Court directed the Customs department to facilitate online amendment of shipping bill

Technocraft Industries (India) Limited Vs Union of India (Bombay High Court)

Bombay High Court directed customs department to come up with the solution to allow online amendment of shipping bill. So that transmitted amended shipping bill can be duly processed by DGFT.

Facts-

The Petitioner has two manufacturing units at MIDC, Murbad, where the Petitioner manufactures Scaffolding steel products and Drum Closures. During the period from December 2017 to July 2019, the Petitioner exported goods manufactured by it which were notified in Appendix-3B, and the Petitioner is eligible for the benefit of Merchandise Exports from India Scheme (MEIS) as per paragraph 3.03 of the Foreign Trade Policy 2015-2020.

While filling out the shipping bills online, the Petitioner erroneously clicked on the option “No” for the benefits of MEIS instead of “YES”. The shipping bills and the associated documents indicated that it was by mistake and that the Petitioner always wanted to take benefit of MEIS. To correct this mistake, the Petitioner approached the Customs Authority as per the provision of section 149 of the Customs Act, 1962, to seek an amendment to 12 shipping bills.

The Commissioner of Customs allowed the amendment to the shipping bills vide two certificates of amendment dated 7 October 2019 and 14 December 2020. Since there exists no facility in the software of the Customs Department for online amendment, physical certificates were issued to the Petitioner.

The Petitioner then approached Respondent No.2 and 3- Director General of Foreign Trade (DGFT) seeking the benefit of MEIS which communicated that In the automated environment, where issuance of MEIS is totally online, unless these S/bills are transmitted to DGFT, no further action is possible at DGFT end.

Conclusion-

When a software regulates the entire process, the DGFT may have a reasonable objection in processing the copies of the amended shipping bills not transmitted online to it. The Policy Relaxation Committee has correctly pointed out that in the computerized environment, when the governance of MEIS is online, it is difficult to proceed unless amended shipping bills are transmitted online. It is thus necessary for the Respondents-Customs Department to come up with a solution so that an issue such as the one presented before us does not recur and the parties entitled to the benefits of MEIS are not required to come to the Court for such trivial issues.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

Rule. Rule made returnable forthwith. Taken up for disposal.

2. The Petitioner has sought to quash and set aside the decision taken by the Policy Relaxation Committee in case No.71 filed by the Petitioner at its meeting held on 13 April 2022 and recorded in the Minutes of Meeting No.02/AM23. The Petitioner further prays that the Respondents should grant a reward under the Merchandise Exports from India Scheme in respect of the goods exported by the Petitioner under 12 shipping bills by issuing necessary scrip for Rs.15,24,334/- to the Petitioner, and to accept the amendment of 12 shipping bills by the Commissioner of Customs vide two amendment certificates dated 7 October 2019 and 14 December 2020 respectively.

3. The Petitioner is a company incorporated under the Companies Act, of 1956. The Policy Relaxation Committee under Respondent No.2 discharges duties under the Foreign Trade (Development and Regulation) Act, 1992. Respondent No.4 is the Commissioner of Customs, Jawaharlal Nehru Customs House, Nhava Sheva.

4. The Petitioner has two manufacturing units at MIDC, Murbad, where the Petitioner manufactures Scaffolding steel products and Drum Closures. During the period from December 2017 to July 2019, the Petitioner exported goods manufactured by it which were notified in Appendix-3B, and the Petitioner is eligible for the benefit of Merchandise Exports from India Scheme (MEIS) as per paragraph 3.03 of the Foreign Trade Policy 2015-2020.

5. While filling out the shipping bills online, the Petitioner erroneously clicked on the option “No” for the benefits of MEIS instead of “YES”. The shipping bills and the associated documents indicated that it was by mistake and that the Petitioner always wanted to take benefit of MEIS. To correct this mistake, the Petitioner approached the Customs Authority as per the provision of section 149 of the Customs Act, 1962, to seek an amendment to 12 shipping bills.

