2010 (2) TMI 934 - CGOVT - Customs

Government grants revision in favor of M/s. Semi Conductor Complex Ltd. in Customs Act drawback claim case.

IN RE: SEMI CONDUCTOR COMPLEX LTD.

The government allowed the revision application in favor of the applicant, M/s. Semi Conductor Complex Ltd., Punjab, in a case concerning a drawback claim ... Drawback claim - revision application - applicant’s claim for drawback was denied – appellant submitted that observations of the Commissioner (Appeals) is erroneous and not supported by any legal authority, as the goods have been allowed to be reexported by the proper officer under claim of duty Drawback under Section 74 only and hence, the applicant is entitled for the Drawback claim even if the Assistant Commissioner has not signed on the Shipping Bill - Held that:- identify of re-exported goods stands established with the goods imported vide relevant Bill of Entry as per examination report of Superintendent (Shed). The applicant cannot be penalized for failure of Superintendent (shed) to put up his report to AC for approval. As such, the condition of Section 74(1)(a) of Customs Act, 1962 has to be treated as fulfilled, and drawback claim is admissible to the applicant, orders are set aside and case is remanded back to the adjudicating authority to sanction the drawback claim if otherwise in order, revision application is thus disposed off ISSUES PRESENTED AND CONSIDERED 1. Whether non-appending of the Assistant Commissioner/Dy. Commissioner of Customs(Export) counter-signature on the shipping bill/examination report precludes entitlement to drawback under Section 74(1)(a) of the Customs Act where the exported goods were examined and identified up to the level of the Superintendent (Export Shed) as re-export of previously imported defective goods. 2. Whether a procedural lapse or omission by departmental officers (failure of Superintendent to mark the shipping bill to the Assistant Commissioner for counter-signature) can defeat an otherwise established substantive right to drawback when identity of the goods has been recorded by customs officers and there is no dispute that the re-exported goods are the same as the goods earlier imported. 3. The effect and applicability of cited authorities on condonation of procedural/technical deficiencies in revenue procedure when substantive compliance and identifiability are established. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework: requirement of Section 74(1)(a) and Rule 5 for re-export drawback claims Legal framework: Section 74(1)(a) of the Customs Act contemplates re-export of imported goods and clearance by the proper officer (including loading for export under Section 51) as a condition for claiming drawback. Rules made under Section 74 (Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995) prescribe documents to be filed; Rule 5 requires furnishing of the triplicate copy of the shipping bill bearing the examination report recorded by the proper officer at the time of export among other documents. Precedent treatment: The authorities cited by the applicant (a number of Tribunal/Commissioner/High Court and Supreme Court decisions) are invoked for the proposition that substantive compliance and identifiability of goods should govern entitlement rather than strict adherence to formalities. Interpretation and reasoning: The Government examined the record and found that the shipping bill clearly indicated 'RE-EXPORT CASE' and 'Shipping Bill for export of goods under claim DBK' and that the goods were examined and identified as per the import Bill of Entry up to the Superintendent (Export Shed) level. The absence of the Assistant Commissioner's counter-signature is an omission in form, not in substance: the required examination report by the proper officer was recorded; the shipping bill was accepted for re-export under Section 51; and the exported goods were established as the same goods imported earlier. The statutory condition in Section 74(1)(a) was therefore treated as effectively fulfilled despite the missing counter-signature, because the functional purpose of the requirement - identification and clearance by the proper officer - was satisfied. Ratio vs. Obiter: Ratio - where identifiability and clearance by customs officers are established and the shipping bill is processed as a re-export under Section 51, a mere lack of counter-signature by the Assistant Commissioner does not automatically deny drawback under Section 74(1)(a). Obiter - remarks about the desirability that departmental officers act as facilitators and the administrative duty to mark reports to the Assistant Commissioner may be supplementary observations. Conclusion: The condition in Section 74(1)(a) must be treated as satisfied on the facts where the examination report and identifiability are present despite the absence of the Assistant Commissioner's signature; the drawback claim is admissible if otherwise in order. Issue 2 - Procedural lapse by