Customs allows conversion of Ex-Bond to Into-Bond Bill of Entry under Section 46(5) with duty payment required

CESTAT Kolkata allowed appellant's request to convert Ex-Bond Bill of Entry to Into-Bond Bill of Entry under Section 46(5) of Customs Act. Appellant initially filed for warehousing but later sought home consumption clearance without paying duty or obtaining proper officer's clearance order. Since application was filed within three months with no duty rate change, no revenue loss, and no fraudulent intent proven, conversion was permitted. Appellant must pay applicable duty and interest under Section 61(2) at time of goods clearance, with any excess duty refundable with interest.

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Issues Involved:
1. Entitlement to conversion of Ex-Bond Bill of Entry into Into-Bond Bill of Entry under Section 46(5) of the Customs Act.
2. Consideration of revenue loss and fraudulent intention under Section 46(5).
3. Applicability of Section 68 and related provisions for clearance of warehoused goods.
4. Impact of delayed action by the authorities on the appellant's application.
5. Refund of excess duties and interest.

Detailed Analysis:

1. Entitlement to Conversion of Ex-Bond Bill of Entry into Into-Bond Bill of Entry under Section 46(5) of the Customs Act:
The appellant filed Bills of Entry for warehousing on 06.09.2021 and 20.09.2021 and subsequently filed Ex-Bond Bills of Entry for home consumption on 21.09.2021 and 28.09.2021. On 08.10.2021, the appellant sought to withdraw/cancel the Ex-Bond Bills of Entry and reinstate the Into-Bond Bills of Entry. Section 46(5) of the Customs Act allows substitution of a Bill of Entry for home consumption for a Bill of Entry for warehousing or vice versa, provided there is no revenue loss and no fraudulent intention. The appellant argued that there was no loss of revenue or fraudulent intention as the application was made before the reduction in duty rates effective from 14.10.2021.

2. Consideration of Revenue Loss and Fraudulent Intention under Section 46(5):
The appellant contended that the conditions under Section 46(5) were met on the date of the application (08.10.2021), as there was no loss of revenue or interest. The appellant could not have anticipated the subsequent reduction in duty rates, and there was no fraudulent intention. The authorities, however, rejected the application citing potential revenue loss due to the subsequent reduction in duty rates. The Tribunal noted that on 08.10.2021, there was no change in the duty rate, and the application should have been considered promptly.

3. Applicability of Section 68 and Related Provisions for Clearance of Warehoused Goods:
Section 68 of the Customs Act deals with the clearance of warehoused goods for home consumption, requiring the filing of a Bill of Entry for home consumption, payment of duty, interest, fine, and penalties, and an order for clearance by the proper officer. The Tribunal found that the appellant had filed Bills of Entry for warehousing initially, and the conditions under Section 68 were not met as no duty was paid, and no clearance order was issued. The application for withdrawal/cancellation of Ex-Bond Bills of Entry and reinstatement of Into-Bond Bills of Entry was thus valid under Section 46(5).

4. Impact of Delayed Action by the Authorities on the Appellant's Application:
The Tribunal emphasized that the authorities' delay in acting on the appellant's application led to a situation where the reduced duty rates came into effect, resulting in a perceived revenue loss. The Tribunal held that the authorities could not benefit from their own delay and inaction. The application should have been considered and disposed of promptly on 08.10.2021, when there was no revenue loss.

5. Refund of Excess Duties and Interest:
The Tribunal concluded that the appellant's application for withdrawal/cancellation of Ex-Bond Bills of Entry and reinstatement of Into-Bond Bills of Entry should be allowed. The duty should be calculated based on the applicable rate at the time of clearance of goods for home consumption, and any excess duty paid by the appellant should be refunded along with interest. The appellant is also liable to pay interest, if any, in terms of Section 61(2) of the Customs Act.

Conclusion:
The appeal is allowed, and the application for withdrawal/cancellation of Ex-Bond Bills of Entry and reinstatement of Into-Bond Bills of Entry filed on 08.10.2021 is accepted. The duty is to be calculated accordingly, and any excess duty paid by the appellant is to be refunded along with interest. The appeal is disposed of in these terms.

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