Custom, Excise & Service Tax Tribunal
M/S Global Exim vs Commissioner Of Customs-Ahmedabad on 9 April, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad *****
Appeal No. : C/13280/2014 [ Arising out of OIA-AHM-CUSTM-000-APP-299-14-15 dtd 19.9.2014 passed by Commissioner of CUSTOMS (Appeals) -AHMEDABAD ] M/s Global Exim - Appellant(s) Vs. Commissioner of CUSTOMS-AHMEDABAD - Respondent (s) Represented by :
For Appellant : Shri H Modh, Advocte.
For Respondent : Shri K Shivkumar, Authorised Representative.
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/10675/2015 dated 09.04.2015 Per : Mr.P.K. Das, The relevant facts of the case, in brief, are that M/s Global Exim (hereinafter referred to as appellant) filed Bill of Entry No 6383884 dated 8.8.2014 for clearance of 2 MT of Edible Lactose 100 MESH (Milk Sugar) claimed duty free clearance against DFIA (Duty Free Import Authorisation) under Notification No 98/2009-Cus dated 11.9.2009. DIFA was originally issued to M/s Excel Corp Care Ltd against export of Metamitron on the basis of SION A-2059. After completion of export obligation by the exporter, DIFA was transferred to the appellant by the Licensing Authority. The Assessing Officer held that Edible Lactose has not been authorised for import in DIFA. By the Impugned Order, the Commissioner (Appeal) rejected the appeal filed by the appellant. Hence, the appellant filed this appeal before the Tribunal.
2. Learned Advocate appearing on behalf of the appellant submits that the imported item Lactose is a milk sugar as evident from various technical books. He drew the attention of the Bench various authorities to substantiate that Sugar covers Lactose. The Public Circular No 13 dtd 31.1.2011 disallowing the import of Lactose and other inputs against export of Confectionary Products and Biscuits, which is not applicable here, as in the present case, the export product is Metamitron. DGFT Notification No 31 dtd 1.8.2013 and clarification by public Notice No 35 dtd 30.10.2013 would not be applicable DFIA, issued, prior to 1.8.2013, supported by the decision of the Tribunal in the case of Uni Colloids Impex Pvt Ltd vs CC, Air Cargo, Ahmedabad 2014.310.ELT.583 (Tri.Ahmd). It is submitted that the said notification and Public Notice are applicable to generic item. But, in the present case, Sugar is a specific item.
3. DGFT Notification No 90 issued on 21.8.2014 cannot be effective retrospectively. In the present case, DIFA was issued on 23.112012 and the exporter had completed the export obligation and the transferability, was endorsed by the licensing authority on 13.5.2014. The Appendix 23 under Para 4.36 of Handbook is a procedural nature followed by the licensing authority. Once the DFIA is endorsed with transferability, the transferee importer is eligible to import specific item mentioned in the DIFA as per DGFT Policy Circular No 72/2008. There is no requirement to state the use of input in export goods. He relied upon various decisions. It is submitted that in this identical issue, the Commissioner (Appeals) following the decision of the Tribunal in the case of Uni Colloids Impex Pvt Ltd (supra) subsequent import, allowed their appeal. It is also submitted that DGFT Notification No 90 dtd 21.8.2014 would be applicable prospectively.
4. On the other hand, the Learned Authorised Representative for the Revenue, submits that there is no dispute that the appellant imported Lactose, which is not mentioned in the DFIA. It is stated that the DFIA permitted the goods under ITC (HS) No 17020000 and the Bill of entry was filed by the importer ITC (HS)17021990. So, they are not eligible the benefit of exemption of goods, which was not mentioned in DFIA. It is submitted that the appellant had not stated the utilisation of inputs in export goods. Notification No 31 amended Para 4.1.15 by inserting new para provides the duty free imports only those items, which are used in the export products. Public Notice No 35 dtd 30.10.2013 in para 4 makes it clear that every export on or after 1.8.2013, the said provisions of Para 4.1.15 of FTP would be applicable. Pubic Circular No 13 dtd 31.1.2011 disallowed the import of Lactose as an alternate input against Sugar. Further, the Appendix 23 of the Hand Book refers the only raw material used in the manufacture of export products are eligible duty free import under DFIA.
5. After hearing both the sides and perusal of records, we find that the appellant filed Bill of Entry in respect of import of Edible Lactose 100 Mesh (Milk Sugar) claiming benefit of Custom Notification No 98/2009-CUS dtd 11.9.2009. The said notification exempted the materials imported into India against the Duty Free Import Authorization (DFIA) issued in terms of Para 4.2.1 an 4.2.2 of the Foreign Trade Policy (FTP), from the whole of duty of customs leviable thereon subject to fulfilment of condition. One of the conditions is description, value and quantity of materials imported are covered by the said Authorisation and the said Authorisation is produced before the proper officer of Customs at the time of clearance of goods.
6. On perusal of the records, we find that DFIA No 031075608 dated 23.11.2012 was originally issued to M/s Excel Crop Care Ltd. Consequent upon fulfilment of export obligation against the said DFIA, by letter dated 13.5.2014, DGFT authority allowed duty free import of various items against DFIA, which is transferable freely in terms of Para 4.36A of Hand Book. In the present case, the said DFIA was transferred to the appellant by the Licensing Authority. The appellant imported Lactose under ITC (HS)1702 1990 without payment of duty against the said DFIA, which allowed to import of Sugar, ITC(HS) Code 17020000. Chapter 17 of ITC(HS) classification of Export & Import Item covers Sugar and Sugar confectionary. The relevant portions of Chapter 17 are reproduced below:
Item Code Item Description 1701 Cane or beet sugar and chemically pure sucrose, in solid form.
