- 1 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF JULY, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND CUSTOMS APPEAL No. 4 OF 2022 BETWEEN: 1. PRINCIPAL COMMISSIONER OF CUSTOMS AP AND ACC COMMISSIONERATE, BENGLAURU. APPELLANT (BY SRI ARAVIND V. CHAVAN, ADVOCATE) AND: 1. M/S LOUVERLINE BLINDS, FIRST FLOOR, HOYSALA BHAVAN, NEAR 3RD CROSS, WILSON GARDEN MAIN ROAD, HOMBEGOWDA NAGAR, BENGALURU - 560 027. …RESPONDENT (BY SRI RAVI RAGHAVAN, ADVOCATE AND SRI TUSHAR SHARMA, ADVOCATE) THIS CUSTOMS APPEAL (CSTA) IS FILED UNDER SECTION 130 OF THE CUSTOMS ACT,1962 PRAYING TO SET ASIDE THE ORDER DATED 01/04/2022 PASSED BY THE CESTAT IN FINAL ORDER No.20168/2022 ANNEXURE-A. Digitally signed by VINUTHA B S Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 THIS APPEAL COMING ON FOR HEARING THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE K.V. ARAVIND) Heard Sri Aravind V. Chavan, learned counsel for the appellant-Revenue, and Sri Ravi Raghavan, learned counsel, along with Sri Tushar Sharma, for the respondent-Assessee. 2. This appeal under Section 130 of the Customs Act, 1962 [hereinafter referred to as 'the Act'], is filed by the Revenue assailing the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bengaluru [hereinafter referred to as 'the Tribunal'], in Final Order No.20168/2022 dated 01.04.2022. 3. The appeal has been admitted on 17.08.2022 for consideration of the following substantial questions of law; - 3 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 "(i) Whether the CESTAT was right in allowing the appeal with consequential benefits, without considering the Board of Circular No.36/2010, dated 23.09.2020? (ii) Whether the CESTAT was right in ignoring the amendment of Documents as per Section 149 of the Customs Act, 1962?" 4. The brief facts leading to this appeal are that, the Assessee is engaged in the manufacture of motorized curtain and blind assemblies and their accessories. For the purpose of manufacturing goods meant for export, the Assessee procured various inputs by way of import. The Assessee was issued an Advance Authorization License by the competent authority and, under the said license, imported certain goods such as ceiling brackets, curtain track belts, etc., for use in the manufacture of the final product. One of the conditions of the Advance Authorization License was that the Assessee was required to export the final products within a period of 18 months from the date of import, without payment of import duty. The Assessee filed six shipping bills for export of goods, indicating its - 4 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 intention to avail the benefit under the Merchandise Export Incentive Scheme (MEIS), instead of stating that the exports were in discharge of the obligation under the Advance Authorization License. Subsequently, the Assessee made a request for amendment of the shipping bills to reflect that the exports were made under the said Advance Authorization License. 5. The request of the Assessee was rejected by the Principal Commissioner of Customs, Airport & Air Cargo Complex, Air India SATS Airfreight Terminal, KIAL, Devanahalli, Bengaluru, in view of the provisions of Section 149 of the Act, and by placing reliance on Circular No.36/2010 dated 23.09.2010 and Circular No.6/2002 dated 23.01.2002. 6. The Tribunal, on appeal filed by the Assessee, held that the shipping bills filed were not free shipping bills and that the intention to avail the benefit under the MEIS was clearly indicated. The Tribunal further observed that the amendment sought was a conversion from MEIS to the Drawback/DEPB Scheme, and since the scale of examination under both - 5 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 schemes is identical, the conversion of shipping bills is permissible in terms of the applicable circulars. 7. Sri Aravind V. Chavan, learned Standing Counsel appearing for the Revenue, submits that, in terms of Section 149 of the Act, an amendment can be permitted only within a period of one year, whereas in the present case, the request was made beyond the prescribed period. It is further submitted that free shipping bills cannot be converted into shipping bills under the Advance Authorization Scheme. Referring to Circular No.36/2010 dated 23.09.2010, learned Standing Counsel submits that, in the case of exports made under free shipping bills, the scale of examination is 'nil', whereas under the DEPB Scheme, the scale of examination ranges between 25% and 50%, and in some cases, between 2% and 10%. It is contended that the Tribunal, without appreciating the aforesaid material aspects, has erroneously allowed the conversion of shipping bills. 