Case Law Details
Shine Flexible Prints And Packs Private Limited Vs Commissioner Of Customs (Kerala High Court)
Kerala High Court has issued a judgment concerning Shine Flexible Prints And Packs Private Limited, resolving a dispute over export obligations and customs duties that arose from the company’s utilization of the Advance Authorisation Scheme. The judgment was delivered in response to the Writ Appeal (WP(C) No. 10445 of 2023) challenging an earlier ruling from February 13, 2024, by a Single Judge.
Background of the Case
Shine Flexible Prints, a company engaged in manufacturing plastic packing materials, imports raw materials for its production processes and subsequently exports finished goods to various international markets. To facilitate its export activities, the company applied for and received Advance Authorisation Licences, which permitted it to import necessary materials without incurring customs duties. The licenses had a validity period of one year, with an obligation to complete exports within 18 months from issuance.
The licenses in question were issued on April 26, May 7, and August 16, 2019. The company complied with its export obligations between May 10 and September 25, 2019, exporting goods valued at USD 313,721.79 under six shipping bills. However, a significant error occurred: the shipping bills were filed under the All Industry Duty Drawback Scheme instead of the Advance Authorisation Scheme. This misclassification led to complications with the Director General of Foreign Trade (DGFT), who subsequently questioned the fulfillment of export obligations under the Advance Authorisation Scheme.
Request for Shipping Bill Conversion
Upon realization of the mistake, Shine Flexible Prints requested the customs authorities to convert the shipping bills from the Drawback Scheme to the Advance Authorisation Scheme. However, the customs authorities rejected this request, citing Circular 36/2010-Customs, which explicitly prohibits such conversions.
In response to the rejection, the company filed a Writ Petition against the customs authorities. The Single Judge ruled against the appellant, asserting that the company had not applied for conversion within the time stipulated in the relevant circular and that it was not permissible to switch from a less rigorous procedure to a more stringent one.
Appeal to the High Court
In the appeal presented before the Kerala High Court, the company’s counsel, Sri. Anil D. Nair, argued that the customs authorities had adopted an excessively technical approach regarding the foreign trade matters. He emphasized that while the misfiling of the shipping bills constituted an error, it did not negate the facts that the company had imported raw materials duty-free and had duly exported the finished products.
Nair pointed out that the customs had already examined the exported products and issued ‘let export’ orders. He further noted that the company was willing to refund the duty drawback received along with applicable interest to rectify the situation. This refund, he argued, would allow the company to obtain a certificate stating that the exports complied with the Advance Authorisation Scheme.
Conversely, the counsel for the Customs Authority, Sri. Suvin R. Menon, maintained that the regulations must be followed strictly and that the request for conversion had been made beyond the three-month period outlined in the circular.
Court’s Findings and Judgment
The High Court, upon reviewing the arguments, found merit in the appellant’s case. The Court noted that there was no dispute regarding the duty-free importation of inputs or the exports conducted. The sole error was the misclassification of the shipping bills. The Court emphasized that while different levels of examination exist for the two schemes, the previously conducted examination should suffice, provided it met the crucial requirements for the Advance Authorisation Scheme.
The judgment mandated that the customs authorities must accept the appellant’s refund of the duty drawback, and upon receipt of payment, the customs should issue a receipt. The company must then present this receipt to the DGFT, which is required to issue an Export Obligation Discharge Certificate if satisfied with the compliance.
Furthermore, the High Court instructed the customs authorities to communicate the amount to be refunded to the appellant within one week. The company is then required to complete the payment and obtain the necessary receipt within an additional week, ensuring a resolution within a three-week timeframe for the issuance of the discharge certificate.
Conclusion
The ruling by the Kerala High Court in the case of Shine Flexible Prints highlights the importance of procedural accuracy in customs and foreign trade matters. The judgment reflects a balanced approach, allowing for rectification of honest mistakes while upholding the need for compliance with regulatory frameworks. The outcome of this case may serve as a significant reference for similar disputes concerning customs procedures and export obligations in the future.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner in WP(C). No.10445 of 2023 is the appellant herein aggrieved by the judgment dated 13.02.2024 of the learned Single Judge in the Writ Petition. Briefly stated the facts necessary for the disposal of the Writ Appeal are as follows:
2. The appellant, a private limited company, is 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. In connection with its export activities, 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. 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.
3. It would appear that between 10.05.2019 and 25.09.2019, the appellant complied with the export obligation envisaged under the Advance Authorisation Licences obtained by him, and exported finished goods valued at USD 313721.79. The export took place under cover of six shipping bills. Unfortunately for the appellant, the shipping bills were filed under the All Industry Duty Drawback Scheme, instead of under the Advance Authorisation Scheme. For this reason alone the Director General of Foreign Trade (DGFT) did not consider the exports effected by the appellant as in due discharge of its export obligation under the Advance Authorisation Scheme. This was more so because, in the meanwhile, the appellant had also received the benefit of duty drawback in respect of the duty supposedly paid on inputs at the time of their import.
