T N C Rajagopalan: Court refines DEPB norms

EXIM MATTERS

Quite often, exporters find that even after they obtain the Duty Entitlement Passbook (DEPB) from authorities, they are unable to use or transfer the same because the Customs raise several queries at the time of verification of the DEPB and many times refuse to allow utilisation of the credit. Now, a judgment by the Bombay High Court in the case of Pradip Polyfils Pvt Ltd (2004 (173) ELT 3 (Bombay) can come to their aid.

Pradip Polyfils exported several consignments of Polypropylene Filter Plates in the years 1998-99, when the government allowed DEPB credit at the rate of 20 per cent against exports of "articles made of polypropylene not elsewhere specified, covered under the Standard Input Output Norms and Chapter 39 of ITC (HS) Classification of Imports and Exports."

After obtaining DEPB from the authorities on the basis of shipping bills passed by the Customs, Pradip Polyfils approached the Mumbai Customs for verification of the DEPB particulars. The Customs refused verification on the grounds that the exported item was not covered under Chapter 39 of the ITC (HS) classification.

The exporters pointed out that the description of the same entry in the DEPB rate list had subsequently been so amended as to do away with the requirement that the export goods must fall under Chapter 39 of ITC (HS).

The Customs, however, were not persuaded, as the DEPB related to shipments during a period when the amendment had not taken effect.

Pradip Polyfils approached the Bombay High Court, Pradip Polyfils and pointed out that as per the circular no. 15/97 dated 3rd June 1997, issued by the Central Board of Excise and Customs (CBEC), the role of Customs authorities is confined to verification of the correctness of the exporters declaration regarding the description, quantity and FOB value of the export product.

Therefore, it is not open to the Customs authorities to deny the benefit of the DEPB issued by the licensing authorities, they pleaded. The Customs argued that so long as the exported item does not answer the description given in the DEPB rate schedule, the exporters had no right to get the DEPB benefit.

The high court observed that the DEPB licences issued by the licensing authorities clearly show the export product as Polypropylene Filter Plates and accessories as shown in the shipping bills and that there is no discrepancy between the description in the shipping bills and the DEPB license.

The Court also observed that as per the CBEC circular, the jurisdiction of the Customs authorities was limited to verifying the correctness of the particulars mentioned in the DEPB license.

The Court held that whether an item falls under Chapter 39 of ITC (HS) classification or not is for the licensing authorities to consider before issuing the license.

Once the licensing authorities have held that export product is covered under the DEPB scheme and have issued the DEPB license, it is not open to the Customs authorities to hold that the said export product is not covered under the DEPB scheme.

Exporters, who suffer high transaction costs, delays and harassment at the hands of the Customs at the stage of DEPB verification, will derive great comfort from the above judgment. They have to, however, be ready to face tougher scrutiny at the stage of getting the shipping bill passed by the Customs.

tncr@sify.com