departmental officer and denial of substantive benefit Legal framework: Administrative and procedural rules must be read with a view to their object - facilitating legitimate exports and enabling claimants to receive dues where statutory conditions are substantively met. Procedural provisions in the Rules enumerate documents and formalities but do not automatically convert every procedural omission into an absolute bar where substantive compliance is shown. Precedent treatment: The Government relied on multiple authorities establishing the principle that minor procedural lapses, technical deficiencies, or non-compliance with formalities should not defeat substantive rights, particularly in revenue matters where identity and entitlement are otherwise established. The cited decisions support condoning procedural defects where public interest and justice require it. Interpretation and reasoning: The Government reasoned that the Superintendent's failure to forward the examination report to the Assistant Commissioner for counter-signature was a departmental lapse for which the exporter should not be penalized. The examination record by the Superintendent established identifiability vis-à-vis the relevant Bill of Entry and there was no contemporaneous objection by customs to the identity of the goods at re-export. Given the object of Section 74 and the Rules to permit drawback on re-export of imported goods found defective, denying relief on account of a subordinate officer's omission would frustrate substantive rights and the statutory purpose. Ratio vs. Obiter: Ratio - where departmental procedural lapses occur (e.g., failure to obtain a counter-signature), relief (drawback) should not be denied if the substantive requirements (identifiability, clearance by proper officers, and other conditions) are met and there is no prejudice to the revenue. Obiter - commentary on the superintendent's duty to mark records to the Assistant Commissioner and administrative admonitions to act as facilitators. Conclusion: Procedural lapses by departmental officers do not automatically bar drawback entitlement; the claim must be adjudicated on substantive compliance. Where identity is established by customs examination and export clearance was effected under Section 51, the exporter should not be penalized for the failure of a departmental official to complete an internal counter-signing formality. Issue 3 - Application and effect of precedents on condonation of procedural defects Legal framework: Judicial and quasi-judicial authorities have applied the principle that minor procedural and technical deficiencies are to be condoned where there is substantive compliance and no prejudice to revenue; this principle influences the exercise of revisional or remedial powers to do justice between the parties. Precedent treatment: The Government expressly considered a number of precedents brought by the applicant that emphasize protecting substantive rights against trivial procedural lapses and the role of departmental officers as facilitators. The Government found these authorities consonant with the view that the exporter's rights ought not to be defeated in such circumstances. Interpretation and reasoning: The Government applied those precedents to conclude that the circumstances here - clear marking of the shipping bill as re-export, an examination report by the Superintendent establishing identity with the import Bill of Entry, absence of any objection by customs as to identity at the time of re-export, and failure by the Superintendent to forward the shipping bill for counter-signature - fall squarely within the class of cases where procedural lapses are to be condoned in favour of substantive entitlement. Ratio vs. Obiter: Ratio - following established authorities, remedial relief (setting aside orders denying drawback) is appropriate where the defect is procedural/technical and the essential statutory conditions are substantively satisfied. Obiter - enumeration of the specific authorities is procedural to reasoning but not necessary to the core holding. Conclusion: The precedents support treating the missing Assistant Commissioner counter-signature as a curable procedural defect; on the facts the claim should be allowed and the adjudicating authority directed to sanction drawback if otherwise in order. Final Disposition and Direction Conclusion: The Government, applying the statutory provisions, reasoning on substantive compliance, and following settled precedent, held that (a) the identity of the re-exported goods with the imported goods was established by the Superintendent's examination report, (b) the exporter should not be penalized for the Superintendent's failure to obtain the Assistant Commissioner's signature, (c) the condition in Section 74(1)(a) is to be treated as fulfilled, and (d) the orders rejecting drawback were set aside and the matter remanded to the adjudicating authority to sanction the drawback claim if otherwise in order.