6. The Commissioner of Customs allowed the amendment to the shipping bills vide two certificates of amendment dated 7 October 2019 and 14 December 2020. For purpose of example, the certificate of 7 October 2019 is reproduced hereinbelow:

“CERTIFICATE OF AMENDMENT/ CONVERSION

M/s. Technocraft Industries (India) Limited approached this office with request to issue amendment certificate after amending S/B  No. 1364458 dtd 06.12.2017, 1378853 dtd 06.12.2017, 1546729 dtd 14.12.2017, 1631780 dtd 18.12.2017, 1782827 dtd 26.12.2017,  070064 dtd 08.01.2018, 2142876 dtd 11.01.2018, 2212535 dtd 15.01.2018, 2235849 dtd 16.01.2018 and 1631707 dtd 18.12.2017.

This certificate is issued after scrutiny of the documentary evidence, which was in existence at the time of export of goods, as required under section 149 of the Customs Act. 1962 for the correctness of the amendment sought by the exporter. All other details will remain same.

Since the correction as requested could not be carried out in EDI shipping bill in the EDI system after completion of export, this certificate is issued at the request of the CHA/Exporter.

This certificate is issued as per section 149 of Customs Act, 1962.”

Since there exists no facility in the software of the Customs Department for online amendment, physical certificates were issued to the Petitioner.

7. The Petitioner then approached Respondent No.2 and 3- Director General of Foreign Trade (DGFT) seeking the benefit of MEIS. The matter was placed before the Policy Relaxation Committee of DGFT on 13 April 2022, and the response of the Committee is as under:

“(Action: Applicant)
Case No 71 M/s. Technocraft Industries (India) Ltd., Mumbai
F.No HQRPRCAPPLY00358706AM22
Meeting No.02/AM23 held on 13.04.2022

Subject: To allow MEIS benefit against 12 shipping bills pertaining to year 2017-18 & 2019-20 inadvertently marked “N” instead of “Y”.

The applicant stated that they filed for the MEIS benefit in the offline mode for 12 shipping bills They were subsequently directed by the RA, Mumbai to approach the EDI of DGFT. Upon their request EDI on 30.12.2021 informed them that shipping bill related to exports from 01.04.2015 to 30.09.2015 where “N” has been declared in the reward item field are eligible are eligible for MEIS benefit. Shipping bill related to exports after 30.08.2015 are not eligible for MEIS benefit if “N” has been declared in the reward item field. Upon further requesting to reconsider their request, EDI system on 13.01.2022 informed them to approach policy division for the same. Hence, they are requesting to allow MEIS benefit against 12 shipping bills pertaining to year 2017-18 & 2019­20 inadvertently marked “N” instead of “Y”.

Decision: The Committee discussed the case at length observed that conversion from “N’ to “Y” as well as reflection of such manual amendments in the automated system is not possible.

The Committee also observed that concerned shipping bills have not been uploaded and transmitted by the Customs authorities to the DGFT. In the automated environment,  where issuance of MEIS is totally online, unless these S/bills are transmitted to DGFT, no further action is possible at DGFT end. Accordingly committee discussed the case at length and rejected the request of the firm.

However if  these amended S/bills are transmitted online by Customs to DGFT, firm can approach PRC again.”

(emphasis supplied)

Thus, the corrected shipping bills were not taken in to consideration. Challenging this decision of the Committee dated 13 April 2022, the Petitioner is before us.

8. We have heard Mr.Prakash Shah for the Petitioner. Ms.Shehnaz Bharucha for Respondent Nos.1 to 3 and Mr.M.P.Sharma for Respondent No.4.

