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K.K. Usha, J. (President)

1. The issue placed before the Larger Bench for consideration is -

"Whether, for the period 1.4.1997-31.3.2002, the Policy Circular No. 32 (RE-99)/1999-2000 dated 17.9.99 issued by the DGFT regarding ITC (HS) classification of 'dried garlic' is a valid and binding clarification on such classification in terms of para 4.13 of EXIM Policy, 1997-2002."

The appellants had imported various quantities of 'dried garlic' and sought Clearance under ITC (HS) Heading 071290.04 and Customs Tariff Heading 0712.90 under Bill of Entry filed on different dates before 17.9.99, the date of Policy Circular No. 32 (RE-99)/1999-2000 issued by DGFT regarding ITC (HS) classification of 'dried garlic'. The garlic imported by all the appellants has a water content of above 10% WW. Relying on the Circular dated 17.9.99 issued by the Joint Director with the approval of the Director General of Foreign Trade, the adjudicating authorities took the view that the garlic imported are not dried garlic. The circular reads as follows : -

"It is hereby clarified that 'Dried Garlic' classified under Exim Code No. 071290.04 of ITC (HS) Classification, 1997-02 would be treated as 'Dried Garlic' provided the moisture content thereof does not exceed 10%, irrespective of the method of drying. This issue with the approval of DGFT."

Admittedly there is no specification regarding percentage of moisture in the Policy before the above circular was issued. The appellants contend that no reliance could be placed on the condition brought in by the Policy Circular to hold that the goods imported by them were not dried garlic. Their submissions are two-fold. The West Zonal Bench of the Tribunal held that the circular is not valid and binding and that the above decision had been followed by other co-ordinates benches of the Tribunal. Alternatively, it is contended that the circular if at all applicable can have no retrospective effect to cover the imports made by them. The Referring Bench was of the view that DGFT has the power to issue the circular dated 17.9.99 and it cannot agree with the view taken in J.B. Impex Vs. CCE Nhava Sheva, 2002-TAXINDIAONLINE-103-CESTAT-MUM, by the West Zonal Bench of the Tribunal. The Bench also took the view that the DGFT circular which is an Exim Policy Circular will have retrospective effect from the date of the Commencement of Exim Policy for the period 1.4.1997 to 31.3.2002.