8. On the other hand, Sri Ravi Raghavan, along with Sri Tushar Sharma, learned counsel appearing for the respondent-Assessee, submits that the export invoices - 6 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 specifically indicate that the supplies were made against the Advance Authorization License. It is further submitted that the Bill of Entry also records the Assessee’s intention to claim rewards under the MEIS Scheme. Contrary to the contention of the Revenue, the exports were not made under free shipping bills at any point in time. Learned counsel submits that the amendment sought was for conversion from the MEIS Scheme to the DEPB Scheme. As per Circular Nos.36/2010 and 6/2002, the scale of examination under both schemes is the same. It is further submitted that, except for the delay of three months in making the request for conversion, all other conditions stipulated under Circular No.36/2010 have been complied with. 9. Having considered the submissions of the learned Standing Counsel for the appellant-Revenue and the learned counsel for the respondent-Assessee, it is not in dispute that the Assessee is engaged in the manufacture of motorized curtain and blind assemblies and their accessories. It is also undisputed that the Assessee procured several inputs by way of import and utilized the same in the manufacture of goods meant for export. The Advance Authorization License was - 7 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 issued to the Assessee by the competent authority. The sole issue for consideration is with respect to the conversion of shipping bills to the DEPB Scheme. 10. The Revenue has rejected the request for conversion on three grounds: (i) that the shipping bills sought to be converted were free shipping bills, and such conversion is impermissible; (ii) that the request for conversion was made beyond the period of one year prescribed under Section 149 of the Act; and (iii) that the shipping bills, being free shipping bills, were not subjected to any examination, whereas under the DEPB Scheme, the consignments would have attracted a prescribed scale of examination. However, the Revenue has proceeded on the erroneous premise that the shipping bills in question were free shipping bills. A perusal of the invoices placed on record along with the Statement of Objections dated 23.09.2022 indicates that the shipping bills were filed under the MEIS Scheme. Therefore, the finding that free shipping bills were sought to be converted under the DEPB Scheme is factually incorrect. - 8 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 11. Circular No.36/2010 dated 23.09.2010 and Circular No. 6/2002 dated 23.01.2002 permit the conversion of shipping bills from one export promotion scheme to another. Furthermore, the scale of examination prescribed under both schemes is of a similar percentage. In light of the finding that the shipping bills were not free shipping bills but were filed under the MEIS Scheme, the contention of the Revenue that the consignments were not subjected to the appropriate scale of examination and therefore conversion is impermissible, is without merit. 12. Circular No.36/2010 permits conversion of shipping bills from one export promotion scheme to another, subject to fulfillment of certain conditions. Such conversion is allowed based on documentary evidence that was in existence at the time of export of the goods, and upon establishing the eligibility of the goods under the scheme. In the present case, the Revenue has not disputed the fact that the imported inputs were used in the manufacture of the exported goods. The invoices and other export documents referred to above satisfy the conditions stipulated under the relevant export promotion - 9 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 scheme. It is also not the case of the Revenue that the exporter has availed benefits under any other export promotion scheme in respect of the same goods. 13. The Revenue erred in holding that the consignment was not subject to physical examination by the Customs on the ground that it was a free shipping bill. The conclusion of the authorities that the shipping bills in question were free shipping bills is erroneous and contrary to the material on record. Furthermore, the Revenue committed a further error in holding that the conversion requested was from free shipping bills to another scheme. In fact, the conversion sought was from the MEIS Scheme to the DEPB Scheme. 14. The Tribunal, having noted the error committed by the Principal Commissioner of Customs, correctly held that the conversion was not from free shipping bills to another scheme, but rather from the MEIS Scheme to the DEPB Scheme, under which the scale of examination is similar. The non-examination of the export goods cannot be attributed to the Assessee. The findings recorded by the Tribunal are therefore justified. - 10 - HC-KAR NC: 2025:KHC:29339-DB CSTA No. 4 of 2022 15. Accordingly, the following; Order (i) The appeal is dismissed. (ii) Substantial questions of law are answered in favour of the Assessee and against the Revenue. (iii) No order as to costs. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE MV List No.: 1 Sl No.: 35