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Case Number

Order No. A/335/2006-WZB/C-II(C.S.T.B) in Appeal No. C/4/2006

Judges

Archana Wadhwa, Member (J)
S.S Sekhon, Member (T)

Acts

SECTION 149 CUSTOMS ACT 1962

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Smart Summary

Structured Summary of the Opinion — M/s. Man Industries (I) Ltd.

Factual and Procedural Background

M/s. Man Industries (I) Ltd. exported "carbon steel submerged ARC welded pipes" under three Shipping Bills (Nos. 1000017585, 1000017579, 1000017580) dated 25-10-2002, initially filed under the DEPB scheme. On 23-12-2002 the exporter requested conversion of those DEPB Shipping Bills to the DEEC scheme, stating the DEPB filing was a mistake. The exporter submitted documentary material including Advance Licence No. 0310156546 (dated 3-9-2000), Chartered Engineer certificate certifying inputs used in the exported product, and subsequent certifications (including a certificate by the Superintendent, Customs & Excise, Pithampur).

The Export Department examined the request against Standing Order No. 7078 (20-1-1995) and found no declaration regarding exempted inputs at the time of export and no standing order authorizing conversion from DEPB to DEEC; the exporter was asked to explain. The exporter supplied further documents and undertakings and maintained that inputs were imported under the Advance Licence and certified by relevant officials.

By letter dated 20-1-2004, Assistant Commissioner (Gr. VII) conveyed rejection of the conversion request, relying on Board Circular No. 4/2004-Cus. (16-1-2004), which permitted conversion only where the benefit of a scheme was denied by DGFT/MoC or Customs due to dispute. Aggrieved, the exporter appealed to the Commissioner (Appeals), who dismissed the appeal as beyond jurisdiction (observing that appeal from Commissioner is to Tribunal). The exporter then appealed to the CESTAT (West), which, by Order No. A-146/WZB/2005/CI dated 14-2-2005, set aside the earlier rejection and remanded the matter to the jurisdictional Commissioner for fresh decision in light of Board Circular No. 6/2003-Cus. and Tribunal decisions (Smruti Pottery Works and Sanghi Industries), directing a fresh order after hearing.

Pursuant to the CESTAT directions, the Commissioner of Customs (EP) heard the exporter on 10-11-2005 and issued the order impugned before the present bench, refusing conversion on the basis that the exporter had chosen to file under DEPB (not forced to file free shipping bill), that the case did not fall within the types of conversions allowed by Board Circulars then in force, and treating the conversion request as an afterthought. The present opinion examines and decides the appeal against that impugned order.

Legal Issues Presented

Whether the exporter’s request for conversion of Shipping Bills from DEPB to DEEC could be permitted under the statutory power to amend documents under Section 149 of the Customs Act, 1962, having regard to the proviso requiring documentary evidence in existence at the time of export.
Whether Board Circulars (in particular Board Circular No. 4/2004-Cus. and earlier Circulars Nos. 6/2003 and 40/2003) can operate so as to curtail or override the statutory right/obligation under Section 149 to amend a shipping bill where the proviso's conditions are met.
Whether, on the facts and documentary record before the authority, the appellant satisfied the proviso to Section 149 (i.e., documentary evidence existed at the time of export) so as to entitle them to conversion.

Arguments of the Parties

Appellant's Arguments

The exporter asserted that the Shipping Bills had been filed under the DEPB scheme by mistake and sought conversion to the DEEC scheme (application dated 23-12-2002).
The exporter relied on documentary proof: Advance Licence No. 0310156546 (3-9-2000), Chartered Engineer Certificate (dated 27-12-2002) certifying exempted inputs used in the manufactured export product, and a certificate by the Superintendent, Customs & Excise (dated 29-10-2003) confirming import of HR Plates under the Advance Licence and manufacture/export of the pipes.
The exporter undertook (letters dated 27-8-2003 and 29-8-2003) to claim only specified exempt inputs and reiterated that DEPB filing was a mistake. They argued documentary evidence required by the proviso to Section 149 existed at the time of export and therefore conversion should be permitted.
The appellant invoked the statutory power under Section 149 of the Customs Act, 1962, to seek amendment of a Shipping Bill, and contended that the proviso's documentary-evidence requirement was satisfied.

