The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, has allowed an appeal concerning the post-export conversion of shipping bills from the Advance Authorisation Scheme to the Duty Drawback Scheme, holding that the three-month limitation prescribed under CBIC Circular No. 36/2010-Cus. cannot override Section 149 of the Customs Act, 1962.
The bench of Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) observed that a subsequent notification prescribing a time limit for post-export conversion could not be applied retrospectively to exports made before the notification came into force.
The appellant, a Mumbai-based manufacturer and exporter of high-grade non-ferrous metal products including brass and copper billets, was recognised as a Three-Star Export House and held AEO-T2 certification.
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The exporter had been granted Advance Authorisation Licence No. 0310833435 dated December 16, 2019, permitting duty-free import of 2,120 MT of raw material. Between October 2019 and February 2022, it exported 30 consignments, initially declaring on the shipping bills its intention to claim benefits under the Advance Authorisation Scheme.
However, the COVID-19 pandemic severely disrupted international supply chains. According to the appellant, overseas suppliers were unable to fulfil orders because of container shortages and port closures. As a result, importing the entire quantity of raw material contemplated under the Advance Authorisation became commercially and logistically impracticable.
To meet export commitments, the appellant instead sourced raw materials domestically and paid the applicable domestic taxes, including GST. Customs records showed that against the authorised quantity of 2,120 MT, only 463.315 MT was actually imported. A Chartered Accountant’s certificate was also produced to establish that the exported goods had been manufactured from duty-paid domestic inputs and to quantify the eligible Duty Drawback at ₹37,60,451.71.
The exporter subsequently sought conversion of all 30 shipping bills from the Advance Authorisation Scheme to the Duty Drawback Scheme under Section 149 of the Customs Act, 1962.
The 30 shipping bills covered 17 consignments of brass billets and 13 consignments of copper billets exported from ICD Tumb. The conversion request was made on the basis that the Advance Authorisation benefit had not actually been utilised in respect of the relevant domestic inputs and that the exporter had suffered the domestic taxes on the materials used in manufacturing the exported goods.
The Principal Commissioner of Customs, Ahmedabad, however, rejected the request through Order-in-Original No. AHM-CUSTM-000-PR-COMMR-60-2024-25 dated January 3, 2025.
The rejection proceeded, among other grounds, on the basis that the exporter had declared its intention to claim Advance Authorisation benefits on the shipping bills and that the application for conversion had been filed beyond the three-month period contemplated under CBIC Circular No. 36/2010-Cus.
The central legal controversy before CESTAT was whether an executive circular could impose a rigid three-month time limit for seeking amendment or conversion of shipping bills when Section 149 itself does not prescribe such a limitation period.
Section 149 governs amendment of documents after export. The appellant argued that the statutory provision requires the amendment to be supported by documentary evidence that existed at the time the goods were exported, but does not impose a three-month deadline.
According to the appellant, the circular could not introduce a restriction that Parliament itself had not incorporated into the statute.
A significant aspect of the Tribunal’s ruling was its reliance on the Supreme Court’s decision in Union of India v. Mahalaxmi Rubtech Ltd., reported at 2023 (385) E.L.T. 99 (S.C.).
The case concerned the validity of the three-month limitation prescribed by CBEC Circular No. 36/2010-Cus. for amendment or conversion of shipping bills.
The Tribunal noted that the Supreme Court had dismissed the Revenue’s Special Leave Petition against the High Court’s decision holding the three-month restriction to be ultra vires Section 149 of the Customs Act.
CESTAT accordingly found that the legal position relied upon by the adjudicating authority could no longer be sustained.
The Tribunal further relied upon the Bombay High Court’s decision in Pinnacle Life Science Pvt. Ltd. v. Union of India, reported in 2024 (16) Centax 340.
In that case, the High Court held that when Section 149 did not itself prescribe a time limit for seeking amendment of a document, the Board could not create a three-month restriction through a circular.
The Ahmedabad Bench observed that this decision reinforced the legal position that the three-month time limit contained in the circular was beyond the authority conferred by Section 149.
