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2014 (5) TMI 525 - AT - CustomsEligibility for duty exemption - import of Amygluten 160 (Wheat Gluten) - Held that - The DFIA was issued to the exporter on the basis of SION E-5 for Biscuits. Having completed the export obligation, on 02.07.2013, the exporter (authorization holder) obtained endorsement of transferability from the licensing authority on the said DFIA, and the transferrable DFIA was transferred to the appellant. The appellant being a bona fide transferee sought duty free clearance of Amygluten 160 (wheat gluten) imported by it. The same was denied by putting conditions. The technical data on record and the communication dated 30.10.2013 from the Ministry of Food processing clearly support the appellant s contention that Wheat Gluten is Wheat Flour in which most of the starch is removed, and even the office of Jt.DGFT, at Hyderabad has clarified in a communication dated 30.7.2007 that Wheat Gluten Flour is nothing but Wheat Flour with specific technical characteristics, and thus eligible for import against Wheat Flour and merits exemption under DFRC scheme. The Commissioner (Appeals) in the instant case has therefore clearly erred in ignoring the settled position. These decisions and clarifications backed by technical literature which are available on record, leave no room for doubt that Wheat Gluten under import is Wheat Flour with specific technical characteristics. Once it is concluded that the imported goods are covered under the scope and ambit of permissible item Wheat Flour , and also that it was capable of being used in the manufacture of Biscuits , it is to be seen whether exemption could still be denied on the ground of nexus and Public Notice no. 35 dated 30.10.2013 - Apart from the DGFT s Circular 72/2008 and CBEC s Circular 46/2007-Cus, relevant portion of which is extracted, 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 - 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 - Decided in favour of assessee.
Issues Involved:
1. Eligibility for duty exemption on the import of Amygluten 160 (Wheat Gluten) under a transferable duty-free import authorization (DFIA). 2. Interpretation of whether Amygluten 160 (Wheat Gluten) qualifies as Wheat Flour under the DFIA. 3. Applicability and legal standing of various DGFT and CBEC circulars and public notices. 4. Requirement of establishing a nexus between imported inputs and exported products under a transferable DFIA. 5. Retrospective application of amendments to the Foreign Trade Policy (FTP) and related public notices. Detailed Analysis: 1. Eligibility for Duty Exemption: The core issue in this appeal is the eligibility for duty exemption on the import of Amygluten 160 (Wheat Gluten) under a transferable DFIA issued on 30.05.2012, in terms of Notification No. 98/2009-Cus dated 11.09.2009. The DFIA was transferred to the appellant after the export obligation was completed, and the appellant sought duty-free clearance of Amygluten 160, which was denied by the authorities, leading to the appeal. 2. Interpretation of Wheat Gluten as Wheat Flour: The appellant argued that Amygluten 160 (Wheat Gluten) is a refined form of Wheat Flour and is used in the manufacture of biscuits. The Commissioner of Customs (Appeals) had previously decided in favor of the appellant in similar cases, recognizing Wheat Gluten as Wheat Flour with specific technical characteristics. Technical data and communications from the Ministry of Food Processing and the office of Jt.DGFT supported this interpretation. Therefore, the tribunal concluded that Wheat Gluten is indeed Wheat Flour with specific technical characteristics and eligible for duty-free import under the DFIA. 3. Applicability and Legal Standing of Circulars and Public Notices: The tribunal examined various notifications, public notices, and policy circulars, including DGFT's Circular No. 13 dated 31.01.2011, which suggested that Wheat Gluten is not permissible under SION E-5 for biscuits. However, the tribunal noted that this circular did not have a corresponding amendment in the SION norms and could not legally restrict the import of Wheat Gluten. The tribunal cited precedents where it was held that circulars could not amend statutory notifications or restrict their scope. Therefore, the tribunal concluded that Circular No. 13 could not be relied upon to deny the duty-free import of Wheat Gluten. 4. Nexus Between Imported Inputs and Exported Products: The tribunal referred to several judicial pronouncements, including Aditya Birla Nuvo Ltd vs CC, which established that the nexus between imported materials and export products need not be proved afresh by the transferee of a transferable DFIA. The tribunal emphasized that once the imported material is covered by the advance license, the benefit of exemption notification would be available without the need to establish a nexus again. Therefore, the tribunal held that the appellant, as a transferee, was not required to prove that Wheat Gluten was actually used in the manufacture of exported biscuits. 5. Retrospective Application of Amendments: The tribunal examined the applicability of amendments to the FTP and related public notices, including Public Notice No. 35 dated 31.10.2013, which sought to apply Notification No. 31 dated 01.08.2013 retrospectively. The tribunal cited precedents, including Union of India vs Asian Food Industries and Soubhik Exports Ltd, which held that amendments to the policy could not have retrospective effect and could not take away vested or accrued rights. Therefore, the tribunal concluded that the provisions of Notification No. 31 dated 01.08.2013 (as amended) would not apply to the DFIA issued on 30.05.2012. Conclusion: The tribunal allowed the appeal, directing the respondent to assess the Bill of Entry as per the directions recorded and within seven days, confirming that the duty-free import of Wheat Gluten under the DFIA was legally permissible. The judgment emphasized that the appellant, as a transferee of the DFIA, was entitled to the duty exemption without the need to establish a nexus between the imported Wheat Gluten and the exported biscuits, and that amendments to the policy could not be applied retrospectively to deny the exemption.
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