Tribunal grants conversion of shipping bills under Customs Act.

The Tribunal accepted the appellants' request for conversion of free shipping bills to DEEC shipping bills under the Customs Act, 1962. The appellants demonstrated a clear link between imported inputs like CRGO Steel Sheet, Copper Wire Rods, and exported transformers, supported by various documents. Despite discrepancies noted by the adjudicating authority, the Tribunal overturned the impugned order, citing flexibility in utilizing duty-free materials under the Foreign Trade Policy. The appeal was allowed, and the conversion was granted, with the operative part of the order pronounced on 15-4-2009.

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Issues:
Conversion of free shipping bills to DEEC shipping bills under the Customs Act, 1962.

Analysis:
The appellants obtained three DEEC licenses in 2002 for importing parts and materials for manufacturing transformers for export. They exported transformers and spares to Morocco, Algeria, and Ethiopia under free shipping bills instead of DEEC shipping bills. Their request for conversion was initially rejected based on a CBEC Circular but was later allowed by the Tribunal. The appellants provided various documents to prove exports under the DEEC scheme, which were rejected again by the adjudicating authority, leading to the current appeal.

The appellants presented a certificate from a Chartered Engineer and documents showing consumption of imported goods in the export products. They established a clear link between the imported goods like CRGO Steel Sheet, Copper Wire Rods, etc., and the exported transformers with unique serial numbers tailored to specific customer requirements. The documents submitted, including purchase orders, export invoices, and shipping bills, demonstrated the connection between imported inputs and export products.

The adjudicating authority noted discrepancies in correlation for some shipping bills related to export of transformer spares but failed to provide sufficient grounds for rejection. The Commissioner's argument regarding examination norms for DEEC shipping bills not being followed was countered by the unique nature of transformer exports, which are not containerized but shipped in break bulk. The Foreign Trade Policy allows flexibility in utilizing duty-free materials after meeting export obligations, as supported by precedent in Kit Ply Industries Ltd. v. Commissioner of Customs, Mumbai. The requirement of physical incorporation of imported materials in export products was deemed unnecessary.

Based on the established link between imported inputs and export products, the Tribunal accepted the appellants' request for conversion of free shipping bills to DEEC shipping bills, overturning the impugned order and allowing the appeal. The operative part of the order was pronounced on 15-4-2009.

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