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2015 (11) TMI 378 - SC - CustomsBenefit of duty drawback - Conversion of free shipping bills into drawback shipping bills - Circular No. 04/2004 dated 16.01.2004 - Held that - conversion is permissible only when the exporter is able to satisfy the Commissioner that for reasons beyond his control drawback was not claimed. In the instant case, a finding of fact is arrived at by the Commissioner (Customs), which has been accepted by the High Court also, that no case was made out by the appellant to suggest that claim for duty drawback was beyond the control of the appellant. It is rightly pointed out that merely because the appellant was not aware of the correct legal position would not afford any such ground that it was beyond his control. Benefit of Circular No. 04/2004 dated 16.01.2004 - Held that - After taking note of the provisions contained in Rule 12(1)(a) of the Rules which undoubtedly state that no provision exists for permitting conversion of free shipping bills into drawback shipping bills , the Board was still of the opinion that it was permissible for the Commissioner to examine and consider individual requests on merits and facts in terms of the aforesaid provisions and the relaxation shall only apply in respect of drawback claims pertaining to All Industry Rates of drawback and it would not apply to brand rate of duty drawback, where rate is claimed in terms of Rule 6 or Rule 7 of the Customs & Central Excise Duties Drawback Rules. Appellant wanted only All Industry Rates of duty drawback . Reasons given by the Commissioner that the goods were not physically examined would be of no relevance. This view of ours further stands substantiated on the reading of Sections 50, 51 and 113 of the Customs Act. - proper officer is to satisfy itself only to the extent that the goods which are entered for export are not prohibited goods and the exporter has paid the duty at the time of clearance of the goods meant for export and therefore, the inspection is confined to the aforesaid aspect viz. the goods are not prohibited. Since in the present case, goods are not dutiable, no duty has to be paid. Therefore, there was no reason for denying the benefit only on the ground that at the time when the appellant had sought the duty drawback, the goods could not be physically examined. This position is further supported when we compare the fundamental provisions of Section 113 with the amendment to the said Section carried out by the Finance Act, 2003 (w.e.f. 14th May, 2003). In the instant case amended provisions are applicable - provisions of Circular No. 04/2004 dated 16.01.2004 would be applicable in the instant case. The Commissioner may examine and consider the individual request on merits and facts in terms of the aforesaid provisions. We remit the case back to the Commissioner - Decided in favour of assessee.
Issues Involved:
1. Whether the appellant is entitled to claim conversion of free shipping bills into drawback shipping bills on the basis of Rule 12(1)(a) of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. 2. Whether the appellant is entitled to the benefit of duty drawback on the strength of Circular No. 04/2004 dated 16.01.2004 even without seeking conversion. Issue-Wise Detailed Analysis: 1. Conversion of Free Shipping Bills into Drawback Shipping Bills under Rule 12(1)(a): The appellant, an exporter of food and agriculture-related products, filed 14 free shipping bills for export during the period 08.11.2007 to 23.01.2008. Later, the appellant applied for conversion of these free shipping bills into drawback shipping bills under Rule 12(1)(a) of the Rules. The Commissioner (Customs) rejected this request, stating that conversion is permissible only if the exporter can prove that the failure to claim drawback was for reasons beyond their control. The Commissioner found that the appellant did not satisfy this requirement, as ignorance of the correct legal position does not constitute a reason beyond control. The Central Excise and Services Tax Appellate Tribunal (CESTAT) initially set aside the Commissioner's order, allowing the conversion. However, the High Court, upon appeal by the Department, reversed CESTAT's decision, agreeing with the Commissioner that the appellant did not meet the criteria under Rule 12(1)(a). The Supreme Court upheld the High Court's decision, emphasizing that Rule 12(1)(a) requires the exporter to demonstrate that the failure to claim drawback was beyond their control. The appellant's lack of awareness of the legal provisions did not meet this standard. 2. Entitlement to Duty Drawback Based on Circular No. 04/2004: The appellant argued that even without converting the free shipping bills, they were entitled to duty drawback under Circular No. 04/2004. This circular allows the Commissioner to consider individual requests for duty drawback on merits, even if the shipping bills were not initially filed as drawback shipping bills. The Commissioner had rejected this plea, stating that the goods under the free shipping bills were not physically examined, and there was no evidence to support the description, quantity, and value, which is typically required for drawback claims. The Tribunal did not address this issue as it had allowed the conversion under Rule 12(1)(a). The Supreme Court examined Circular No. 04/2004, which permits the Commissioner to consider individual requests for duty drawback on merits, particularly for All Industry Rates of drawback, and not for brand rates. The Court found the Commissioner's rejection on the grounds of lack of physical examination to be legally untenable. The Court noted that Sections 50 and 51 of the Customs Act focus on ensuring that goods are not prohibited and that duties are paid, rather than on physical examination. The Supreme Court remitted the case back to the Commissioner to reconsider the appellant's request for duty drawback on merits, as per the stipulations in Circular No. 04/2004. The Commissioner was directed to decide the matter within three months, after providing the appellant an opportunity for a hearing. Conclusion: The Supreme Court upheld the High Court's decision on the first issue, denying the conversion of free shipping bills into drawback shipping bills under Rule 12(1)(a). However, on the second issue, the Court remitted the case back to the Commissioner to examine the appellant's request for duty drawback on merits, based on Circular No. 04/2004, and to make a decision within three months.
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