Commissioner Of Customs-Mundra vs M/S Global Exim

[ Arising out of OIA-MUN-CUSTM-000-APP-002-14-15 dtd 12.11.2014 passed by Commissioner of CUSTOMS (Appeals), Ahmedabad ]

Commissioner of CUSTOMS-Mundra - Appellant(s)

Vs.

M/s Global Exim - Respondent (s)

Represented by :

For Appellant : Shri K Shivkumar, Authorised Representative.

For Respondent : Shri H Modh, Advocte.

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Honble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Honble Member (Technical)

Date of Hearing / Decision : 9/4/2015

ORDER No. A/10711 / 2015 dated 09.04.2015

Per : Mr.P.K. Das,

The relevant facts of the case, in brief, are that the respondent filed Bill of Entry No 6920788 dated 25.9.2014 for clearance of Phosphoric Acid 85% technical grade claimed duty free clearance against DFIA in terms of Notification No 98/2009-cus (supra). DIFA was originally issued to M/s Piramal Glass Ltd. After completion of the export by the exporter, DIFA was transferred to the respondent by the Licensing Authority for duty free import of goods. The Assessing Officer denied the benefit of exemption notification on the ground that the exporter did not provide the actual quantity of Phosphoric Acid used in the export goods. It is observed that as per DGFT notification No 31 dated 1.8.2013 read with Public Notice No 35 dated 30.10.2013 and DGFT notification No 90 dated 21.8.014, it is mandatory to state the actual quantity of inputs used in the export product to avail DIFA benefit. By the impugned Order, the Commissioner (Appeals) set aside the decision of Assessing Officer and allowed the appeal filed by the Respondent. So, the Revenue filed this appeal before the Tribunal.

2. The Learned Authorized Representative for the Revenue reiterates the grounds of appeal. He submits that DGFT Notification No 31 dtd 1.8.2013 permitted import only those items which are actually used in the export products . DGFT Notification No 90 dtd 21.8.2014 stipulates that of actual quantity of inputs used on the exported products, shall be allowed under DFIA. Admittedly, the exporter failed to produce any evidence in this regard. The exporter has not stated that Phosphoric acid was actually used in the export product in the shipping bills. The exporter failed to produce any evidence of actual quantity of phosphoric acid to be used for the manufacture of export products and the technical reference as placed by the respondent would not serve any purpose. It is submitted that the decision of the Tribunal in the case of Uni Colloids Impex Pvt Ltd vs CC, Ahmedabad  2014(310)ELT.583 (Tri. Ahmd.) as relied upon by the Commissioner (Appeals) cannot apply, in the present case DFIA was endorsed after the issue of the DGFT Notification dtd 31.8.2013 and public Notice No 35 dtd 30.10.2013. In that case, date of endorsement of transferability was prior to 1.8.2013 and therefore the said case law cannot be applicable herein.

3. The Learned Advocate on behalf of the Respondent submits that the DFIA dtd 17.10.2012 covered a list of inputs as per SION in force on the date of issue of DFIA. The licensing authority endorsed the transferability of the DFIA on 13.3.2014 without any restriction. Further, Phosphoric Acid is specifically mentioned in DFIA. So, DGFT Notification No 31 dtd 1.8.2013 is not applicable for such specific item. The Licensing Authority noticed that Phosphoric Acid in the SION A 3627 would not cover generic or alternate inputs and the DGFT Notification No 31 dated 1.8.2013 would not apply. Customs authority has no power to interfere the decision of DGFT. In this case, the importer claimed the benefit of DFIA on the license transferred to them in terms of provisions of Para 4.2.6 of FTP. Notification No 31 dtd 1.8.2013 was not available at the time of issue of DFIA on 17.10.2012 and therefore the restriction would not be applicable as held by the Tribunal in the case of Uni Colloids Impex Pvt Ltd (supra). It is noted that the exemption notification No 98/2009-CUS was not amended to restrict the import as per DGFT Notification No 31. So, it is not necessary to establish the utilisation of imported goods in the resultant product. He relied upon following case laws :

a) CC, Good Luck Industries  2000.120.ELT.A66 (SC)

b) CC, Alfa Exim  2000-120.ELT.A195 (SC)

c) CC, Salem Stainless Steel  2001-131.ELT.39 (Mad)

He further submits that the DGFT Notification No. 90 dtd 21.8.2014 would be effective prospectively and not applicable in the present case as DFIA was issued on 17.10.2012. The impugned order passed by the Commissioner (Appeals) is correct, legal and proper.

