Tribunal upholds dismissal of appeals seeking conversion of free shipping bills to DEPB.

The Tribunal upheld the impugned orders, dismissing the appeals seeking conversion of free shipping bills into DEPB shipping bills. The decision was based on the lack of physical examination of goods, the delay in filing the conversion request, and the strict requirements of the DEPB scheme. The Revenue's argument that conversions should not be routine and must be substantiated by contemporaneous documentary evidence was accepted, emphasizing the need for proper verification and adherence to scheme conditions.

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Issues Involved:
1. Conversion of free shipping bills into DEPB shipping bills.
2. Application of Section 149 of the Customs Act, 1962.
3. Relevance of Board’s Circular No. 4/2004 dated 16.1.2004.
4. Physical examination of goods and correlation with imported items.
5. Timeliness and delay in filing the request for conversion.
6. Discretion of the Proper Officer in permitting amendments.

Detailed Analysis:

1. Conversion of Free Shipping Bills into DEPB Shipping Bills:
The primary issue is whether the conversion of 51 free shipping bills (in Appeal No. C/493/2011) and 28 free shipping bills (in Appeal No. C/492/2011) from the period 1997-1999 into DEPB shipping bills, as requested by the appellant on 1.10.2003, is allowable. The appellants argued that the conversion should be permitted based on the same set of export documents under Section 149 of the Customs Act, 1962. The Revenue contended that due to the lack of physical examination of the goods, it is difficult to correlate the exported items with the imported items, thus rejecting the conversion request.

2. Application of Section 149 of the Customs Act, 1962:
Section 149 allows amendments to documents presented in the customs house, provided the amendment is based on documentary evidence existing at the time the goods were exported. The appellants claimed they possessed all necessary documents at the time of export to show entitlement under the DEPB scheme. However, the discretion to permit amendments lies with the Proper Officer and must be exercised judiciously, ensuring the amendment is based on pre-existing documentary evidence.

3. Relevance of Board’s Circular No. 4/2004 dated 16.1.2004:
The circular clarifies that conversion of free shipping bills into DEPB shipping bills should not be allowed routinely. It permits such conversions only when the benefit of an export promotion scheme claimed by the exporter has been denied due to a dispute, subject to conditions such as timely request, satisfactory evidence of input use, and compliance with export promotion scheme conditions. The circular emphasizes that conversion requests should not be encouraged due to the difficulties they create.

4. Physical Examination of Goods and Correlation with Imported Items:
The conversion request was denied partly because there was no physical examination of the goods at the time of export, making it challenging to verify the correlation between exported and imported items. The Hon’ble Delhi High Court in Terra Films Pvt. Ltd. v. C.C. emphasized that physical verification of documents and goods is necessary to draw benefits from any export scheme.

5. Timeliness and Delay in Filing the Request for Conversion:
The appellants filed the conversion request four to five years after the export, which is significantly delayed. The Hon’ble Madras High Court in Areva T & D India Ltd. highlighted that amendments should not be permitted as a matter of course and must be based on contemporaneous documentary evidence. The delay in filing the request makes it difficult for the authorities to ascertain the use of duty-free goods in the export product.

6. Discretion of the Proper Officer in Permitting Amendments:
The Proper Officer has the discretion to permit amendments, but this discretion is qualified by the requirement for documentary evidence existing at the time of export. The Commissioner rightly observed that the request for conversion was not merely an amendment but a change in the status and character of the documents, which could not be allowed after such a long period.

Conclusion:
The Tribunal upheld the impugned orders, agreeing with the Revenue's contention that the conversion request could not be considered due to the lack of physical examination and the strict interpretation required for the DEPB scheme. The appeals were dismissed, reinforcing the principle that such conversions should not be allowed routinely and must be supported by contemporaneous documentary evidence.

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