CESTAT allows conversion from DFIA to Drawback after HC struck down three-month time limit in Para 3(a) Circular 36/2010

CESTAT Ahmedabad allowed the appeal challenging rejection of conversion request from DFIA to Drawback shipping bills. The Commissioner had rejected the request citing three-month time limit under Para 3(a) of CBIC Circular No. 36/2010-Customs. However, Gujarat HC in Mahalaxmi Rubtech case declared this provision ultra vires Articles 14 and 19(1)(g) of Constitution and Section 149 of Customs Act 1962. Since the rejection was solely based on the struck-down circular provision, the Commissioner's order was held bad in law. The appellant had applied for conversion promptly after DFIA license cancellation as required under Para 4.28(e) of Handbook of Procedures, which prescribed no time limit for such conversion requests.

---

---

Issues:
Whether rejection of the request for conversion of Shipping Bills from DFIA to Drawback, based on the time limit prescribed in Circular No. 36/2010-Customs, is sustainable in law.

Analysis:
The Appellant, a manufacturer-exporter, exported goods under DFIA licenses but did not import under them. The Appellant surrendered the licenses and applied for conversion of Shipping Bills to Drawback Shipping Bills. The Commissioner rejected the request citing Circular No. 36/2010-Customs. The Appellant argued that the Circular was struck down by the Gujarat High Court and Tribunal's previous decision favored them.

The Tribunal found the rejection based on the Circular invalid due to the Gujarat High Court's ruling that the Circular was ultra vires the Constitution and the Customs Act. The Bombay High Court also deemed the Circular illegal. The Tribunal previously held that no time limit was prescribed for conversion. The Commissioner should have followed the Tribunal's decision in the Appellant's case.

The Appellant promptly applied for conversion after canceling the DFIA licenses, with no delay. The Tribunal held that the Appellant was entitled to conversion without any time limit as per the Handbook of Procedures. The Tribunal allowed the appeal, stating that the impugned order was unsustainable and granted consequential relief.

---