4. After hearing both the sides and on perusal of records, we find that DFIA was originally issued to the exporters viz., M/s Piramal Glass Ltd and after fulfilment of export obligation, the same was transferred to the Respondent, duly endorsed by the Licensing Authority. The Adjudicating Authority directed the exporter to intimate the actual quantity of phosphoric acid used in the export of goods, who did not provide the information to the department. As the exporter fulfilled export obligation, the licence were transferred to the respondent/importer as endorsed by the Licensing Authority. In such situation, in our view, the exporter cannot be compelled to furnish any information in respect of the said DFIA, which has already been transferred to the respondent. The Tribunal in the case of M/s Uni Colloids Impex Pvt Ltd (supra) after following the decision of the Honble Supreme Court and High Court rightly held that once the DIFA was transferred by the Licensing Authority, it is not necessary to establish by the importer that the use of imported material in the export product, which is, in fact, not in the hands of importer.

5. The findings of the Commissioner (Appeals) are as under :

 However, the contentions of the appellant in this context appear to be valid especially in the light of Honble Tribunal decision in the matter of Uni Colloide Impex Pvt Ltd Vs commissioner of Customs, Ahmedabad. The Tribunal held that as per provision of Para 4.2.2. (b) DFIA is issued as per the policy and procedure in force as on the date of issue of authorisation. Therefore, Notification No 31 issued on 1.8.2013 cannot be made applicable to DFIAs issued prior to that date. By following the decision of Honble Tribunal, the appellant in the instant case is not required either to declare the actual input or its quantity used in the export product, since the DFA is issued as per standard Input Output Norms A -3627 which clearly permit import of Phosphoric Acid as one o the input item required to use in the export product.

Further, I also find that the input entry of Phosphoric Acid mentioned in the DFIA is a specific entry, whereas DGFT Notification No 31 dated 1/8/2013 and 90 dated 21/8/2014 specifies declaration of actual input an quantity used in the export product only in the case of yens appearing under generic entries or alternative entries. Therefore the impugned decision of the Ld Asstt Commissioner of Customs denying the benefit of notification by contending that the actual input and its quantity is required to be declared for allowing duty free clearance of phosphoric Acid is not correct.

It is well settled in law that once a license is issued by DGFT, Cosmos cannot go beyond the scope of the license. The case cited by the appellant in the case of Arkema Catalysts India Pvt Ltd vs Union of India  2012.276.ELT/206 (Bom) and in the matter of Hindustan Lever Ltd vs Commissioner of Customs (EP), Mumbai are relevant in this regard.

Once the licence is transferred then the transferee importer is permitted to import duty free goods as per the description in the DFIA. The condition of Notification No 31 and 90 cannot be applied retrospectively to DFIA already issued and operate under the policy prevailing at the time of issue of DFIA.

6. We find that this issue is squarely covered in favour of the respondent as per the decision of the Tribunal in the case of Uni Colloids Impex Pvt Ltd. The relevant portion of the decision of the Tribunal in the case of Unio Colloids Impex Pvt Ltd (supra) is reproduced below :

 In Aditya Birla Nuvo Ltd. v. CC - 2010 (249) E.L.T. 273 (Tri. - Bang.), while relying on various precedent decisions of higher judicial foras, this Tribunal held as under -

8.6 ?We now take up next issue framed by us i.e., issue (g) for discussions.

(g) ?Whether the appellant has failed to establish nexus as envisaged in advance licensing scheme?

The instant case relates to imports under license issued for actual user condition by the license to the license holder. It is no longer res integra and is a settled law that nexus between the imported materials and export product, is not required to be proved fresh by the transferee/licensee once imported material is otherwise covered by the advance license and the benefit of exemption notification would be available. In Commissioner v. Goodluck Industries - 2000 (120) E.L.T. A66 (Supreme Court), the Honble Supreme Court upheld the Tribunals judgment in Goodluck Industries v. Commissioner - 1999 (108) E.L.T. 818 (Tribunal) laying down the said ratio, and on merits dismissed the same appeal filed by the Commissioner of Customs, Calcutta against the same. In Jayant R. Patel v. CC, Hyderabad - 1997 (89) E.L.T. 164, the Tribunal held that the duty free import entitlement are not to be proved again by the exporter or the transferee of license once advance license is granted and vide Commissioner v. Jayant R. Patel - 2003 (155) E.L.T. A68 (S.C.), the Revenues appeal against said judgment was dismissed. In CC, Chennai v. Salem Stainless Steel - 2001 (131) E.L.T. 30 (Mad.), the Honble Madras High Court held that nexus need not be established because the question of nexus would arise only when obligation of the exporter exists and the petitioner as a purchaser of the licenses after discharge of the obligation of export is not required to establish the nexus. The Honble Supreme Court in the matter CC (Imports), Mumbai v. Hico Enterprises - 2008 (228) E.L.T. 161 (S.C.) held that the Customs Department cannot compel the appellant-importer who are the transferee to once again prove that the export obligation has been fulfilled by the original license holder in accordance with the notification.