170111 Cane Sugar 17019990 Other 1702 Other sugars, including chemically pure lactose, maltose, glucose an fructose, in solid form; sugar syrup not containing added flavouring or colouring matter; artificial honey, whether or not mixed with natural honey; caramel.
17021990 Lactose and Lactose Syrup Other 1703 Molasses resulting from the extraction or refining of sugar.1704
Sugar Confectionery.
ITC Exim Code 1701 covers cane or beet sugar. As per HSN Notes, Cane Sugar is derived from the juices of the sugar cane stalk. Beet sugar is derived from the juices obtained by extraction from the root of the sugar beet. Exim Code 1702 covers sugars other than sugars of heading 1701. As per HSN Notes Headings 17.02, Lactose is also known milk sugar. Lactose is extensively used with milk in the preparation of infant foods. It is seen that Exim Code 17020000 as shown in DIFA, is not mentioned in ITC (HS) classification of Export and Import items, 2008, 13th Edition by Centex Publications Pvt Ltd. Apparently, Item Code 1702 covers other sugars, including Lactose. The Learned Advocate referred various authorities, which would show that the item Sugar covers Lactose. So, the item Sugar as mentioned in DFIA would include Lactose.
7. The Learned Authorised Representative for the Revenue submits that DGFT Policy Circular No. 13 dtd 31.1.2011 imposed restriction to import lactose as alternative input. On perusal of the Policy Circular No 13, we are unable to agree with the submission of the Learned Authorised Representative. The relevant portion of the Policy circular No 13 is reproduced below:
Attention is invited to the Policy Circular No.72(RE-08)/2004-2009 dated.24.03.2009 regarding importability of alternative inputs allowed as per SION under DFIA Scheme.
2. The Standard Input-Output Norms (SION) for Biscuits (with or without dry fruits) are at Sl. No. E-5 and for Assorted Confectionery at Sl. No. E-1. The import of inputs allowed under SION E-5 and SION and SION E-1 do not include Tapioca Starch, Wheat Gluten, and Lactose / Fructose / Maltose / Mannitol / Sodium Saccharin / Artificial sweetening Agents.
3. Therefore, (i) import of Tapioca Starch and Wheat Gluten as alternative inputs against import item No. 1 of SION E-5 and, (ii) import of Lactose / Fructose / Maltose / Mannitol / Sodium Saccharin / Artificial Sweetening Agents, as alternative inputs against import items No. 2 of SION E-5 and import item No. 1(a) of SION E-1, is not to be allowed, under Advance Authorisations and Duty Free Import Authorisations issued agasint SIONs E-1 & E-5.
This issues with the approval of Director General of Foreign Trade. In the present case, import of Sugar as mentioned in DIFA is against export of Metamitron SION A-2059. But the above circular issued in relation to SION E-1 and DION E-5 against the export of confectionery. Thus, the said circular would be applicable for the export of confectionary products, biscuits. We have observed that the item Sugar covers Lactose as against export of Metamitron SION A 2059, for which there is no separate condition notified in the norms. The Honble Bombay High Court in the case of AV Industries 2005.187.ELT.9 (Bom) held that when the import is in accordance with the import license issued to the petitioner, Revenue cannot take shelter under import policy and purport to take action against the importer.
8. The Commissioner (Appeals) rejected the appeal of the appellant on another reasons that DGFT Notification No 31 which amended Pra 4.1.15 by inserting a new para which stipulates that only input actually used in manufacture of the export product should only be imported under the authorisation. Similarly, inputs actually imported must be used in the export product. This has to be further established in respect of every advance Authorisation/DFA. A clarification letter issued vide DGFT Public Notice No 35(RE.2013)/2009-2014 dtd 30.10.2013 in para 4 amply makes it clear that every export made or after 1.8.2013 provision of Para 4.1.15 of FTP shall apply.
9. We agree with the submissions of the Learned Advocate that this issue was not before the original authority. In any event, it is noticed on this issue, the appellants own case for the subsequent import, the Commissioner (Appeals) allowed the appeal following the decision of the Tribunal in the case of Uni Colloids Impex Pvt Ltd (supra). We find that this issue is squarely covered in favour of the appellant by the decision of the Tribunal in the case of Uni Colloids Impex Pvt Ltd (supra). The relevant portion in the case of Uni Colloids Impex Pvt Ltd, 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.
10. The other aspect of this issue is that DGFT Notification No 31dated 1.8.2013 deals with the input either (a) a generic input or (b) alternative inputs. 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 used in the export goods. We find that in the present case, Sugar is a specific entry mentioned in the DIFA Licence and Lactose is covered under the scope and ambit of permissible item Sugar. 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 imported product and the use in export goods is not required to be established afresh by the transfered as held in various decisions relied upon by the Learned Advocate.
11. In view of the above discussions, the impugned order is set aside and the appeal filed by the appellant is allowed.
(Dictated and pronounced in the Court)
(H.K. Thakur) (P.K. Das)
Member (Technical) Member (Judicial)
swami
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