M/S. V.R.A. Cotton Mills Pvt. Ltd vs Customs Commissionerate, Ludhiana

Pronounced on:22.09.2015

Appeal No. C/52646/2015-CU[SM]

[Arising out of the impugned order No. 03/LDH/CUSTOM/2015 dt. 15-06-2015 passed by the Principal Commissioner Customs Commissionerate, Ludhiana]

For Approval and Signature:

Honble Smt. Sulekha Beevi C.S., Member (Judicial)

1. Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

M/s. V.R.A. Cotton Mills Pvt. Ltd. Appellant

Vs.

The Principal Commissioner

Customs Commissionerate, Ludhiana Respondent

Appearance: Shri Sumit Wadhwa, Advocate for the appellant.

Shri M.R. Sharma, DR for the respondent.

Coram: Honble Smt. Sulekha Beevi C.S., Member (Judicial)

Final Order No. 52935/2015

Per: Sulekha Beevi C.S.

The appellant who is an exporter of raw cotton of CTH 5201 applied for Duty Free Import Authorization (DFIA) to DGFT and they were issued DFIA licence dated 15/2/2012 with export obligation of Rs. 25 crores. The DFIA licence allowed duty free import of inputs, fuel, oil, energy sources catalyst which are required for production of product exported. The DFIA benefit during the relevant period was about 1.5 per cent on fulfillment of export obligation and the appellant initially thought that they would be able to fulfill the export obligation. The appellant exported 16 consignment of Raw Cotton of CTH 5201 totally for Rs. 16,14,79,968/- under DFIA Bill of Exports. The export was only to Pakistan and according to the appellant, as the prices of Indian cotton were higher compared to international market, due to competition, further exports became not viable and there was no possibility for the appellant to export further quantity to Pakistan. For this reason, the appellant was not able to fulfill the export obligation of Rs. 25 crores. After the exports to Pakistan made under the DFIA, the appellant had not made any imports against the DFIA. The appellant then vide letter dated 28.06.2013 requested DGFT, New Delhi for cancellation of DFIA in terms of para 4.28 (e) as the appellant could not fulfill the export obligation. The request for cancellation of DFIA was allowed by the DGFT, New Delhi vide order dated 10.03.2014. After such cancellation, the appellant vide application dated 21.3.2014 requested Commissioner of Customs (Preventive), Amritsar for conversion of Bill of Exports from DFIA to Drawback. This request for conversion was rejected by the Principal Commissioner, Ludhiana vide order dated 24/6/2014. The request for conversion was rejected on the basis of Circular No.13/10 of Customs dated 23/9/2010 wherein it is stated that the request has to be made within three months from the date of Let Export Order (LEO). Being aggrieved by the impugned order rejecting the request for conversion of DFIA to Drawback, the appellant has filed the present appeal.

2. At the time of hearing, the learned counsel for the appellant pointed out that in the appellants own case, on the same issue, the CESTAT by final order No. A/11457/2014 dated 1/8/2014 has held in the favour of appellant. Needless to say that the Commissioner is bound to apply and follow the decision passed by the Tribunal. The Commissioner has observed in the impugned order that the said decision cannot be applied to the case in hand, because in the said decision the export was made by appellant to China, and appellant could not fulfill the export obligation to China which was on quota basis. In the present letter requesting for cancellation of DFIA licence, the appellant has stated that the document before the customs was incomplete. Another reason stated by the Commissioner for not following the decision of the Tribunal is that the department has preferred an appeal before the High Court against the above final order passed by the Tribunal.

3. Ld. DR justified the impugned order and also submitted that the judgment of the Tribunal in the said final order is challenged by the department before the High Court of Madhya Pradesh.

4. In the said case decided by the CESTAT, it is seen that appellant could not fulfill the export obligation to China and requested for cancellation of DFIA. After cancellation of DFIA, the appellant requested for conversion of shipping bills/DFIA to draw back. This request was rejected by the Commissioner against which the appellant approached the Tribunal. The CESTAT considered the issue of rejection including that of limitation and held in favour of the appellant. Even if the said judgment is challenged before the High Court, the decision is binding, the facts being identical. As regards the observation of the Commissioner that the appellant had stated in the letter to the DGFT that the documentation before the Customs was incomplete, it is seen that the Commissioner has quoted a part of sentence from the request letter dated 28/6/2014 which is reproduced as below:

for whatever exports had taken place, export documentation from the Customs was incomplete and hence not been able to redeem the authorization as applied.

4. The full sentence in the request letter dated 28/6/2014 is as under:

With reference to the above, we like to state that we have not been able to complete 100% exports under the aforesaid DFIA and whatever exports has taken place, export documentation from the customs is incomplete and hence not able to redeem the authorization as applied.

We further like to mention that no imports against the said DFIA have been made and hence no export obligation exists thereon.

5. On the basis of a part of the sentence as first quoted above, the Commissioner has concluded that the moot reason for request for cancellation of DFIA by the appellant is because the appellant has made improper declaration in the shipping bills at the time of export, which would deny DFIA benefit and that it is not due to the stated fact of unavoidable circumstances to comply with their export obligation. Apparently, the Commissioner assumes that the reason for giving the request for cancellation of DFIA is improper declaration made by the appellant on the shipping bills. But this assumption made by the Commissioner is not supported by any evidence. The shipping bills have been produced by the appellant. If the Commissioner is of opinion that there is improper declaration on the shipping bills by which the appellant could not be able to claim DFIA benefit, then the Commissioner ought to have mentioned clearly as to what are the deficiencies in these shipping bills. According to appellant, all the documents are in order. It was also argued that Rule 12 (1) (a) of the Draw Back Rules require an exporter to declare on the shipping bill, the description, quantity and such other particulars as are necessary for deciding whether the goods are entitled to drawback and if is so, at what rate or rates and make a declaration on the relevant shipping bill that the claim for drawback is being made and in respect of duties paid on containers, packing materials, service tax, etc. and no separate claim for rebate of duty has been made. The Commissioner is empowered to allow drawback on shipping bills which may not contain any of these details. The provisions of Rule 12 (1) of custom and Central Excise Duties Drawback Rule, 1995 empowers the Commissioner to condone non-observance of provisions of Rule 12 and allow Drawback. This is nothing but an amendment or conversion of shipping bill filed. The circular issued by the Board goes beyond the Rules as section 149 of the Customs Act clearly permits amendment of shipping bills without any such time limit even after export of goods. All these submissions have been considered in detail by the CESTAT in the above said case. In these circumstances, I do not think that Commissioner is justified in not following the decision rendered in the appellants own case.

6. From the above discussions applying the ratio laid in the appellants own case in Final order no. A/11457/2014 dated 1/8/2014, I find that the rejection of request for conversion of DFIA shipping bills to Drawback was not justified. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.

(Pronounced in the open court on 22.09.2015)

(Sulekha Beevi C.S.)

Member (Judicial)

Ritu

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