2004 (97) ECC 701 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Ms. Jyoti Balasundaram, Member (J) and Shri V.K. Agrawal, Member (T)

Sanghi Industries Ltd.

Versus

C.C., Jamnagar

Appeal No. C/197/2004-NB(C)

[Arising out of Order F. No. VIII/48-156/Cus/(T)/02/8865 dated 11.12.2003 passed by the Commissioner of Customs (Prev.), Jamnagar]

Final Order No. 620/2004-NB-C, dt. 31.8.2004, Certified on 15.9.2004

DFRC Scheme

Export -- Notified or Un-notified Ports -- DFRC shipping bills -- Exports made through Mundra Port which is notified, are eligible for DFRC benefit. Jakhao Port, which has been notified subsequent to the export made by the assessees, the benefit of DFRC will not be available in respect of such shipping bills. Hence, Tribunal allow conversion of free shipping bills into DFRC shipping bills in respect of which goods were exported through Mundra Port vide Circular No. 6/03 Cus dt. 28.1.2003 and under Circular No. 40/03 Cus dt. 12.5.2003.

Appeal is partly allowed

PRESENT :

Shri K. Kant, Adv. for the appellant.

Shri U. Raja Ram, JDR for the respondent.

Per : V.K. Agrawal

The issue involved in this appeal, filed by M/s. Sanghi Industries Ltd., is whether they are eligible to get their free shipping bills converted into DFRC shipping bills.

2. Shri Krishna Kant, learned Advocate, submitted that the appellants had exported rotary kiln clinker under free shipping bills during the period from 3.5.2002 to 15.7.2002; that the appellants, under their letter dated 24.9.2002, made a request to the Commissioner of Customs for conversion of 9 free shipping bills into DFRC shipping bills on the ground that they were new in the filed of export of cement clinker and were not aware of the procedure to be followed for filing the shipping bills for DFRC since filing of free shipping bills was on account of need to export the goods expeditiously and since the exports were required to be made in time; that the Commissioner, under the impugned order, has rejected their request on the ground that since the fuel and coal are not covered under DFRC and also the fact that bauxite used in the clinker exported by them was not as per the specification of SION entry, the admissibility of DFRC Scheme is not applicable. The learned Advocate, further, submitted that furnace oil is clearly mentioned in SION entry No. 1030 and as such, it cannot be claimed by the Revenue that fuel is not covered by the specification of SION; that in respect of bauxite, they are not pressing their claim for DFRC; that it has been clarified by the C.B.E.C., vide Circular No. 6/2003 dated 28.1.03, that if the exporter wanted to avail of Export Promotion Scheme, but he was forced to file free shipping bill, conversion of shipping bill may be allowed by the Commissioner;

that all the three conditions, specified in Circular No. 6/03-Cus dated 28.1.03, had been fulfilled by them: that the first condition requires that on the basis of available export documents, the fact of use of inputs is satisfactorily proved in the resultant export product; that they had filed a certificate issued by the Chartered Engineer wherein it has been certified that coal, magnesite refractory bricks and furnace oil are very essential inputs in the manufacture of cement clinkers; that as such, this condition of the circular stands fulfilled by them. He, further, mentioned that condition (b) of the circular provides that the examination report and other endorsements made on the shipping bill prove the fact of export of the export product and the export product is clearly covered under relevant SION; that the appellants have requested for DFRC licence in respect of coal, furnace oil and magnesite refractory bricks, which are duly mentioned at Serial No. A 1030 in SION; that in respect of other inputs, lime stone, silica sand and laterite, they have not claimed DFRC benefit; that as such condition (b) of the circular also stands fulfilled; the condition (c) of the circular provides that on the basis of shipping bill, the exporter has fulfilled all conditions of DFRC Scheme and is eligible for its benefit; that the Commissioner has given his finding that as fuel and coal are not covered under the DFRC and also the fact that bauxite used in the clinker exported is not as per the specification of SION entry, the DFRC Scheme is not applicable; that this finding of the Commissioner is not correct; that furnace oil and coal both are covered under the DFRC Scheme and they are not claiming DFRC benefit in respect of bauxite; that the Commissioner has also given a finding that Jakhao Port has not been notified in Notification No. 46/02; that they have exported the clinker from Jakhao Port only under one shipping bill;

