Legal principle

Where a statute uses the word 'shall' the provision is prima facie mandatory and what is prescribed must be done in the manner prescribed, so conversion of free shipping bills into drawback shipping bills cannot be claimed as of right where the exporter bypassed the mandatory declaration and examination requirements of Section 74 and Rule 4 of the Drawback Rules.

Court decision

The Tribunal upheld the impugned order rejecting conversion of the NFEI shipping bills into drawback shipping bills and rejected the appeal, deciding in favour of the Department/Revenue.

Facts

M/s. J.K. Tyre and Industries Ltd. imported steel cord, steel spools, plastic pallets and plastic separators from M/s. XING DA Steel Cord (Thailand) Co. Ltd., and upon sample testing found the goods defective, re-exporting the entire lot to the supplier under three shipping bills. The goods had been imported on payment of 18% IGST (credit of which was later reversed), but the shipping bills were filed under Code 99 (NFEI - No Foreign Exchange Involved) instead of Code 19 (Duty Drawback). The appellant then filed applications dated 20.09.2022 seeking conversion of the three NFEI shipping bills into drawback shipping bills to claim Section 74 drawback read with the Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995. The Commissioner of Customs, Chennai-II rejected the conversion application, holding the goods were never physically examined to establish identity and use and the Rule 4 declarations were not made. The appellant appealed to the CESTAT, Chennai.

Key provisions

• Section 74, Customs Act, 1962 — Drawback allowable on re-export of duty-paid goods
• Section 27, Customs Act, 1962 — Claim of refund duty
• Rule 4(a), Re-export of imported goods (Drawback of Customs duties) Rules, 1995 — Statements/Declarations to be made on exports other than by post