2021 (6) TMI 264 - HC - Customs

Court overturns decision on shipping bill scheme conversion, stresses fair process, timely orders

The Court set aside the impugned order denying the conversion of shipping bills from 'drawback' to 'drawback-cum-advance authorization' scheme, ... Conversion of drawback shipping bill to drawback-cum-advance authorization - applicability of Board Circular No.36/2010 - opportunity of personal hearing - remand for fresh consideration on merits - LEO granted under RMS without examinationLEO granted under RMS without examination - conversion of drawback shipping bill to drawback-cum-advance authorization - Validity of the advance authorization and timeliness of the petitioner's request for conversion of the shipping bills; legality of the impugned rejection when the shipping bills were cleared under RMS without examination and the conversion request was made shortly after export. - HELD THAT: - The Court found that the advance authorization relied upon by the petitioner was not disputed and that the shipping bills in question were filed under the drawback scheme and were cleared for export under RMS with LEO granted on 09.09.2014. The petitioner's request for conversion was submitted on 08.12.2014, within three months of export. The Court rejected the respondents' contention that the request could not be traced after five years and six months and recorded that the respondent rejected the request without giving the petitioner an opportunity or conducting required scrutiny. Having examined these facts, the Court concluded that the impugned disposal could not stand.Impugned order dated 09.09.2020 is set aside insofar as it rejected the conversion request without proper consideration; the Court accepted that the petitioner had a valid advance authorization and that the conversion request had been made in time.Applicability of Board Circular No.36/2010 - opportunity of personal hearing - remand for fresh consideration on merits - Requirement that the respondents re-examine the petitioner's request for conversion in accordance with law, giving reasonable opportunity including personal hearing, and decide on merits consistent with Circular No.36/2010 where applicable. - HELD THAT: - The Court held that the matter must be reconsidered afresh by the first respondent because the earlier disposal did not afford the petitioner a proper opportunity and no adequate examination was shown to have been carried out in respect of the composition of imported material as contemplated by the Circular. The Court directed that the first respondent must give the petitioner a reasonable opportunity, including personal hearing, and thereafter decide the conversion request on merits and in accordance with law. The Court prescribed a timeline of six weeks from receipt of the order for completion of this exercise.The matter is remanded to the first respondent for fresh consideration and appropriate orders on merits after giving reasonable opportunity (including personal hearing); the exercise to be completed within six weeks.Final Conclusion: The writ petition is allowed to the extent that the impugned order dated 09.09.2020 is set aside and the matter is remitted to the first respondent for fresh consideration of the petitioner's application for conversion of the shipping bills, with a reasonable opportunity including personal hearing, to be decided on merits and in accordance with law within six weeks. Issues:1. Conversion of shipping bills from 'drawback' to 'drawback-cum-advance authorization' scheme.Analysis:Issue 1: Conversion of shipping billsThe petitioner sought to convert shipping bills from 'drawback' to 'drawback-cum-advance authorization' scheme. The petitioner had obtained an Advance Authorization for import of specific materials and had an export obligation. The petitioner imported raw materials, manufactured goods, and exported them under the 'drawback scheme'. However, due to the nature of manufacturing using both locally procured and imported inputs, the shipping bills should have been filed under the 'Drawback-cum-Advance Authorization Scheme'. The petitioner made repeated requests for conversion, but faced delays and rejections based on grounds of limitation and lack of examination of imported materials used in manufacturing. The petitioner also faced penalties for alleged non-fulfillment of export obligations under the Advance Authorization. Despite efforts and grievances raised by the petitioner, the conversion request was consistently denied without proper consideration.The Court observed that the Advance Authorization license was not disputed, and the petitioner had exported goods under the 'drawback scheme'. The Court rejected the respondent's claim that the conversion request could not be traced after several years, noting that the petitioner had made the request within three months of export. The Court criticized the lack of response and consideration given to the petitioner's request, leading to the passing of the impugned order without proper opportunity for the petitioner to present their case. Consequently, the Court set aside the impugned order and remanded the matter back to the first respondent for fresh consideration, emphasizing the need for a reasonable opportunity, including a personal hearing, for the petitioner. The Court directed the first respondent to pass appropriate orders on merits and in accordance with the law within six weeks from the date of the order.In conclusion, the judgment focused on the procedural fairness and proper consideration required in matters of conversion of shipping bills, highlighting the importance of providing a reasonable opportunity for affected parties to present their case and ensuring decisions are made in accordance with the law.