Respondent's / Commissioner’s Arguments

The Commissioner relied on Board Circular No. 4/2004-Cus. (16-1-2004), which permits conversion only where benefit of an export promotion scheme was denied by DGFT/MoC or Customs due to dispute; the appellant did not fall into such categories.
The Commissioner found that the exporter had intentionally filed under DEPB (evidenced by DEPB declarations, SION Sr. No., Product Code, DEPB rates, and absence of declaration regarding exempt inputs), so the plea of mistake was an afterthought rather than a genuine error; consequently the case did not fall within conversion types under Board Circulars Nos. 6/2003 or 40/2003.
The Commissioner observed that Circular No. 4/2004 superseded earlier circulars and that a condition in paragraph 3.2(a) of Circular No. 4/2004 applied; accordingly, conversion was refused on those circular-based grounds.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Collector Of Central Excise, Patna v. Usha Martin Industries (S.C.)	Principle that a beneficial/benevolent Board Circular is binding on the department and the department cannot take a stand contrary to Board instructions; department may be resisted by assessees but the department itself cannot depart from such instructions.	The Court relied on this Supreme Court authority to hold that departmental circulars cannot be applied so as to curtail or nullify the statutory right under Section 149; the opinion used the case to support the proposition that a circular cannot assume the status of a statute overruling Section 149.
Smruti Pottery Works v. Commissioner of Customs, Kandla (Tribunal)	Used as an instance where conversion of shipping bill was considered where exporters had been forced to file free shipping bills or were otherwise entitled to conversion (as described in the opinion).	The CESTAT (earlier Bench) relied on this Tribunal decision to remand the appellant's matter to the jurisdictional Commissioner for fresh decision; the present bench observed that the Commissioner failed to follow the ratio laid down by this Tribunal decision.
M/s. Sanghi Industries Ltd. v. Commissioner of Customs, Jamnagar (Tribunal)	Similar tribunal authority cited alongside Smruti Pottery to illustrate past tribunal practice on conversion applications in analogous circumstances.	The CESTAT earlier referenced this decision in remanding the case for reconsideration; the present opinion notes the Commissioner did not properly apply the Tribunal's reasoning in these decisions.

Court's Reasoning and Analysis

The bench began by identifying the statutory mechanism relied upon by the appellant: Section 149 of the Customs Act, 1962, which empowers the proper officer to amend any document (including a shipping bill) after presentation to the Custom House, subject to the proviso that such amendment after export is permissible only on the basis of documentary evidence that existed at the time of export.
The opinion examined whether the proviso to Section 149 was satisfied. It noted the appellant had produced Chartered Engineer certificates, the Advance Licence, and a Superintendent of Customs & Excise certificate — documentary material antecedent to export and in existence at the relevant time. On that basis, the Court found the proviso's requirement of pre-existing documentary evidence was met by the appellant.
The Court then addressed the Commissioner's reliance on Board Circulars (Nos. 6/2003, 40/2003 and, in particular, 4/2004) that specify limited situations in which conversion between export promotion schemes would be permitted. The Commissioner had concluded that the appellant did not fall within the categories listed in those circulars (for example, cases where exporters were forced by Customs to file free shipping bills or where the benefit of a scheme had been denied by Customs/DGFT).
Applying the authority of the Supreme Court in Collector of Central Excise, Patna v. Usha Martin Industries, the bench emphasized the legal principle that departmental instructions or circulars cannot be applied so as to curtail statutory rights conferred by an Act. The Court held that the Commissioner had effectively given the Board Circular the status of a statute and used it to deny the statutory power and obligation under Section 149 — an approach the bench found impermissible.
The bench also observed that the Commissioner's factual findings (that the exporter intentionally filed under DEPB and that the plea of mistake was an afterthought) were not sufficient to override the statutory entitlement where the documentary evidence required by the proviso existed. The Court noted that various declarations and entries on the Shipping Bills did indicate an intention to avail DEPB, but stressed that where the proviso to Section 149 is satisfied by documentary evidence existing at export time, the Commissioner had no valid reason to refuse amendment solely by reference to the circulars.
The opinion further criticized the Commissioner for not following the ratio in Tribunal decisions (Smruti Pottery Works and Sanghi Industries) which had been relied upon by the CESTAT in its earlier remand; the Court held the reasons assigned by the Commissioner were incorrect in law and fact.
On the basis of the foregoing legal analysis — statutory power under Section 149, satisfaction of the proviso by pre-existing documentary evidence, and the inapplicability of treating Board circulars as overriding the statute — the bench concluded that the impugned order refusing conversion was untenable.