9. The stand taken by Respondent Nos.1 to 3 – DGFT and Policy Relaxation Committee is reiterated before us by the learned counsel for Respondent Nos.1 to 3 that unless the shipping bills are transmitted online to DGFT, they cannot be taken into consideration. The learned counsel for Respondent No.4- Customs Department states that as per the software maintained by the Customs Department, there is no procedure to communicate or transmit the amended shipping bill online; therefore, amended shipping bills were issued physically. On behalf of Respondent No.4-Customs Department, the Assistant Commissioner of Customs has filed a reply affidavit, which does not deny any assertion in the petition and states that amendment certificates have been issued and there is no grievance against the Customs Department. Therefore, no response is necessary. The learned counsel for the Petitioner contends that Petitioner cannot be deprived of the benefits of the Merchandise Exports from India Scheme for lack of coordination in the software maintained by the Respondents. The learned counsel for the Petitioner draws our attention to the decision of the Division Bench of this Court in the case of Ajanta Industries v. The Assistant Commissioner of Customs 2021 (12) TMI 389 whereby the Division Bench has followed the view taken by the Kerala High Court in Annu Cashews v. Commissioner of Customs 2019 SCC ONLINE Kerala 4729.

10. There is no debate before us concerning the entitlement of the Petitioner. The fact that there was a bona fide error committed by the Petitioner while filling out shipping bills by clicking the option “No” is also not in dispute, and the Customs Department permitted the amendment to the shipping bills. The Petitioner is deprived of the benefits due the logistical problem and the stand taken by Respondent Nos.1 to 3. We find the stand taken by the Respondent as if they are separate of each other, is not in conformity with the governing scheme, which emphasises assimilation and prompt and efficient processing of the claims. It is necessary to elaborate on the object behind the policy and the initiatives taken to simplify the procedure to highlight the lacuna that the authorities must remedy. The learned counsel for the parties agree that a deficiency continues in the procedure and has assisted the Court by placing necessary material on t on record.

11. Government of India, Ministry of Commerce and Industry, Department of Commerce, Directorate General of Foreign Trade notified the Foreign Trade Policy, 2015-2020 in the exercise of powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992), as amended from to time. For claiming rewards under MEIS on exports, an application has to be filed online on the website of the Director General of Foreign Trade (DGFT). The relevant shipping bills and e-BRC are to be linked with the online application. The applicant must upload the documents to claim the benefit if the application is filed for exports made through EDI ports, including SEZ exports. Manual feeding is not allowed in respect of shipping bills. The Authority processes the electronically acknowledged files, and the scrip is issued after due scrutiny of electronic documents. DGFT has issued a note regarding the shipping bills with “No” in the “Rewards” column. It is stated in the note that the eligibility of the exporter to claim benefit under MEIS depends on the fulfilment of all notified procedural provisions as outlined in the Foreign Trade Policy (FTP) 2015-20 and the Hand Book of Procedures (HBP) 2015-20. The entitlement under MEIS is allowed only when the exporter follows the procedure. A public notice was issued on 16 May 2016, marking “Y” (for Yes) in the EDI shipping bills as mandatory and that such marking has to be done at the time of filing shipping bills. The HBP, in Para-3.01, also mentions that processing the MEIS application would be done online, and physical copies of the shipping bills are not required.

12. The material placed on record shows that Customs Department and DGFT are to implement MEIS in a completely online environment, and an Electronic Data Interchange (EDI) exists for “Y” marked shipping bills. Only these “Y” marked shipping bills are transmitted by the Indian Customs Electronic Data Interchange Gateway (ICEGATE), i.e. a server of the Customs Department to DGFT. The data integrity for value and other details, as in the shipment captured once in the shipping bill, is maintained by the system of electronic data transfer and existing data exchange protocols between DGFT and the Customs Department. A type of finally assessed shipping bills, for which EGMs have been filed, are being transmitted by all ICES locations to DGFT through ICEGATE under cover of digital signatures daily. Each location has two files for each day , even if no shipping bill is available for transmission to DGFT. DGFT acknowledges these shipping bill files sent by Customs with pre-defined codes. These shipping bills are either accepted or rejected by DGFT, and all acknowledgments are sent to ICES locations for automatic updation of the status. Shipping bills which have been rejected are re-transmitted to ICES locations through ICEGATE. Action is taken at the Customs end for the acknowledgment files as per codes received from DGFT. On checking the status at the service centre, if the status is shown as ‘R’, the shipping bills are automatically transmitted to DGFT in the next day’s file. In cases where the status is shown as ‘A’, shipping bills are re-transmitted to DGFT if so requested by the exporter. This, in short, is the procedure.

