TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Exporter wins appeal for converting 1767 shipping bills from drawback to DFIA scheme under Section 149</h1> <h3>M/s. ADF Foods Ltd. Versus Commissioner of Customs, Nhava Sheva-II, Raigad, Maharashtra</h3> M/s. ADF Foods Ltd. Versus Commissioner of Customs, Nhava Sheva-II, Raigad, Maharashtra - TMI 1. ISSUES PRESENTED and CONSIDERED 1. Whether a limitation period can be imposed on the conversion of shipping bills under Section 149 of the Customs Act, 1962 from the Drawback Scheme to the Duty Free Import Authorisation (DFIA) Scheme, in the absence of any express time limit in the statute. 2. Whether the provisions of the Limitation Act, 1963, particularly Article 137 prescribing a three-year limitation period, apply to quasi-judicial proceedings under Section 149 of the Customs Act. 3. Whether the restriction under Clause 3(e) of Circular No. 36/2010-Cus. dated 23.09.2010, which prohibits conversion of shipping bills after availing benefit of an Export Promotion Scheme (EP Scheme), applies to conversion from the Drawback Scheme to the DFIA Scheme. 4. The validity and effect of examination or non-examination of shipping bills on the permissibility of conversion under Section 149. 5. Whether the Foreign Trade Policy (FTP) 2015-20 has prospective effect limiting conversion of shipping bills to the period post its commencement. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Applicability of Limitation Period to Conversion under Section 149 and Applicability of Limitation Act - Relevant Legal Framework and Precedents: Section 149 of the Customs Act, 1962 provides for conversion of shipping bills from one export promotion scheme to another but does not prescribe any time limit for such conversion. The Limitation Act, 1963, particularly Article 137, prescribes a three-year limitation period for applications to courts but does not expressly apply to quasi-judicial proceedings. The Supreme Court in M.P. Steel Corporation held that the Limitation Act applies only to courts and not to tribunals or quasi-judicial authorities unless expressly stated. Earlier decisions of this Tribunal and various High Courts have held that limitation provisions of the Limitation Act do not apply to quasi-judicial proceedings under the Customs Act. - Court's Interpretation and Reasoning: The Tribunal relied on the authoritative Supreme Court pronouncement in M.P. Steel Corporation, which clarified that limitation provisions under the Limitation Act are not applicable to quasi-judicial authorities unless explicitly provided. The Tribunal rejected the imposition of a three-year limitation period on conversion of shipping bills under Section 149, as no such limitation is prescribed in the statute. The Tribunal also distinguished the decision of the Chennai Bench applying Article 137 of the Limitation Act, holding that such application is not sustainable in law. - Key Evidence and Findings: The Commissioner had imposed a three-year limitation period on conversion relying on a Chennai Bench decision applying Article 137. The Appellant demonstrated several judicial precedents including Supreme Court and High Court rulings that no limitation applies to quasi-judicial proceedings under Section 149. The Tribunal also noted that Section 149 itself contemplates conversion on documentary proof without any time bar. - Application of Law to Facts: Since Section 149 does not prescribe any limitation and the Limitation Act does not apply to quasi-judicial proceedings, the Tribunal held the imposition of a three-year limitation by the Commissioner to be unsustainable. The conversion requests beyond three years were found valid subject to compliance with reversal of drawback benefits. - Treatment of Competing Arguments: The Department relied on the Chennai Bench decision and the principle of reasonable time from the Supreme Court decision in GOI vs. Citedal Fine Pharmaceuticals. The Tribunal distinguished these on the ground that the Limitation Act does not apply to quasi-judicial proceedings and that the reasonable time principle cannot override the statutory silence on limitation in Section 149. - Conclusion: No limitation period can be imposed on conversion of shipping bills under Section 149 of the Customs Act. The rejection of conversion requests beyond three years on limitation grounds is legally unsustainable. Issue 3: Applicability of Clause 3(e) of Circular No. 36/2010-Cus. Prohibiting Conversion after Availing Export Promotion Scheme Benefits - Relevant Legal Framework and Precedents: Clause 3(e) of Circular No. 36/2010-Cus. restricts conversion of shipping bills once benefits under an Export Promotion Scheme have been availed. The Drawback Scheme is governed by the Customs Act and is distinct from Export Promotion Schemes administered by the DGFT under the Foreign Trade Policy. The Punjab & Haryana High Court in Commissioner, Customs ICD, GRFL vs. M/s. Bectors Food Specialities Ltd. upheld conversion from drawback to DFIA subject to reversal of drawback benefits. - Court's Interpretation and Reasoning: The Tribunal observed that the Department did not raise this issue before the Commissioner and did not appeal against the order allowing conversion for three years. The Tribunal held that Clause 3(e), being a