Holding and Implications

CORE RULING: THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL IS ALLOWED.

Direct consequences for the parties:

The Commissioner's order refusing conversion of the Shipping Bills from the DEPB scheme to the DEEC scheme was set aside.
The appeal by M/s. Man Industries (I) Ltd. was allowed on the basis that the statutory proviso to Section 149 was satisfied by documentary evidence existing at the time of export, and therefore conversion should not have been refused on the basis of Board circulars.

Broader legal implications explicitly discussed in the opinion:

The opinion emphasizes that Board circulars cannot be applied so as to curtail or nullify a statutory right under Section 149 of the Customs Act, 1962; reliance was placed on the Supreme Court's decision in Collector of Central Excise, Patna v. Usha Martin Industries.
The Court noted that the Commissioner should have considered the appellant's claim on the basis of the statutory provision and the documentary evidence at hand rather than denying conversion by treating a circular as having overriding force.

The opinion does not purport to announce a novel legal principle beyond applying Section 149 and existing authorities; it resolves the dispute between the parties by setting aside the impugned administrative refusal and remitting effect to the appellant in accordance with that conclusion.

(This summary is confined to and derived exclusively from the contents of the provided opinion.)

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Man Industries (India) Ltd. v. Commissioner Of Customs (Ep), Mumbai

[Order per : S.S. Sekhon, Member (T)]. - M/s. Man Industries (I) Ltd. vide Shipping Bill No. 1000017585, 1000017579 1000017580 all dated 25-10-2002 exported “carbon steel submerged ARC welded pipes” under DEPB Scheme.Vide letter dated 23-12-2002 they requested Dy. Commissioner/Export Department for conversion of above mentioned three DEPB Shipping Bills under DEPB Scheme to DEEC Scheme. Exporter submitted that they have filed above mentioned Shipping Bill under DEPB Scheme by mistake. They also submitted a copy of Advance Licence No. 0310156546 dated 3-9-2000 and submitted that the company is a Registered Export House and have been accredited with ISO 9002 certification for the manufactures of quality products. They also submitted that they had already submitted the Chartered Engineer Certificate certifying the inputs used in the resultant export product which is mandatory for logging the DEEC.

1.2 Exporters request was examined in the light of Standing Order No. 7078 dated 20-1-1995, they were to declare the exempted material used in manufacture of the resultant export product at the time of export, as the same is to be examined at the time of examination of the goods. Since no declaration regarding inputs used in the manufacture of the resultant export product was made by the exporter at the time of export and also there was no Standing Order for conversion of DEPB Shipping Bills to DEEC Shipping Bills, they were asked to explain, why their request for conversion should not be rejected?

1.3 The exporter submitted that they had provided Chartered Engineer Certificate certifying the inputs used in the resultant product. They also submitted that during the verification of Advance Licence with the Shipping Bills and other documents after obtaining the Export Obligation Discharge Certificate from Jt. DGFT, Department can verify the inputs used in the resultant product. Exporters vide letter dated 9-4-2003 reiterated what they submitted vide their letter dated 23-1-2003 as already discussed/stated above. As per Chartered Engineer Certificate dated 27-12-2002, exempted material i.e. HR Coils/Plates, Welding Flux, Welding Wire, Grinding Wheel, CO2 Wire, Cutting Oil, Oil and Lubricant, Rust Preventive and X-Ray Films are used in the manufacture of the resultant product i.e. Carbon Steel Submerged ARC Welded Pipes and rare of the same description as mentioned in the Advance Licence No. 0310156546 dated 3-9-2002.