13. Under section 157, read with section 50 of the Customs Act, Rules have been framed for electronic shipping bills. The Rules are titled “Shipping Bill (Electronic Integrated Declaration and Paperless Processing) Regulations, 2019”. Electronic Integrity Declaration (EID) is defined as particulars relating to export goods entered into the Indian Customs Data Interchange Data System. The shipping bills are defined under the Regulations of 2019 as an electronic integrated declaration accepted and assigned a unique number by the Indian Customs Electronic Data Interchange System. Under Regulation 4, the shipping bills shall be deemed to have been filed and self-assessment completed after the entry of electronically integrated declaration on the ICEGATE or by way of data entry from the service centre. A shipping bill number is generated on the interchange system. The Regulations are mandatory as Regulation 8 provides for penalty for infringement.

14. It is evident from the various passages of the FTP and the statutory enactments that there is an emphasis on the online activity to promote the ease of doing business as regards overseas commerce.

15. The objective of the FTP states that trade facilitation is a priority of the Government for cutting down the transaction cost and time to make Indian exports more competitive. The Finance Minister, in the foreword to the FTP 2015-20, highlighted the Trade facilitation and enhancing the ease of doing business as the primary focus areas in the policy. It was emphasised that endeavour and commitment are to move towards paperless processing. Various steps were introduced to enhance electronic governance.

16. Some of the initiatives for creating a robust online environment for transactions are as follows.Importer Exporter Code (IEC) is mandatory for export/import from/to India. For issuance of e-IEC, an application has to be made online on the DGFT website. An e-BRC (Electronic Bank Realisation Certificate) initiative enables DGFT to capture details of the realisation of export proceeds directly from the Banks through secured electronic mode. MoU has been signed by DGFT with state governments for sharing of e-BRC data to facilitate refund of the VAT by the state governments to exporters. MoU has also been signed with Enforcement Directorate. All the Regional Authorities (RA) of DGFT and extension counters are connected to high-speed internet. The applications are received and processed electronically. DGFT provides the facility of online filing of applications to obtain an Importer Exporter Code and various authorisations/scrips. DGFT uses digital signature with a higher level of Encrypted digital signature. A web interface for the online filing of applications is provided. The application can be filed 24X7 from anywhere. Application fees can also be paid online from linked banks. Online Inter-ministerial consultation is provided. A facility is being provided to upload copies of all the required documents. The processing of the applications will also be done online. FTP states that to move towards paperless processing, an electronic procedure is being developed to upload digitally signed documents by Chartered Accountant, Company Secretary, and Cost Accountant. FTP also showcases the Electronic Data Interchange (EDI) Established for export facilitation and good governance. DGFT has set up a secured EDI message exchange system for various documentation-related activities, including import and export authorisations established with other administrative departments, namely, Customs, Banks and EPCs. The FTP states that DGFT has endeavoured to enlarge the scope of EDI to achieve a higher level of integration with partner departments. There is a specific emphasis on providing facilities online and for digital integration with various components involved in foreign trade.

17. The FTP also refers to the interaction with Customs departments. Clause 1.20 deals with Message exchanges with Community partners such as Customs, Banks, and Export Promotion Councils, recognising them as major community partners of DGFT for message exchange. A message exchange system is set up with Customs Department. It is for, amongst others, Shipping Bills. Clause 1.25 deals with the facility of 24 X 7 Customs clearance for specified imports. Clause 1.26 refers to the Single Window facility in Customs Introduced to facilitate trade; the importer and exporter would lodge their clearance documents at a single point only. Required permission, if any, from other regulatory agencies would be obtained online without the trader having to approach these agencies. This would reduce interface with Governmental agencies, time and cost of doing business. Clause 1.27, regarding Self-Assessment of Customs duty by importers or exporters, was introduced vide Finance Act, 2011. The objective is to expedite the release of imported/exported goods. The system operates on an electronic Risk Management System (RMS).To facilitate the processing of shipping bills before actual shipment, a prior online filing facility for shipping bills has been provided by Customs.

