Wrongful Mentioning of Duty Drawback Scheme, instead of AA Scheme: Kerala HC directs Company to Drawback Amount & Obtain Receipt from Customs Dept. [Read Order]

In a recent case, the Kerala High Court has directed the company to drawback the amount along with interest and obtain receipt from the customs department. The appellant has wrongfully mentioned the shipping bills in the Duty Drawback Scheme, instead of the Advance Authorisation Scheme.

Shine Flexible Prints and Packs Private Limited, the appellant/assessee is a private limited company, engaged in the manufacture of plastic packing materials. The appellant imports raw materials for the manufacture of the plastic packing materials, and thereafter, exports the finished packing materials to various countries.

The  appellant had applied for and obtained Advance Authorisation Licences from the 4th respondent under the Advance Authorisation Scheme that allowed the appellant to import inputs, required for the manufacture of the export product, free of import duty. It is not in dispute that the appellant availed the benefit of the Advance Authorisation Licences granted to him and imported the inputs for the manufacture of the export product.

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As per the conditions of the Advance Authorisation Licences issued to the appellant, the licences remained valid for a period of one year and the export obligation was to be fulfilled within a period of 18 months from the date of issuance of Advance Authorisation. The licences issued to the appellant were dated 26.04.2019, 07.05.2019, and 16.08.2019, respectively.

When the appellant later realised the mistake and was confronted with a notice from the DGFT alleging non-fulfillment of the export obligation, he approached the customs authorities with a request for converting the shipping bills under the Drawback Scheme to shipping bills under the Advance Authorisation Scheme.

The customs authorities took the stand that since the application seeking conversion of shipping bills from one Scheme to another was not permissible in terms of Circular No.36/2010-Customs dated 23.09.2010, the request of the appellant for conversion of the shipping bills could not be entertained.

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 The Writ Petition was dismissed on the ground that the appellant had not applied for conversion within the time contemplated under the Circular aforementioned, and further that he had sought for a conversion of the shipping bills from one filed under a scheme involving less rigorous procedures (duty drawback scheme) to one filed under a scheme that involved a more rigorous procedure (Advance Authorisation Scheme) and this was not permissible as per the Circular.

The appellant argued that the order of the Customs Authorities evidenced a very technical approach adopted by them in matters of foreign trade. The defect was a venial one since the fact of import of raw materials without payment of duty, as also the fact of export of the final product are all evidenced by documents such as the import bills of entry and the shipping bills evidencing export, signed by the customs authorities themselves.

The appellant contended that the conversion of the shipping bills would enable him to obtain an Export Obligation Discharge Certificate from the DGFT and avoid payment of any differential duty of customs for allegedly violating the terms of the Advance Authorisation Scheme.

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The department on the other hand contended that as much as the Customs Authorities are acting strictly in accordance with Circular, and an examination as required under the Advance Authorisation Scheme cannot be conducted at this distance of time, and further, the request of the appellant for conversion of the shipping bills had come beyond the period of three months contemplated in the Circular, the Customs Authorities cannot accede to the request of the appellant for a conversion of the shipping bills.

The two member  bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has held that the sole mistake committed by the appellant was that, in the shipping bills he had mentioned the Duty Drawback Scheme, instead of the Advance Authorisation Scheme, as the Scheme under which the exports were effected.

To Read the full text of the Order CLICK HERE

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