping bills.  The Tribunal only allowed conversion into draw back shipping bills and the eligibility of the appellant to the amount of drawback and the quantum, etc., would be decided in accordance with the law by the appropriate authorities of customs.