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 “Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 06.03.2025

CESTAT Mumbai ruled that the conversion of shipping bills was necessary before applying for a brand rate drawback

CESTAT Mumbai ruled in favor of John Deere India Pvt. Ltd., stating that the limitation period for duty drawback claims should be calculated from the date of shipping bill conversion, not the original export date. The tribunal set aside the rejection order and directed the Customs Commissioner to reconsider the application.

Background:

John Deere India Pvt. Ltd., a 100% Export Oriented Unit (EOU), transitioned to the Export Promotion Capital Goods (EPCG) scheme under the Foreign Trade Policy (FTP). As part of this transition, they applied for the fixation of a brand rate for duty drawback on exports under Rule 6 of the Customs, Central Excise Duties, and Service Tax Drawback Rules, 2017.

The Commissioner of Customs, Pune, rejected their application solely on the grounds that it was filed beyond the time limit prescribed under Rule 5 of the Drawback Rules. This rejection led John Deere India Pvt. Ltd. to file an appeal before CESTAT Mumbai.

Key Issues:

1. Whether the limitation period for filing the application for a brand rate of duty drawback should be calculated from the original Let Export Order (LEO) date or from the date of conversion of shipping bills under Section 149 of the Customs Act, 1962.
2. Whether the rejection of the application based on limitation was legally valid.

Arguments by the Appellant (John Deere India Pvt. Ltd.):

• The company continued to manufacture and export goods during the transition from EOU to EPCG.
• The shipping bills for exports made during this period were later converted to drawback-eligible shipping bills only after the final debonding order was issued on 16th September 2021.
• Their application for brand rate determination was filed on 13th January 2023, which was after the conversion of shipping bills.
• Since the conversion of shipping bills was approved on 20th August 2022, 10th October 2022, and 12th October 2022, the relevant date for limitation should be from the conversion date, not the original export date.
• The rejection of the application solely on the basis of limitation ignored the factual circumstances and procedural requirements.

Decision by CESTAT Mumbai:

• The tribunal acknowledged that the conversion of shipping bills was necessary before applying for a brand rate drawback.
• It held that the date of conversion of shipping bills should be treated as the relevant date for limitation purposes.
• The Commissioner of Customs had misinterpreted the limitation rules and overlooked procedural contingencies.
• The tribunal set aside the rejection order and remanded the case back to the Commissioner for reconsideration of the application with a proper determination of the limitation period.

Final Ruling:

The appeal was allowed by way of remand, directing the Commissioner of Customs to reconsider the application based on the actual circumstances and compliance with Rule 7 of the Drawback Rules.

Impact of the Decision:

This ruling clarifies that when an export unit transitions from one scheme to another (EOU to EPCG), the date of conversion of shipping bills should be considered for calculating limitation periods for duty drawback claims. The decision protects exporters from procedural rejections and ensures fair application of drawback rules.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

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Source: CESTAT Mumbai

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