By TIOL News Service

NEW DELHI, NOV 04, 2015: BOTH these appeals are filed by the same appellant who is an exporter of a variety of food and agriculture related products. During the period 08.11.2007 to 23.01.2008, the appellant had filed as many as 14 shipping bills for export of Soyabean meal through Visakhapatnam Port to Vietnam and Japan. While filing the shipping bills, the appellant did not claim any duty drawback under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 and instead free shipping bills for export were filed. On 06.08.2008, the appellant submitted an application to the Commissioner (Customs) for conversion of the said free shipping bills into drawback shipping bills under Rule 12(1)(a) of the Rules. At the time of arguments, before the Commissioner, the appellant also referred to Circular No. 04/2004 dated 16.01.2004 on the basis of which it was arguned that even the conversion of free shipping bills into drawback shipping bills was not needed as the said circular, under the given circumstances, gave discretion and authorized the Commissioner to give the duty drawback even without conversion.

The Commissioner (Customs) after hearing the appellant rejected the request for conversion vide order dated 24.10.2008. The CESTAT vide its final order dated 23.12.2009 set aside the order of the Commissioner(Customs) holding that the appellant was entitled to get the bills converted from free shipping bills to duty drawback bills in terms of Rule 12(1)(a) of the Rules, ingredients whereof are satisfied by the appellant.

The Department challenged the aforesaid order in the High Court in which the Department has succeeded.

It may be noted that almost on identical facts the conversion sought by the appellant is disallowed in other appeals.

Two issues arise for consideration in this appeal before the Supreme Court:

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 Rules?

2. If the answer to the aforesaid question is in the negative, 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?

The Supreme Court observed on the two issues:,

1. A bare reading of the Rule demonstrates that such 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.

2. Coming to the second issue, the appellant had made a specific plea before the Commissioner(Customs) at the time of personal hearing to the effect that even without the request for conversion of free shipping bills into drawback shipping bills, the appellant was entitled to duty drawback claim having regard to Circular No. 04/2004 dated 16.01.2004. The appellant had also cited the judgment of the Tribunal in Nucleus Satellite Communications Vs. CC (Sea Port) Chennai - 2007-TIOL-1146-CESTAT-MAD. This plea of the appellant was, however, rejected.

Since the Tribunal had accepted the appeal of the appellant on the first issue namely permitting the appellant to seek conversion under Rule 12(1)(a) of the Rules, the Tribunal did not go into this issue at all. It appears that when the matter was argued before the High Court, the High Court also confined the discussion only on the first issue. Since on the first issue we have accepted the view taken by the High Court, it becomes necessary to deal with this issue though it has not been gone into either by the Tribunal or the High Court.

After perusing Circular No. 04/2004 dated 16.01.2004, along with some relevant provisions of the Customs Act, we find that the treatment given by the Commissioner to the aforesaid argument is not legally tenable. The clarification is given precisely in the following terms:

"In view of above, it is clarified that there is no need for allowing conversion. However, in terms of the proviso to Rule 12(1)(a) of the Customs and Central Excise Duties Drawback Rules, 1995, the Commissioner may examine and consider individual requests on merits and facts in terms of the aforesaid provisions. The aforesaid 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."

It is not in dispute, as has been recorded by the Tribunal as well, that the appellant wanted only "All Industry Rates of duty drawback". In view of the above, the reasons given by the Commissioner that the goods were not physically examined would be of no relevance.

We thus hold that the 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 to examine and consider the request of the appellant on merits as per the stipulation contained in Circular No. 04/2004 dated 16.01.2004. The Commissioner shall decide the same, after giving opportunity of hearing to the respondent within a period of three months from the date of receipt of the copy of this Judgment.

(See 2015-TIOL-263-SC-CUS)