1.4 Vide Letter dated 27-8-2003 exporters undertook that they will claim only HR Plates, Welding Flux, Welding Wire, CO2 Wire and X-Ray Films used as inputs (exempted material) in the manufacture of the resultant export product covered under above Shipping Bills. Again vide letter dated 29-8-2003 they reiterated that by mistake the DEPB Shipping Bills have been filed instead of DEEC Shipping Bills. They submitted that they had already imported the HR Plates Welding Wire, Welding Flux, X-Ray Films against the Advance Licence No. 0310156546 dated 3-9-2002

1.5 Exporter vide letter dated 13-11-2003 submitted a certificate dated 29-10-2003 issued by the Supdt. Customs & Excise, Pithampur certifying that M/s. Man Industries (I) Ltd. imported HR Plates under Advance Licence No. 0310156546 dated 3-9-2002 and manufactured and exported Carbon Steel Submerged ARC Welded Pipes.

1.6 Instructions in way of Board Circular No. 4/2004-Cus., dated 16-1-2004 regarding conversion of Shipping Bills from one export promotion scheme to another export promotion scheme were issued. Request of the exporter was examined in view of Board Circular No. 4/2004-Cus., dated 16-1-2004 and the same was rejected as pre condition of the referred circular is that the conversion of Shipping Bill from one export promotion scheme to another promotion scheme is allowed only in cases where the benefit of an export promotion scheme claimed by the exporter has been denied by DGFT/MOC or Customs due to any dispute. The same was conveyed to exporter by Assistant Commissioner/Gr. VII vide letter No. F. No. S/6-DEPB-MISC-1147/2003 dated 20-1-2004.

1.7 Aggrieved by the order of the Commissioner (EP) conveyed by AC/Gr VII vide letter dated 20-1-2004 rejecting the request for conversion of Shipping Bills from DEPB Scheme to DEEC Scheme, M/s Man Industries (I) Ltd. filed an appeal before Commissioner of Customs (Appeals) and prayed :

(i) That the impugned order (letter dated 20-1-2004) be quashed and set aside.

(ii) That any further and other reliefs as deemed necessary may be granted.

Commissioner (Appeals) dismissed the Appeal vide Order-in-Appeal No. 503/2004-MCH dated 31-8-2004 on the ground that Appeal against the order/decision of the Commissioner lies to the Tribunal and Appeal filed before Commissioner (Appeals) in such cases is beyond jurisdiction.

1.8 M/s. Man Industries (I) Ltd. filed an Appeal before CESTAT, West Regional Bench at Mumbai, where vide an Order No. A-146/WZB/2005/CI dated 14-2-2005 [ (Tri. - Mumbai)], the Bench observing that the Commissioner has refused permission for conversion only on the basis of Circular No. 2/2004, such denial cannot be sustained in view of the circulars in force during the pendency of the application for conversion and the Tribunal’s order in the case of Sumruti Pottery Works v CC Kandla and M/s. Sanghi Industries Ltd. v CC, Jamnagar. Since there is no finding by the Commissioner in the entitlement of the appellants to conversion on the basis of the circulars and decision, CESTAT set aside the order and remanded back the case to the jurisdictional Commissioner for fresh decision in the light of the Board’s Circular No. 6/2003-Cus., dated 40/2003-Cus. and Tribunal’s order in Smruti Pottery Works [ (Tri.)] and Sanghi Industries Ltd. [ (Tri.)]. CESTAT also directed the jurisdictional Commissioner to pass fresh order after extending reasonable opportunity of hearing to the appellants.

