The Commissioner has power to convert the free shipping bill into drawback shipping bill?

PJ/Case Laws/2010-11/1021

Case: Essar Oil Ltd v/s Commissioner of Customs, Jamnagar

Citation: 2010 (259) ELT 295 (Tri-Ahmd)

Issue:- Whether the Commissioner has power to convert the free shipping bill into drawback shipping bill?

Brief Facts:- Appellants applied for conversion of free shipping bill into drawback shipping bills. The Commissioner rejected the appellant’s request. Appellants therefore approached the Tribunal. The Tribunal allowed the appeal. Against this, Revenue went in appeal before the High Court and High Court restored the appeal for passing of speaking order.

Hence, the matter is again before the Tribunal.

Appellant’s Contentions:- Appellant contended that the Commissioner has placed reliance on Board Circular no. 4/2004-Cus, dated 16.01.2004. Para 3.1 of the same states that power of Commissioner to grant exemption from observance of the provisions of Rule 12 (1) (a) for the purpose of availment of drawback shall apply only 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 Customs and Central Excise Duties Drawback Rules. It is submitted that the rule does not have any such restriction and therefore the reliance of the Commissioner on circular was misplaced.

It was submitted further that appellants had claimed drawback under all industry rates vide SL. No. 271002 but this was not allowed on the ground that the said entry is applicable only to supplies made by the DTA units to units under SEZ, thinking that no drawback is available, they filed free shipping bills but on approaching the directorate of drawback they were advised to go for brand rate procedure. It was submitted that the item exported was furnace oil which is a bulk cargo and therefore the Weighment is done in the presence of customs officers only. Thus, there cannot be any issue with regard to the quantum of export.

Respondent’s Contentions:- Revenue contended that there is no provision in law for conversion of shipping bills. The Board Circular only clarified the legal position according to which the Commissioner can consider a free shipping bill as a drawback shipping bill. It was submitted that under Rule 12 of Drawback Rules, Commissioner is not converting the shipping bill but only exempting observance of certain procedures and thereafter giving direction to allow drawback. It was submitted that the Assistant Commissioner of Customs sanctioned drawback in respect of free ‘shipping bills’. Unlike all industry rates, the brand rate is not fixed by the Commissioner and therefore the clarification given by the Board that Commissioner cannot convert the shipping bill is correct.

Reasoning of Judgment:- The Tribunal held that the discussion in the Board Circular is entirely related to provisions of Rule 12 of Drawback Rules. As per the Circular Rule 12 empowers the Commissioner to condone non-observance of provisions of Rule 12 and allow drawback. It was held that the distinction made by Board between all industry rate shipping bills and brand rate shipping bills was not supported by provisions of Rule 12. The Commissioner is empowered to condone non-observance of procedure under Rule 12 irrespective of the claim for drawback on the basis of brand rate or all industry rates. The artificial distinction has been made only by the Board in the Circular and is not supported by law.

It was held that in the case of Gokuldas Images Pvt Ltd v/s CC, Bangalore [2008 (227) ELT 238 (Tri-Bang)] and Hero Cycles v/s CC, Shillong [2004 (171) ELT 342 (Tri-Del)], the brand rate shipping bills were not under consideration. It was observed that judicial discipline required that the Tribunal followed the decision in Hero Cycles Ltd unless a decision of superior authority was shown or the Tribunal disagrees with the decision of the single member bench of the Tribunal.

The Tribunal held that it cannot be said that the Commissioner has no power to convert a free shipping bill into drawback shipping bill. It was observed that Rule 12 (1) (a) required the exporter to mention details like the description, quantity and such other particulars in the shipping bill which are necessary for deciding whether the goods are entitled to drawback and if so at what rate or rates and makes 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 etc no separate claim for duty has been made.

And the Board Circular provided that relaxation can be given by the Commissioner to the exporter from mentioning the details as prescribed by Rule 12. The Tribunal accordingly, held that this is nothing but an amendment of the shipping bill filed or conversion. Therefore, the observation of the Commissioner that he has no powers to convert a free shipping bill into drawback shipping bill was supported by the rule at all. The Circular of the Board goes beyond the rules.

The Tribunal further observed that Section 149 of Customs Act, 1962 clearly permitted amendment of shipping bill. And the amendment was permitted even after the goods had left the country if the basis for amendment is documentary evidence.

It was held that the Commissioner should have considered the application under Section 149. Accordingly, the matter remanded with direction to the Commissioner to consider the documentary evidence to be produced by the appellant in support of their application. No reason to differ with the judgment given in Hero Cycles Ltd.

Decision:- Appeal allowed accordingly.

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PJ/Case Laws/2010-11/1021

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