4. 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 thereupon took the stand that since the application seeking conversion of shipping bills from one Scheme to another was not permissible in terms of Ext.P6 Circular 36/2010-Customs dated 23.09.2010, the request of the appellant for conversion of the shipping bills could not be entertained. It is impugning the said rejection letter that the appellant approached this Court through the Writ Petition aforementioned.
5. The learned Single Judge, who considered the matter placed reliance on the very same Circular that was relied upon by the Customs Authority, and found that the appellant, who was not a novice in the business, had nobody else to blame than himself for the predicament that he found himself in. The Writ Petition was therefore dismissed, inter alia, 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.
6.In the appeal before us, it is the submission of Sri.Anil D. Nair, the learned Senior counsel appearing on behalf of the appellant, that the impugned order of the Customs Authorities evidences a very technical approach adopted by them in matters of foreign trade. It is pointed out that 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. It was never in dispute, therefore, that the appellant had not exported the goods in question. As regards the erroneous filing of the shipping bills in connection with the exports effected under the Advance Authorisation Scheme, it is the submission of the learned Senior counsel that the appellant is prepared to refund the duty drawback amount received by him, together with up-to-date interest, so as to obtain the certificate stating that the exports covered by the shipping bills issued between 10.05.2019 and 25.09.2019 were under the Advance Authorisation Scheme. Towards this end, he has also produced a copy of a certificate issued by a chartered engineer certifying that it was the goods imported duty free that was used in the manufacture of the exported final products. It is his further submission 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.
7. Per contra, it is the submission of Sri. Suvin R. Menon the learned Central Government counsel appearing for the Customs Authority that inasmuch as the Customs Authorities are acting strictly in accordance with P6 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.
8. We have considered the rival submissions and we are of the view that, for the reasons that are set out below, this appeal must succeed.
9. The fact of import of inputs by the appellant without payment of duty is not in dispute. The appellant was exempted from payment of duty at the time of import only because the inputs had been imported under the Advance Authorisation Scheme, and there was a customs notification in force granting the exemption from import duty. It is also not in dispute that the appellant had exported finished products during the period between 10.05.2019 and 25.09.2019 under cover of six shipping bills which had passed through the Customs Authorities, who had issued the ‘let export’ order permitting the export of the said products. The sole mistake committed by the appellant was that, in the shipping bills aforesaid he had mentioned the Duty Drawback Scheme, instead of the Advance Authorisation Scheme, as the Scheme under which the exports were effected. While it may be a fact that there is a different level of examination envisaged at the time of export for each of the Schemes, we are of the view that, at this distance of time, the examination already done on the appellant’s exported products needs to be revisited only if it is established that the earlier examination did not look into aspects that were crucially relevant for exports under the Advance Authorisation Scheme. The respondents have not been able to tell us whether there were any such aspects, that were missed out in the earlier examination. At any rate, on the facts of the instant case, we are unable to see why an examination of the exported products, which led to the appellant being sanctioned a drawback, cannot be relied upon for the purposes of the Advance Authorisation Scheme. Since the appellant has agreed to refund the drawback amount received by him together with up-to-date interest till the date of payment, we are of the view that on receipt of such payment from the appellant, the Customs Authorities shall issue a receipt to him evidencing such payment by the appellant. The appellant shall thereupon produce the said receipt before the DGFT, who shall treat the six shipping bills covering the exports between 10.05.2019 and 25.09.2019, as shipping bills under the Advance Authorisation Scheme, and determine whether, in the light of the Chartered Engineers Certificate produced by the appellant as Ext.P5 in this Writ Appeal, the exports effected under cover of those shipping bills satisfy the requirements of the Advance Authorisation Scheme. If the DGFT is satisfied that the appellant has discharged his export obligation through the exports that took place between 10.05.2019 and 25.09.2019, then he shall, without further delay, issue the export obligation discharge certificate to the appellant.
10. The figure showing the drawback amount, together with up-to-date interest, that has to be refunded by the appellant, shall be communicated to the appellant by the Customs authorities, within a week from the date of receipt of a copy of this judgment. The appellant shall thereupon make the payment and obtain a receipt from the Customs Authorities, within a further period of one week. He shall then approach the DGFT who shall consider the request of the appellant for the Export Obligation Discharge Certificate within an outer time limit of three weeks from the date on which the appellant produces the receipt before him.
The Writ Appeal is disposed as above.
Author Bio