1.9 As per the directions of the CESTAT Commissioner of Customs (EP) granted personal hearing to M/s. Man Industries (I) Ltd. on 10-11-2005 and by the order now impugned before us, the Commissioner (EP) found -

“As per Paras 3 & 4 of Board’s Circular No. 6/2003 dated 28-10-2003, in cases where the exporter wanted to avail benefit of a particular export promotion scheme but he was forced to file a free shipping bill by customs or in cases where benefit of an export promotion scheme was denied to the exporter by Customs or DGFT, in all such cases conversion of shipping bill may be allowed subject to certain conditions. As per circular referred, following types of conversion of Shipping bill may be allowed :

1. Where the exporter wanted to avail benefit of an export promotion scheme (including DBK) but he was forced to file free shipping bill.

2. Where an exporter had filed Shipping Bill under a particular export promotion scheme but benefit of that scheme was denied to him by DGFT or Customs.

Also as per Board Circular No. 40/2003 dated 12-5-2003, conversion of Shipping Bills from one export promotion scheme to another (where the benefit of that scheme has been refused by Customs/DGFT vide para 4 (ii) of DOR Circular No. 6/2003-Cus., may be permitted by the Commissioner on case to case basis.

Here, I find that the exporters M/s. Man Industries (I) Ltd. were entitled to avail the benefits of DEEC Scheme but they suo motu and on their own choice preferred export under DEPB Scheme. I observe that this case does not come under the types of cases of Conversion of Shipping Bills as per Paras 3 & 4 of the Board’s Circular No. 6/2003 dated 28-1-2003. Also this case is not covered under Circular No. 40/2003-Cus. dated 12-5-2003 which clearly states that conversion of Shipping Bills from one export promotion scheme to another (where the benefits of that scheme has been refused by Customs/DGFT vide Para 4(ii) of DOR Circular No. 6/2003-Cus.) may be permitted on merits by the Commissioner on case to case basis. There is no such refusal by Customs or DGFT under Para 4(ii) of the Circular No. 6/2003 ibid. In fact, the request for conversion is an afterthought and not merely a mistake. I find the benefit of the Export Promotion scheme has not been denied by DGFT, Ministry of Commerce or Customs.

As regards submission of the exporters during Personal Hearing that request for conversion from DEPB to DEEC was made within one month of the export in December 2002, I observe that there is no such condition for conversion of Shipping Bills in Circular No. 6/2003 and 40/2003 but a condition stipulated in para 3.2 (a) of Circular No. 4/2004-Cus., dated 16-1-2004 and already submitted by the exporters that they do not fall under the Board’s Circular No. 4/2004-Cus., dated 16-1-2004. Since Board’s Circular Nos. 4/2004 supersedes earlier DOR Circular Nos. 6/2003-Cus., dated 28-1-2003 and 40/2003-Cus., dated 12-5-2003, so the exporter cannot claim benefit of one condition of Board’s Circular No. 4/2004 and request conversion under Board’s Circular No. 6/2003 & 40/2003.

I observe that the basic condition for conversion of Shipping Bill from one export promotion scheme to another export promotion scheme is same in all the Circulars issued by the Board on this issue.

I observe that all details such as SION Sr. No., Product Code and DEPB rate notified were mentioned in the Shipping Bills and also all declarations required for filing of DEPB Shipping Bills were made on/attached with the Shipping Bills by the exporter which clearly shows the intention of the exporter to avail the benefit of DEPB scheme and not of DEEC Scheme as they had not made declaration regarding exempt material used in the manufacture of the resultant export product required at the time of export. This also makes it evident that their plea of mistake is nothing but afterthought. Since Shipping Bills were filed under DEPB Scheme, examination Order by the assessing AO and examination report by examining AO were in the light of S.O. No. 7300/97 and 7306/97, which elaborate the export procedure under DEPB Scheme. I observe that exporter applied for conversion of DEPB Shipping Bills to DEEC Shipping Bills on 23-12-2002 when they later realised that exporting the subject goods under DEPB Scheme they would get higher incentives on account of Duty foregone benefit under DEEC as compared to benefit under DEPB Scheme.