circular provision, cannot override the statutory provisions of Section 149. It further distinguished between the Drawback Scheme and Export Promotion Schemes, holding that drawback is a statutory benefit under Customs Act and not an EP Scheme under DGFT policy. Therefore, the prohibition in Clause 3(e) does not apply to conversion from Drawback Scheme to DFIA. - Key Evidence and Findings: The Tribunal noted that the Circular itself enumerates EP Schemes separately and excludes drawback from such schemes. The Department's own acceptance of conversion for three years with reversal of drawback benefits was also noted. - Application of Law to Facts: The Tribunal held that the circular's restriction cannot be applied to prevent conversion from Drawback to DFIA scheme. The Appellant's conversion requests are valid subject to reversal of drawback benefits with interest. - Treatment of Competing Arguments: The Department argued for the applicability of Clause 3(e) to prevent conversion after availing EP Scheme benefits. The Tribunal rejected this on statutory and policy grounds and due to non-raising of the issue before the Commissioner. - Conclusion: Clause 3(e) of Circular No. 36/2010-Cus. does not apply to conversion from Drawback Scheme to DFIA Scheme; such conversion is permissible subject to reversal of drawback benefits. Issue 4: Examination of Shipping Bills and its Impact on Conversion - Relevant Legal Framework and Precedents: Section 149 requires documentary proof for conversion of shipping bills. Circular No. 36/2010-Cus. contemplates examination of shipping bills, but the Risk Management System (RMS) era has reduced the rigour of examination. - Court's Interpretation and Reasoning: The Commissioner had noted that shipping bills were duly examined through the ICES system and that rigorous examination at the point of conversion has lost significance in the RMS era. The Tribunal found no legal impediment to conversion based on examination status. - Key Evidence and Findings: The Commissioner's order records specific examination of shipping bills and departure from strict examination requirements in the RMS context. - Application of Law to Facts: Since shipping bills were examined as per system records, and no statutory bar exists against conversion for non-examined bills, the Tribunal did not uphold the Department's objection on this ground. - Treatment of Competing Arguments: The Department argued that many shipping bills were not examined and thus conversion is impermissible. The Tribunal rejected this argument based on the Commissioner's findings and prevailing procedural norms. - Conclusion: Examination or non-examination of shipping bills does not bar conversion under Section 149, especially in the RMS era. Issue 5: Prospective Application of Foreign Trade Policy 2015-20 on Conversion Requests - Relevant Legal Framework and Precedents: Foreign Trade Policy (FTP) 2015-20 governs export promotion schemes during its operative period. The Punjab & Haryana High Court upheld conversion of shipping bills predating FTP 2015-20 commencement. The Supreme Court in M.P. Steel Corporation held procedural rules to be retrospective unless expressly stated otherwise. - Court's Interpretation and Reasoning: The Tribunal rejected the Department's contention that conversion should be restricted to the FTP 2015-20 period. It found no specific provision or precedent supporting prospective application limiting conversion requests to the FTP period. - Key Evidence and Findings: The Tribunal relied on judicial precedents permitting conversion for periods prior to FTP 2015-20 and procedural rules' retrospective application. - Application of Law to Facts: Conversion requests for shipping bills predating FTP 2015-20 were held valid. - Treatment of Competing Arguments: The Department's argument for prospective application was dismissed due to lack of statutory or judicial support. - Conclusion: FTP 2015-20 is not applicable prospectively to restrict conversion of shipping bills for prior periods. 3. FINAL CONCLUSIONS - The imposition of a three-year limitation period on conversion of shipping bills under Section 149 of the Customs Act is not legally sustainable as the Limitation Act does not apply to quasi-judicial proceedings unless expressly provided. - Conversion of shipping bills from the Drawback Scheme to the DFIA Scheme is permissible beyond three years from the date of export, subject to reversal of drawback benefits with applicable interest. - Restrictions under Clause 3(e) of Circular No. 36/2010-Cus. do not apply to conversion from Drawback Scheme to DFIA Scheme, as drawback is a statutory benefit distinct from Export Promotion Schemes. - Examination or non-examination of shipping bills does not bar conversion under Section 149, particularly in the RMS era where examination rigor has reduced. - The Foreign Trade Policy 2015-20 does not have prospective effect to limit conversion requests to its operative period; conversion for prior periods is valid. - The appeal is allowed, and the order rejecting conversion of 1767 shipping bills beyond three years is set aside. Conversion is permitted subject to reversal of drawback benefits with interest within three months and issuance of necessary certificates for DFIA license validation.
TaxTMI 