Central Board of Excise and Customs issued a circular, Circular No. 4/2004 dt. 16-01-2004    [2004 (163) ELT T29], saying that conversion of Shipping Bills from free Shipping Bill to drawback Shipping Bill or from one export incentive scheme to other should not be encouraged. The said circular imposes conditions which have made it almost impossible to attain such conversion. In this context, the present paper seeks to examine the relevant legal provision for such conversion under the Customs Act, 1962, and propriety and legality of such circular.

Section 149 of the Customs Act, 1962 allow for Amendment of Documents. It reads as,

Save as otherwise provided in Section 30 and 41, the proper officer may, in his discretion, authorise any document, after it has been presented in customs house to be amended:

Provided that no amendment of a bill of entry or a shipping bill or bill of export shall be so authorised 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 of the time the goods were cleared, deposited or exported, as the case may be”.

The presence of this Section in the Act clarify one thing, that the legislature have recognized the fact that even after filing of a document, amendment may be required and has provided for such amendment. The Section gives to the trade a right to apply for amendment, as and when required. Of course such amendment shall be subject to the condition imposed by the law. In view of this, a delegated legislation by the central Government or the Board, much less a circular or trade notice, cannot be used to take away this right given to the trade by expressed legislative will.

Discretion implies reasonable exercise of such power.

The Section gives a discretion to the proper officer either to allow amendment or to disallow it. It reads as “may, in his discretion.” We, being a democratic country, are governed by the principles of “Rule of Law”. Rule of Law have also been accepted as a basic structure of our Constitution. There is nothing like absolute discretion or unfettered discretion.

In Rooke’s case, [1598] 5 Co. Rep 996, discretion has been defined as “ a science or understanding to discern falsity and truth; between right and wrong, between shadows and substance, between equity and colourable glosses and pretences and not to do according to wills and private affections.”

Black’s law dictionary describes discretion as, in its application to public functionaries, discretion means a power or right conferred upon those by law of acting officially in certain circumstances, according to the dictates of their own judgement and conscience, uncontrolled by the judgement or conscience of others. In its application to public officers, it means power to act in a official capacity in a manner which appears to be just and proper under the circumstances.

It is a settled principle of law that discretion always means reasonable exercise of discretionary power. The exercise of discretionary power must not be arbitrary and vague but legal and regular of his office ought to confirm himself.

In Common cause V/s Union of India [AIR 1996 SC 3538], Hon’ble Supreme Court held that arbitrary exercise of discretion violates Article 14 ( Equality Clause) of the Constitution of India. In further held that if a public servant abuses his office by an act of commission or omission, resulting in injury to an individual, an action may be maintained against such public servant. No public servant can arrogate to himself the power to act in a manner, which is arbitrary. Thus, against abuse of administrative discretion all the grounds of judicial review, i.e. illegality, irrationality and procedural impropriety are available.

Discretionary powers are always coupled with duties. The Apex Court in U.P. State Transport Corporation V/s Mohd. Ismail [AIR 1991 SC 1099], held that.

“The repository of discretion is under a legal duty to observe certain requirements that set limit to the manner in which such discretion to be exercised. It may, however be noted that the court cannot direct the statutory authority to exercise a discretion in a particular manner not expressly required by law. What the court can do is to command such authority to perform its duty by exercising its discretion according to law”. There are numerous cases where in the Judiciary applied prerogative judicial remedies like mandamus, certiorari, prohibition, declaration, injunction etc. against capricious exercise of such power.

Requirement of “natural justice” under Sec. 149

The next question comes that whether under Sec 149 of the Customs Act, 1962 the authorities have to follow the principles of natural justice. The Section is silent on this point. It is a settled law that in every case where the order or decision involve civil consequences, the principles of natural justice is to be followed unless the statute specifically ruled out the application of natural justice. Since, natural justice has not been specifically ruled out in this case the custom authorities are required to follow the principles of natural justice. In A.K. Kaipak V/s Union of India [AIR1970 SC 150], the apex court held,

“Every authority, quasi-judicial or administrative or executive, should act fairly, reasonably and in a just manner, i.e., in accordance with the principle of natural justice, when the result of the exercise of the power is likely to affect any person or visit him with civil consequences.”

In Baldev Singh V/s State of Himachal Pradesh, [1987] 2 SCC 510, the Apex Court held,

“Where exercise of powers results in civil consequences to the citizens, unless the statute specifically rules out the application of natural justice, such rules would apply.”

It is clear that application of discretion under Section 149 of the Customs Act does result in civil consequences and hence principles of natural justice have to be followed in such cases. Thus a decision, under section 149 of the customs Act, 1962 has to be arrived after following the principles of natural justice.


Apart from the constitutional remedies, whether an order under section 149 of the Act is appealable to the Tribunal or Commissioner (Appeals) as the case may be? This question is very important as in normal circumstances, use of extra-ordinary remedy is neither desirable nor should be encouraged. Before looking at the question, it must be understood that right to appeal is merely a statutory right, which exist only when it has been provided by the statute.

Section 129A of the Act reads as,

Section 129A (1): any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order-

(a) The decision or order passed by the commissioner of customs as an adjudicating authority……………………………….

The term “adjudicating authority” has been defined in section 2(1), as

Adjudicating authority means any authority competent to pass any order or decision under this Act.

A plain reading of these sections will provide that a decision under Sec 149 is a decision or order under the Act and hence Appeal may be made to Tribunal against the order.

In Sarsuti Pottery Works V/s CC [2004 (163) ELT 184], the tribunal did not accept the contention of the revenue that denial of conversion of shipping bill is not an appealable order. The tribunal have examined the issue of conversion under section 149 in various other case like Hindalco Industries V/s CC [1997(96) ELT 477], Premnath Diesel V/s CC [1997 (91) ELT 130], SAIL V/s CC [1987 (30) ELT 933] and other cases. In view of wide definition of adjudicating authority and views of  Tribunal, it appears that order under Section 149 of the Act is an appealable order.

Section 149 of the Act stipulates that after export of goods, shipping bill can be converted only on the basis of documentary evidences, which was in existence at the time when the goods were exported. Thus it appears that when a request for conversion of shipping bill filed to the custom authorities, it is their duty to examine the request on the basic of available documents at the time of export and pass a reasonable order.

It is expected that with technological advances and computerisation the Board will endeavour to provide more and more  facilities to the trade in order to make India a strong economy. With computerisation and some change in mindset it is very much possible also. Nevertheless a circular was issued which curtailed the facilities which was already existing. In the view of the author, the circular should be re-examined and necessary amendment should be issued so that the substantial benefits of export promotion schemes are not lost in the technicalities.

(Views expressed are personal views of the author.)

Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on , Web:

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Category : Custom Duty (7149)
Type : Articles (18530) Circulars (7927) Notifications/Circulars (32855)
Tags : CBEC (401) Custom Duty Notifications (6775)

0 responses to “Conversion of Shipping Bills and relevant legal provision for such conversion under the Customs Act, 1962”

  1. Lakshmi Narsimhan says:

    conversion of shipping bill must be allowed from one scheme to an another or from free shipping bill to an another. for all EDI generated sbills even when goods physically get examined we get a note on the shipping bill that goods are not physically opened. we need to simplify the procedure and trade must be made customer friendly. A declaration to customs DGFT and to Excise that fraudulantly undue benefits have not been taken. if found prosecution could be made .

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