that Jakhao Port was, subsequently, notified by the Commissioner of Customs, Ahmedabad by Notification No. 36/02 dated 24.9.2002; that, therefore, they have fulfilled the condition No. (c) of the circular also. He also relied upon the decision in the case of M/s Smruti Pottery Works v. C.C., Kandla, wherein the Tribunal, vide Final Order No. A/827-828/03-B dated 6.11.2003, has allowed the conversion of free shipping bill into DFRC shipping bill; that the Tribunal has held in the said decision that "a perusal of both the circulars, referred to by the learned Advocate, reveals that the Government has allowed conversion of free shipping bills into Advance licence/DEPB/DFRC/Drawback shipping bills without the necessity of exporter proving that he was forced to file free shipping bill by Customs at the time of export of goods. Accordingly, the conversion of free shipping bill into DFRC shipping bill cannot be denied on the ground that the appellants have not established that they were forced to file shipping bills under free shipping bills category." Finally, he submitted that in their case they have, subsequently for the same period, filed shipping bills under DFRC Scheme, which has been accepted and DFRC has been allowed.

3. Countering the arguments, Shri U. Raja Ram, learned DR, reiterated the findings, as contained in the impugned order. He also distinguished the decision, relied upon by the learned Advocate by submitting that in the said decision, the appellants, therein, were forced to file free shipping bills as the Customs Authorities had refused the DFRC shipping bills as the certificate from the Central Excise officers, listing the inputs used in the manufacture of export product, was required.

4. We have considered the submissions of both the sides. It has been clarified by the Board, vide Circular No. 6/03-Cus dated 28.1.2003, that in all those cases where the exporters were not allowed to file shipping bills under a particular Export Promotion Scheme and had to export goods against free shipping bills, the conversion of shipping bills could be allowed by the Commissioner subject to the following conditions:

"(a) On the basis of available export documents, etc., the fact of use of inputs is satisfactorily proved;

(b) The examination report, etc. proved the export and the export product is covered under relevant standard input output norms (SION); &

(c) On the basis of shipping bills, etc. all conditions of the Scheme were fulfilled;"

5. The Board, under Circular No. 40/03 Cus dated 12.5.2003, has also clarified that as the trade had found it difficult to prove that the exporter was forced to file free shipping bills, the conversion of free shipping bills into DFRC shipping bills may be permitted on merits by the Commissioner on case to case basis subject to the conditions specified in Circular No. 6/03. The Board also added another condition to the effect that the exporter has not availed of the benefit of any Export Promotion Scheme and no fraud or suspected manipulation and no investigations have been initiated against the party in respect of such exports under the shipping bills. Both these circulars came up for interpretation before this Tribunal in the case of M/s. Smruti Pottery Works v. C.C., Kandla (supra). It has been held by the Tribunal that a perusal of both the circulars, reveals that the Government has allowed conversion of free shipping bills into DFRC, etc. shipping bills without necessity of exporter proving that he was forced to file free shipping bill by customs at the time of export of goods. In the present matter, the appellants have filed the free shipping bills as the goods were to be exported in time and to avoid any business loss and have, subsequently, requested for conversion of the same into DFRC shipping bills. In view of the clarification, issued by the Board vide Circular No. 40/03-Cus, the conversion has to be permitted on merits on case to case basis subject to fulfilment of all the conditions. In the impugned order, the Adjudicating Authority has not made any mention about the condition which was included vide Circular No. 40/03-Cus, which goes to show that there was no violation of the said condition relating to availment of the benefit of any Export Promotion Scheme. We find force in the submissions of the learned Advocate that they are not claiming DFRC benefit in respect of inputs like lime stone, silica and laterite and, accordingly, the fact that they are not covered by SION entry is not material. They have also given up their claim in respect of bauxite.

It is not disputed by the Revenue that coal, magnesite refractory bricks and furnace oil find mention in SION at Serial No. 1030 and as such condition No. (a) of the circular dated 28.1.03 stands complied with. The condition No.(b) also stands satisfied as the fact of export of clinker is not in dispute. As far as condition No. (c) is concerned, it has been mentioned by the Adjudicating Authority himself in the impugned order that Mundra Port is the notified Port.

Accordingly, exports made through Mundra Port which is notified, are eligible for DFRC benefit. We, however, agree with the learned DR that Jakhao Port, which has been notified subsequent to the export made by the appellants, the benefit of DFRC will not be available in respect of such shipping bills. We allow conversion of free shipping bills into DFRC shipping bills in respect of which goods were exported through Mundra Port. The appellants are not eligible for conversion of free shipping bills into DFRC shipping bills where the goods were exported through Jakhao Port. The appeal is, thus, partly allowed. (Operative part of order pronounced in open Court on 31.8.2004).

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