2011 (8) TMI 670 - AT - Customs

Duty exemption under Notification No.46/2002 - Import of hydroxy ethyl cellulose under DFRC certificate - Revenue held there was no nexus between the export product and the goods imported under the said licence thus rejected claim - Held That - Export product has not been subjected to any test at the time of export and, therefore, it is not possible to know at this point of time that what did the export product contain. In the absence of a positive finding that the export product did not contain hydroxy ethyl cellulose, it will not be possible to deny the benefit to import hydroxy ethyl cellulose as the certificate granted clearly permits the import of the said product.

Summary

Issues:
- Interpretation of DFRC Licence terms and conditions for duty exemption under Notification No.46/2002-Cus.
- Nexus between export product and goods imported under the DFRC Licence.
- Eligibility for duty exemption under Notification No.46/2002-Cus based on technical specifications.
- Validity of DFRC certificate permitting import of hydroxy ethyl cellulose.

Analysis:

The case involves a departmental appeal against an order-in-appeal passed by the Commissioner of Customs (Appeals), Mumbai concerning the import of Hydroxy Ethyl Cellulose under a DFRC Licence claiming duty exemption under Notification No.46/2002-Cus. The dispute arose due to the department's contention that there was no nexus between the export product and the goods imported under the licence, leading to the denial of the duty exemption benefit. The lower appellate authority allowed the appeal, stating that the import was in line with the terms of the DFRC certificate, specifically citing SIO S.No.1037, which permitted the import of hydroxy ethyl cellulose against the export of a glass fibre reinforced plastic product containing 70% polyester resin and 30% glass fibre by weight.

The grounds of appeal by the department focused on the technical specifications required under Notification No.46/2002 for duty exemption, emphasizing the need for imported materials to match those used in the manufacture of the export product. The respondent argued that the import item permissible under SIO No.1037 included hydroxy ethyl cellulose, making them eligible for duty-free import under the Notification. This argument was supported by a clarification from the Joint DGFT, Mumbai, stating that the import of hydroxy ethyl cellulose was permitted under the DFRC scheme.

Upon careful consideration, the Tribunal found that the respondent held a valid DFRC certificate allowing the import of hydroxy ethyl cellulose. The description of the export product in the shipping bill did not definitively confirm the absence of hydroxy ethyl cellulose, and without such evidence, denying the duty exemption would be unjustified. The Tribunal referenced a similar case precedent to support its decision, highlighting the importance of specifications provided in export documentation for customs purposes. Ultimately, the Tribunal upheld the lower appellate authority's decision, dismissing the departmental appeal based on the validity of the DFRC certificate and the lack of evidence to refute the eligibility for duty exemption.

In conclusion, the judgment centered on the interpretation of DFRC Licence terms, the nexus between export and import products, compliance with technical specifications for duty exemption, and the validity of the DFRC certificate permitting the import of hydroxy ethyl cellulose. The decision emphasized the importance of documentary evidence and upheld the lower appellate authority's ruling in favor of the respondent.