Limit of three months for the amendment of the shipping bill prescribed by Circular No. 36/2010-Customs is ultra vires

This article analyses the Madras High Court ruling in The Commissioner of Customs (Export), Tuticorin Versus M/s. Regin Exports - 2026 (4) TMI 804 - MADRAS HIGH COURT, examining the interplay between Section 149 of the Customs Act 1962 and departmental circulars.

Background & Issue

M/s. Regin Exports ('the Respondent') applied for Duty Free Import Authorisation ('DFIA') licences before the Joint Director General of Foreign Trade for importing 1000 MT and 5 MT of raw cashew nuts. DFIA file numbers were duly allotted, and shipping bills recorded that the exports were being made under DFIA licences.

However, while filing the shipping bills through the Customs Broker, an erroneous billing code was entered. The mistake went undetected at the time of export, and the consignment was not physically examined.

On 26 December 2018, the Respondent wrote to the department seeking an amendment of the shipping bills. The request was rejected by the Commissioner. The CESTAT, Chennai, however, allowed the Respondent's appeals in July 2023. Against the said CESTAT Order, the Department appealed before the Madras High Court.

Key Legal Questions

• Whether the three-month time limit prescribed by Circular No. 36/2010 for conversion of shipping bills bars an amendment application filed beyond that period, overriding the statutory power under Section 149 of the Customs Act, 1962.
• Whether substituting Code '00' with Code '26' in the shipping bills amounts to an impermissible conversion of a free shipping bill into an Export Promotion (EP) scheme shipping bill, barred by the proviso to Section 149.
• Whether the fact that the exported goods were not physically examined at the time of export, by itself, constitutes conversion from one scheme to another.

Decision

The High Court dismissed the department's appeals and upheld the CESTAT order permitting amendment of the shipping bills, on three principal findings:

(i) Circular Cannot Curtail a Statutory Right.Section 149 of the Customs Act does not prescribe any period of limitation for seeking amendment of documents. A departmental circular cannot, therefore, impose a time bar that the statute itself does not contemplate. The Court expressly held that such a circular limitation cannot override or curtail the substantive right conferred by Section 149, and that the CESTAT was correct in overruling the department's objection on the ground of limitation.

The Court distinguished the Delhi High Court decision in M/s. Terra Films Pvt. Ltd. Versus Commissioner of Customs - 2011 (4) TMI 13 - DELHI HIGH COURT and the Gujarat High Court decision in ANIL SHARMA AND 1 Versus UNION OF INDIA AND 3 - 2017 (2) TMI 50 - GUJARAT HIGH COURT, relied upon by the department, noting that those cases concerned actual conversions of scheme rather than correction of a clerical error.

(ii) Entry of wrong code was an inadvertent clerical error, not a change of scheme. The Court noted that the Respondent had applied for and been granted DFIA file numbers before the exports, and the shipping bills themselves described the consignment as being under DFIA licence. The only defect was the entry of billing code '00' by the Customs Broker in place of the correct code '26'.

The Court placed reliance on its own earlier decision in The Commissioner of Customs Versus M/s. Diamond Engineering (Chennai) Pvt. Ltd., The Customs, Excise and Service Tax Appellate Tribunal - 2019 (5) TMI 492 - MADRAS HIGH COURT, where exports under the Advance Authorisation Scheme were similarly coded as '00' instead of '01', and the Court had held that Section 149 permits correction of such inadvertent mistakes.

(iii) Non-Examination of Goods Does Not Constitute Scheme Conversion. The department contended that, since the goods were not physically opened and examined at the time of export (as would ordinarily happen under DFIA scheme norms), permitting the amendment would deny Customs the opportunity to verify.

The Court rejected this argument. The mere fact of non-examination does not, by itself, amount to a conversion from free shipping to DFIA scheme. The contemporaneous material the DFIA licence applications, the allotted file numbers, and the language of the shipping bills themselves - clearly established that the exports were, in substance, always intended as and under the DFIA scheme. Accordingly, the first proviso to Section 149 (which bars amendment where the goods have been examined) did not apply, since the request was only to correct an inadvertent code entry and not to convert from one scheme to another.

Conclusion

The Madras High Court's decision in Regin Exports authoritatively settles two distinct but related propositions.

First, a departmental circular cannot limit a power that is given by the law. So, the three-month time limit mentioned in Circular No. 36/2010 was considered ultra vires, because Section 149 does not set any such time limit.

Second, the test for allowing an amendment under Section 149 is substantive rather than merely procedural. The key question is whether the documentary evidence reflects the true nature and intent of the transaction at the time of export. Where DFIA file numbers had already been allotted, DFIA licenses were in place, and the shipping bills themselves referred to the DFIA scheme, an incorrect billing code is only a clerical error. Rectifying such an error does not amount to a conversion of the scheme.