With this clear exposition, it is emphatically clear that in case of transferable license the nexus between the imported material and export product is not required to be proved afresh by the transferee/importer, once the imported material is otherwise covered by the advance license. In view of this authoritative judicial pronouncement, the department cannot now loosely interpret the provisions under scheme by reading several contrasting instructions issued from time to time in Notification as 4/93, 4-3-1993, 1/94, dated 5-1-94, 34/94, 12-12-94, 11/95, dated 15-2-1995 and thereafter superseded by 36/97-Cus., dated 16-9-1997, in a manner out of the context or contrary to these authoritative judicial pronouncement, only to deny the exemption benefit granted by the license. Merely because in the instant case, licenses are not transferable, it does not mean that the customs authorities are permitted to go beyond the license to deny exemption benefits. In the instant case, the specifications of the goods imported are squarely covered by the advance license issued by the licensing authority. The appellant has thus established a nexus as envisaged by the advance licensing scheme. We do not find any cogent reason to charter a different course in the instant case. Apart from the DGFTs Circular 72/2008 and C.B.E. & C.s Circular 46/2007-Cus., relevant portion of which is extracted above, which have been according to us rightly relied upon by the appellants, we note that it is settled law that when the import is against the transferred DFIA (Licence) it is not necessary to establish that the material imported was actually used in the export product unless the resultant product figures in the sensitive list and the theory of broad nexus being settled by Apex Court.

?Moreover, Para 4.2.2(b) of Foreign Trade Policy stipulates that DFIA shall be issued in accordance with Policy and procedure in force on date of issue of Authorisation. We are therefore not impressed by the submission of the Revenue that the position as prevailing on the date of clearance would govern imports under valid licence. The appellant, who are transferee, cannot be compelled to establish that wheat gluten was actually used in the manufacture of the biscuits which have been exported against the DFIA. The provisions of Notification No. 31, dated 1-8-2013 (as amended) will not be applicable to such DFIA issued on 30-5-2012 i.e. issued prior to amendment. Consequentially any policy circular or public notice, if seeks to deny the exemption which is otherwise available in the instant imports, will also have no applicability for the same reason. In Commissioner v. Global Exim, 2010 (259) E.L.T. A139 (Bombay High Court), it was observed that -

4.?According to the Revenue, a co-relation of technical characteristics, quality and specification is required to be established in respect of bearings sought to be imported that the bearings were actually used in the resultant product.

5.?The Tribunal did not agree with the submissions made by the Revenue which were pressed into service by Revenue before the Tribunal and rejected them making following observations :

Having allowed export of motors with input specifications as bearings upto 50 mm bore, it may not be appropriate for the customs authorities to insist on technical specifications at the time of import of bearings. Further we also find that specifications provided in the DFIA authorisation have to be considered as, sufficient for the customs purposes since the specifications are based on goods exported under a shipping bill. Therefore the responsibility to ensure that exporter gives a proper declaration while making exports in the shipping bill lies on both customs as well as DGFT authorities and having missed the bus at the time of export, it may not be correct to insist on specifications from a transferee of DIFA. Further we also take note of the fact that DGFT is supposed to ensure that all the requirements have been fulfilled before allowing transferability.

6.?The above findings recorded by the Tribunal is based on the documentary evidence. Even during the course of hearing, the learned counsel appearing for the Revenue was unable to point out from any of the- documents available on record that the import was not in accordance with the licence conditions or the specifications provided therein. The view taken by the Tribunal is in accordance with the law laid down by this Court in the case of A.V. Industries v. Union of India - 2005 (187) E.L.T. 9 (Bom.) to which one of us (V.C. Daga, J.) is party. The Appeal is therefore dismissed for want of substantial question of law with no order as to costs. The fact situation in the instant case is also similar. Exemption under DFIA under Notification No. 98/2009-Cus., dated 11-9-2009 would thus be available.

7. The other aspect of this case is that DGFT Notification No 31dated 1.8.2013 deals with the case of import either (a) a generic import or (b) alternative imports. Public Notice No 35 dated 30.10.2013 have enlarged the scope of Notification No 31 dated 1.8.2013. Notification No 90 dated 2.8.2014 provides declaration of actually used quantify of inputs in the export goods. We find that in the present case, Phosphoric Acid is a specific entry mentioned in the DIFA Licence issued as per SION A-3627 in relation to the export goods Glass vials/phials/ampoules etc. So, the DGFT Notification 31 dated 1.8.2013 with Public Notice No 35 dated 30.10.2013 cannot be applicable in the present case. In our considered view, once the license was endorsed for transferability by the licensing authority, the nexus between import goods use in export goods, is not required to be established afresh by the transferee as held in various decisions relied upon by the Learned Advocate.

8. In view of the above discussions, he appeal filed by the Revenue is rejected and the impugned order passed by the Commissioner (Appeals) is upheld. Both the applications are disposed of.

(Dictated and pronounced in the Court)

(H.K. Thakur) (P.K. Das) Member (Technical) Member (Judicial)

swami

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