Drawback on free shipping bills may be considered on waiver of declaration requirement, without prior conversion into drawback shipping bills.

All Industry Rate drawback could not be refused solely because exports were made under free shipping bills. The proper inquiry was whether waiver of the declaration requirement under the proviso to Rule 12(1)(a) of the Customs, Central Excise and Service Tax Drawback Rules, 1995 should be granted on the facts, and Board circulars indicated that conversion into drawback shipping bills was not a necessary precondition. The Commissioner had not examined the waiver request on its merits and had focused instead on conversion. The matter was therefore remitted for fresh consideration limited to the statutory waiver issue and the applicable circulars.

---

---

Issues: Whether drawback at All Industry Rate could be considered on exports made under free shipping bills by granting waiver of the declaration requirement under the proviso to Rule 12(1)(a) of the Customs, Central Excise and Service Tax Drawback Rules, 1995, and whether the matter required remand for such consideration.

Analysis: The Development Commissioner had permitted debonding with effect from 06.06.2008, and the record showed that the unit was to be treated as an EPCG unit from that date. The dispute was not whether drawback was conceptually barred, but whether the Commissioner should have considered the request for waiver of the declaration requirement under the proviso to Rule 12(1)(a) instead of focusing only on conversion of free shipping bills into drawback shipping bills. The applicable Board circulars clarified that conversion was unnecessary and that the Commissioner could examine individual requests on merits and facts for granting drawback on free shipping bills at All Industry Rate. The order also did not address the waiver request on its merits.

Conclusion: The request for drawback could not be rejected merely on the ground that the exports were made under free shipping bills. The Commissioner was required to consider waiver of the declaration requirement under the proviso to Rule 12(1)(a), and the matter was sent back for fresh consideration on that limited issue.

Final Conclusion: The impugned order was set aside and the matter was remitted for reconsideration of the claim in the light of the statutory waiver provision and the Board circulars governing drawback on free shipping bills.

Ratio Decidendi: Where the law permits exemption from the declaration requirement for All Industry Rate drawback, the proper inquiry is whether such waiver should be granted on the facts, and conversion of free shipping bills into drawback shipping bills is not a necessary precondition.

---