The Tribunal also referred to the Gujarat High Court’s ruling in Pr. Commissioner of Customs, Mundra v. Lykis Ltd., reported in 2021 (377) E.L.T. 646.
The case involved questions concerning conversion of export documents after expiry of the three-month period prescribed under the circular. The Gujarat High Court found no error of law in the Tribunal’s decision and dismissed the Revenue’s appeal.
CESTAT noted that the issue was therefore already covered by judicial precedents, including the decision in Inter Continental (India) v. Union of India, which had also been upheld by the Supreme Court.
The Bench also relied on its own earlier decision in Nisan Exports v. Pr. Commissioner of Customs, Mundra, Final Order No. A/12221/2023 dated October 9, 2023.
In that matter, CESTAT had permitted conversion of shipping bills from one export promotion scheme to Duty Drawback even after the expiry of the three-month period prescribed by Circular No. 36/2010-Cus.
The Tribunal had observed that once an export had taken place, the consequential export benefit should not ordinarily be denied merely because of the limitation contained in the circular.
Another important issue considered by the Tribunal was whether merely declaring an intention to claim Advance Authorisation benefits amounted to actual availment of those benefits.
The appellant argued that the substantive benefit under the Advance Authorisation Scheme was the duty-free import of eligible raw materials. Since only 463.315 MT had actually been imported against an entitlement of 2,120 MT, a substantial portion of the authorisation remained unused.
The appellant therefore contended that a declaration on the shipping bill could not, by itself, establish actual receipt of a financial or fiscal benefit.
The appellant further relied upon the Gujarat High Court’s decision in Ball Aerosol Packaging India Pvt. Ltd. v. Union of India, reported at (2024) 25 Centax 29, concerning amendment of shipping bills under Section 149.
The Tribunal noted the appellant’s reliance on that judgment to contend that where the statutory requirements for amendment were satisfied, the consequential export benefit could not be denied merely because of the initial declaration on the shipping bill.
The Department relied upon the conditions contained in CBIC Circular No. 36/2010-Cus. and contended that post-export conversion was subject to the procedural requirements prescribed by the Board.
The adjudicating authority had also relied upon decisions including Commissioner of Customs (Seaport–Export) v. Suzlon Energy Ltd. and Anil Sharma v. Union of India, which had treated the Board’s circular as governing the procedure for conversion of export schemes.
The Department further pointed out that the appellant had continued its export operations during and after the pandemic and that the Advance Authorisation itself had been extended by the DGFT until February 28, 2023.
The adjudicating authority consequently did not accept the COVID-19 explanation as sufficient justification for the delayed application and held that the conditions for conversion had not been satisfied.
The Bench specifically observed that the legal position relied upon by the adjudicating authority was no longer good law, particularly in view of the Supreme Court’s decision in Mahalaxmi Rubtech.
According to the Tribunal, the Supreme Court’s dismissal of the Revenue’s challenge had the effect of affirming the position that Circular No. 36/2010-Cus., insofar as it prescribed a three-month limitation from the Let Export Order, was ultra vires Section 149.
The Bench further noted that the Gujarat High Court’s ruling in Lykis Ltd. and CESTAT’s own decision in Nisan Exports supported the same conclusion.
The Department had also raised the applicability of Notification No. 11/2022-Customs (N.T.) dated February 22, 2022, which prescribed a time limit for post-export conversion of shipping bills in specified cases.
The Tribunal rejected its application to the present exports.
The Bench recorded that the exports in question had taken place between October 2019 and January 2022, whereas the notification was dated February 22, 2022.
CESTAT therefore held that the notification could not be applied retrospectively to transactions that had already taken place before its issuance.
After examining the statutory framework, documentary evidence and judicial precedents, the Tribunal concluded that the appellant’s export benefit could not be denied on the facts of the case.
The Bench specifically held that, in light of the legal position prevailing at the time of export, the export benefit was liable to be extended to the appellant.
Consequently, the appeal was allowed.
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