2024 (10) TMI 68 - HC - Customs

Customs authority must reconsider shipping bill conversion application after circular provision struck down as unconstitutional

Gujarat HC quashed customs authority's rejection of petitioner's application for converting shipping bills to drawback shipping bills. The court held that ... Prayer for striking down and declaring para 3 (a) of the circular no. 36/2010-Customs dated 23.09.2010 issued under the Customs Act, 1962 as being ultra-vires the statutory provisions - application for conversion of the shipping bills has been rejected - HELD THAT:- It would be germane to reproduce the findings given by this Court in case of MESSRS MAHALAXMI RUBTECH LTD. VERSUS UNION OF INDIA [2021 (3) TMI 240 - GUJARAT HIGH COURT] while striking down para 3 (a) of the circular it was held that 'the impugned circular to the extent of para 3 (a) is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as also ultra vires Section 149 of the Customs Act, 1962.' When the petitioner filed an application for conversion of the shipping bills to drawback shipping bills from 01.10.2017 to 31.03.2020, para 3 (a) of the Circular No. 36 of 2022 was already struck down and therefore the time limit prescribed therein would not be applicable to the application made by the petitioner on 01.07.2022 and the respondent No. 3 was required to consider the application for conversion of the shipping bills to drawback shipping bills as per the provision of Section 149 of the Customs Act without rejecting the same on the ground of limitation. The impugned order dated 19.04.2023 passed by the respondent No. 3 is hereby quashed and set aside. The matter is remanded back to the respondent to pass appropriate order to convert the shipping bills of the petitioner from 01.10.2017 to 13.03.2020 to drawback shipping bills while exercising its powers under Section 149 of the Customs Act, so that the petitioner becomes eligible for duty drawback as per Circular No. 88 of 2017. Petition allowed by way of remand. Issues Involved:1. Validity of Paragraph 3(a) of Circular No. 36/2010-Customs.2. Application for conversion of shipping bills and its rejection.3. Applicability of Section 149 of the Customs Act, 1962.4. Impact of subsequent regulations and judicial precedents.Issue-wise Detailed Analysis:1. Validity of Paragraph 3(a) of Circular No. 36/2010-Customs:The petitioner challenged Paragraph 3(a) of Circular No. 36/2010-Customs dated 23.09.2010, which prescribes a three-month time limit for filing applications for conversion of shipping bills from the date of the Let Export Order (LEO). The petitioner argued that this provision is ultra vires the statutory provisions of Section 149 of the Customs Act, 1962, which does not prescribe any time limit for such amendments. The court agreed with the petitioner, referencing the decision in Mahalaxmi Rubtech Ltd. v. Union of India, where it was held that the CBEC could not impose a time limit through a circular when the substantive statutory provision did not provide for one. Consequently, the court declared Paragraph 3(a) of the Circular No. 36/2010-Customs as ultra vires Articles 14 and 19(1)(g) of the Constitution of India and Section 149 of the Customs Act.2. Application for Conversion of Shipping Bills and Its Rejection:The petitioner, engaged in the export of tea, applied for the conversion of shipping bills from the category of free/EPCG to duty drawback on 14.07.2022. This application was rejected by the respondent on 19.04.2023, citing non-compliance with the three-month time limit prescribed in Paragraph 3(a) of Circular No. 36/2010-Customs. The court found that the respondent had ignored the binding decision in Mahalaxmi Rubtech Ltd., which had already struck down Paragraph 3(a) of the circular. Therefore, the rejection of the application based on this provision was deemed invalid.3. Applicability of Section 149 of the Customs Act, 1962:Section 149 of the Customs Act allows for the amendment of documents presented in the customs house, provided the amendment is based on documentary evidence existing at the time the goods were exported. The court emphasized that Section 149 does not prescribe any time limit for such amendments. The court also referenced various judicial precedents, including the case of Gokul Overseas vs. Union of India, which supported the view that amendments could be made without a time limit, provided the necessary documentary evidence was available.4. Impact of Subsequent Regulations and Judicial Precedents:The court noted that subsequent regulations, specifically the Shipping Bill (Post Export Conversion in relation to Instrument Based Scheme) Regulations, 2022, which came into effect on 22.02.2022, apply prospectively. Therefore, these regulations did not affect the petitioner's application filed on 01.07.2022 for conversions of shipping bills from 01.10.2017 to 31.03.2020. The court also referenced multiple judicial precedents, including the cases of Kedia (Agencies) Pvt. Ltd. v. Commissioner of Customs and Raj and Company vs. Union of India, which supported the view that amendments to shipping bills should be allowed based on existing documentary evidence without being constrained by a time limit.Conclusion:The court allowed the petition, quashing the impugned order dated 19.04.2023 and remanding the matter back to the respondent to consider the application for conversion of shipping bills without applying the time limit from Paragraph 3(a) of Circular No. 36/2010-Customs. The respondent is directed to exercise its powers under Section 149 of the Customs Act to convert the shipping bills, thereby making the petitioner eligible for duty drawback as per Notification No. 88 of 2017.