In case of Smruti Pottery Works v. CC, Kandla, advocate for the appellant submitted that appellant exported consignment of sanitary wares under Shipping Bills and they wanted to avail the benefits of DFRC in respect of their exports which has been refused by the Customs Authorities as the certificate from Central Excise Officers listing the inputs used in the manufacture of the exports product was required, that in these circumstances they were forced to file Free Shipping Bills. He also submitted that their request for conversion of Free Shipping Bill to DFRC Shipping Bill was rejected on the ground that they had not established that they were forced to file Free Shipping Bill and they have not proved use of inputs in the resultant export product as under the DFRC Scheme. In Sanghi Industries case, the issue is similar to that of Smruti Pottery, & thereafter relying on the case laws rejected the request of conversion of the Shipping Bills.

Hence this appeal.

2.1 The request of the appellant for conversion of the Shipping Bills was made in terms of the statutory rights available to the appellant under Section 149 of the Customs Act, 1962. The said section entitles the proper officer of Customs to direct amendment of any document, after it has been presented in the Custom House. By the application of conversion of the Shipping Bill, appellant was requesting the proper officer, to exercise this statutory power vested in such authority, to amend a Shipping Bill. The statutory conditions subject to which such amendment could or could not be made is described in the proviso to Section 149 of the Customs Act, 1962, which reads as :

“Provided that no amendment of a bill of entry or a shipping bill or bill of export shall be so authorized to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the export goods have been exported, except on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported, as the case may be.“

It is not in dispute that the requirements of abovementioned proviso are satisfied by the appellant and consequently Commissioner ought to have allowed the request for conversion in stead of “bound” by the terms of a Board circular which laid down certain situations, only in which conversion was permitted. That the appellants case was not specifically covered by one of the situations contemplated in the Board’s circular cannot deny the appellants statutory right, to seek any amendment & same is lost. The statutory right, as also the statutory obligation of the proper officer to amend a document after its presentation in the Custom House cannot be curtailed or set to naught by circulars of the Board. The approach adopted by the Respondent has the effect of inferring from & conferring upon the Board Circular, a status of a statute overruling the proviso to Section 149 of the Customs Act, 1962 which is impermissible.

2.2 The Commissioner has clearly overlooked only circulars which are benevolent to the assessee that are binding upon the department and not circulars which seek to curtail statutory rights. This proposition is clearly laid down by the Hon’ble Supreme Court in the case of Collector Of Central Excise, Patna v. Usha Martin Industries - (S.C.), wherein it was held that :

“21. Through a catena of decisions this Court has pronounced that Revenue cannot be permitted to take a stand contrary to the instructions issued by the Board. It is a different matter that an assessee can contest the validity or legality of a departmental instruction. But that right cannot be conceded to the department, more so when others have acted according to such instructions,……….”

The Supreme Court thus makes it clear that while a benevolent Circular is binding on the department and an assessee is always entitled to dispute the applicability & correctness of a Board’s Circular. By application of this principle, it ought to be held that even if the appellants’ case did not fall within four corners of the Board’s Circulars in question, the claim was eligible for consideration independently subject to provision of Section 149 of the Customs Act, 1962 and, in view of the facts and circumstances of the case, particularly the undisputed position that the entire claim for conversion of the Shipping Bills was based on documentary evidences in form of Chartered Engineers, & Range Superintendent of Central Excise certificates, arrived at on documents and material anterior to export i.e. which were in existence at the time of export of the goods, as is the requirement in the proviso to Section 149.

2.3 Since the entire claim of the appellant is established on the basis of documentary evidence already in existence at the time of export, there was no valid reason for the Commissioner to have refused such an amendment. The impugned order passed is therefore clearly untenable and is to be set aside.

2.4 The Commissioner has also erred in not following the ratio laid down by this Tribunal in the case of Smriti Pottery Works v CC, Kandla and the reasons assigned by the Commissioner is clearly incorrect.

3.1 In view of the findings hereinabove, the order is set aside and the appeal is allowed.

(Pronounced in Court.)

Man Industries (India) Ltd. v. Commissioner Of Customs (Ep), Mumbai

Structured Summary of the Opinion — M/s. Man Industries (I) Ltd.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's / Commissioner’s Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Man Industries (India) Ltd. v. Commissioner Of Customs (Ep), Mumbai

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