18. The Central Board of Indirect Taxes and Customs has also initiated numerous measures to facilitate ease in the clearance procedure and reduce transaction costs. The Indian Customs Single Window Project has been established for an online exchange system, and dealing in the movement of all physical papers has been done away with by conducting the transactions online. By introducing various initiatives such as Indian Customs Single Window Project, SWIFT in export and WCCB. From 1 April 2015, the importers, exporters, customs brokers etc., have been given the facility to use digital signatures for filing various documents, including shipping bills. The Board has introduced e-Sanchit for paperless transactions. The importers are required to upload the documents online through the procedure instead of physical papers. The physical presence of papers and presence for assessment-related work has been done away with. Various steps have been taken to introduce a project to bring all participating agents under e-Sanchit for issuance of a licence, permit etc. Electronic closure of manifest has been introduced, doing away with hard copies of dockets.

19. With this elaboration of the initiatives taken to promote digital transitions regulating foreign trade, we turn to the stand taken by the Respondents before us. The position is that the Customs Department will not transmit the amended shipping bills to DGFT, and the DGFT will not receive the hard copies of the modified shipping bills.

20. There appears to be a clear lacuna in the existing procedure as it emerged before us as to how to deal with shipping bills amended by the Customs Department under section 149 of the Act. DGFT has taken a stand that it has to go by the shipping bills transmitted online as per the procedure referred to aforesaid, and it has no methodology to deal with the amended shipping bills. The Customs Department has taken a completely non-committal stand. The only statement in the affidavit is that amended shipping bills are submitted; therefore, the Customs Department has no role to perform.

21. For making the MEIS policy efficient and workable, integration between the Customs Department and DGFT is vital. Two departments cannot work in silos. As per the DGFT, no manual modification to the shipping bills in the system is acceptable Section 149 of the Customs Act empowers amendment to the documents. The power is conferred on the Proper Officer to use his discretion to amend the documents in cases where there is a genuine mistake in checking the relevant documents on the online shipping bills; power is confirmed to amend the shipping bills. The shipping bills duly amended under section 149 are legitimate in the eyes of the law. However, even though the law permits amendment to the shipping bills under section 149 of the Act, it has no functional effectiveness for claiming benefit under MEIS as per the stand of DGFT. This would render the power under section 149 of the Customs Act to amend the shipping bills to correct the declaration and reward item field, nugatory. Such a position would cause extreme hardship to the persons claiming benefits of the scheme.

22. When a software regulates the entire process, the DGFT may have a reasonable objection in processing the copies of the amended shipping bills not transmitted online to it. The Policy Relaxation Committee has correctly pointed out that in the computerized environment, when the governance of MEIS is online, it is difficult to proceed unless amended shipping bills are transmitted online. It is thus necessary for the Respondents-Customs Department to come up with a solution so that an issue such as the one presented before us does not recur and the parties entitled to the benefits of MEIS are not required to come to the Court for such trivial issues. The learned counsel for the Customs Department and DGFT have left it to this Court to issue necessary directions. However, recourse to writ jurisdiction for directions in each case cannot be the answer. The Respondents will have to coordinate to find a solution to the above-highlighted issue, if possible, by setting up a joint committee.

23. As regards relief to the Petitioner is concerned ,in light of the above discussion, the Rule is made absolute in terms of prayer clauses (a) and (b). The concerned departments of the Respondents will take necessary steps within four weeks from the date order is uploaded.

24. Respondent-Customs and Respondent-DGFT will file an affidavit placing on record steps taken by them regarding the provision to submit amended shipping bills to the DGFT. The Petition be listed on board under the caption “For Directions” on 27 February 2023 for reporting compliance on this aspect.