2020 (3) TMI 167 - HC - Customs

Court directs conversion of shipping bills to MEIS; respondents' rejection unjustified. Petition allowed, letter quashed.

The court concluded that the respondents were not justified in rejecting the petitioner's request for conversion of shipping bills from free to MEIS ... Merchandise Exports From India Scheme (MEIS) - declaration of intent on shipping bills - conversion/amendment of shipping bills under section 149 of the Customs Act - time limit for conversion under Circular No.36/2010-Cus. - distinction between EDI and Non-EDI shipping bills - substantial compliance and documentary evidence as basis for amendmentDeclaration of intent on shipping bills - distinction between EDI and Non-EDI shipping bills - Merchandise Exports From India Scheme (MEIS) - Whether omission to record the prescribed declaration of intent on free/Non-EDI shipping bills for exports made in April-May 2015 is fatal to entitlement to MEIS rewards where the exports and documentary evidence otherwise establish eligibility. - HELD THAT: - The court examined para 3.14 of the Handbook of Procedure and the Public Notices dealing with EDI and Non-EDI shipping bills. It held that, unlike EDI shipping bills where ticking 'Y' was made mandatory, the Handbook does not make the specific form of declaration mandatory in the same manner for Non-EDI/free shipping bills. The respondents did not dispute that the goods were exported, that the goods fall within notified tariff lines and that documentary evidence (shipping bills, invoices, etc.) exists to establish the shipments and their eligibility for MEIS. Applying the principle of substantial compliance, and following the reasoning in Kedia (Agencies) Pvt. Ltd., the court held that where all other material is available and the omission is limited to failure to make the declaration, that omission is not decisive and does not bar conversion to MEIS shipping bills if the competent authority is otherwise satisfied on the documentary record. [Paras 24, 25, 36, 37]Omission to file the declaration of intent on the free/Non-EDI shipping bills in the peculiar facts of this case is not fatal; the petitioner may have the shipping bills converted to MEIS shipping bills subject to satisfaction of the competent authority.Conversion/amendment of shipping bills under section 149 of the Customs Act - time limit for conversion under Circular No.36/2010-Cus. - substantial compliance and documentary evidence as basis for amendment - Whether the three month time limit in Circular No.36/2010 Cus. for seeking conversion/amendment of shipping bills under section 149 is an absolute bar to conversion in the petitioner's case. - HELD THAT: - The court noted that Circular No.36/2010 Cus. prescribes that requests for conversion should ordinarily be made within three months of the Let Export Order, the rationale being that free shipping bills are subject to 'nil' examination norms. The authorities rejected the petitioner's conversion application as time barred. However, the court observed that the Development Commissioner had recorded that the petitioner had regularly claimed MEIS for similar goods in later periods and that documentary evidence existed at the time of export. In these circumstances, and having regard to precedents recognizing amendment where all material exists and the omission is limited to a procedural declaration, the court held that the strict time condition could not defeat the claim. The court directed conversion subject to satisfaction of the competent authority, thereby permitting relief despite the delay in making the conversion application. [Paras 33, 34, 36, 37, 38]Although Circular No.36/2010 Cus. prescribes a three month limit, on the facts of this case - where documentary evidence exists and eligibility is not disputed - the petitioner's application for conversion cannot be denied solely on the ground of delay; conversion is to be permitted subject to satisfaction of the competent authority.Final Conclusion: The petition is allowed: the impugned communication refusing acceptance of the shipping bills for MEIS is quashed and the respondents are directed to permit conversion of the identified free/Non EDI shipping bills to MEIS shipping bills, subject to the satisfaction of the competent authority, within two months. Issues Involved:1. Eligibility for benefits under the Merchandise Exports From India Scheme (MEIS).2. Amendment of shipping bills to include 'Declaration of Intent'.3. Time limit for applying for conversion of shipping bills.4. Discrimination between EDI and Non-EDI shipping bills.5. Procedural requirements under section 149 of the Customs Act, 1962.Issue-wise Detailed Analysis:1. Eligibility for benefits under the Merchandise Exports From India Scheme (MEIS):The petitioner, a partnership firm located in Kandla Special Economic Zone (KSEZ), engaged in manufacturing derivatives of Castor Oils, sought benefits under the MEIS for exports made between April 2015 to January 2016. The MEIS, introduced by the Foreign Trade Policy (FTP) 2015-2020, aims to promote exports of notified goods manufactured in India. The petitioner had previously been granted MEIS benefits but faced rejection for twenty-five shipping bills due to the absence of a 'Declaration of Intent'.2. Amendment of shipping bills to include 'Declaration of Intent':The petitioner applied for amendment of shipping bills to include the 'Declaration of Intent' to claim MEIS benefits. Despite continuous follow-ups and representations, the petitioner faced delays and eventual rejection on technical grounds. The court noted that the 'Declaration of Intent' is procedural and not mandatory for Non-EDI shipping bills, unlike EDI shipping bills where it is mandatory.3. Time limit for applying for conversion of shipping bills:The petitioner's request for conversion of shipping bills was rejected based on Circular No.36/2010-Customs, which mandates that such requests must be made within three months from the date of the Let Export Order (LEO). The court observed that the delay was due to the respondents' prolonged inter-departmental communications and not the petitioner's fault.4. Discrimination between EDI and Non-EDI shipping bills:The petitioner argued that the respondents discriminated between EDI and Non-EDI shipping bills by allowing corrections for EDI shipping bills but not for Non-EDI shipping bills. The court found this differentiation unjustified, especially since the petitioner’s goods were eligible for MEIS benefits and had been regularly claiming them for later periods.5. Procedural requirements under section 149 of the Customs Act, 1962:Section 149 allows amendments to documents presented in the customs house at the discretion of the proper officer. The court highlighted that the petitioner had submitted all necessary documents and the goods conformed to the description in the shipping documents. The court relied on the Delhi High Court's decision in Kedia (Agencies) Pvt. Ltd. v. Commissioner of Customs, which permitted amendments to shipping bills when all other relevant materials were present.Conclusion:The court concluded that the respondents were not justified in rejecting the petitioner's request for conversion of shipping bills from free to MEIS shipping bills. The court allowed the petition, quashed the impugned letter dated 11.02.2019, and directed the respondents to permit the conversion of the shipping bills subject to the satisfaction of the competent authority within two months. The rule was made absolute with no order as to costs.