2015 (4) TMI 381 - AT - Customs

Revalidation of Duty Free Import Authorization Licenses (DFIA) - DFIAs could not be debited (utilized as the department had not permitted duty free import of Sodium Saccharin, Ascorbic Acid by importers against DFIA Licences in terms of benefit under Customs Notification No. 40/2006 - could not be utilized due to the ongoing litigation - Held that - Lower authorities have misread the provisions of law. As per the Handbook of Procedures, only the licensing authorities can permit the revalidation of freely transferable DFIAs. There is no dispute on this. But it should be fairly understood that adequate justification for revalidation has to be made available to DGFT. And this information can only be made available by Customs. The appellant has merely sought a statement for issue by Customs to the DGFT certifying that the admissibility of import of Saccharin/Ascorbic Acid against the DFIAs licenses remained in litigation. In fact the Commissioner (Appeals) acknowledges this position but comes to a conclusion that there are no express provisions for issue of certificates for revalidation. - Commissioner (Appeals) accepts the fact that the licenses are to be revalidated by the licensing authority but does not acknowledge that the licensing authority has no information about the prolonged litigation through the importer went while importing the said goods under DFIAs. This information only, can help DGFT to allow revalidation. It is for DGFT to revalidate the Licenses. The fact remains that the Licenses were presented to the Customs Authorities for debit but the goods were cleared on provisional basis. Due to ongoing litigation licenses were also not presented for debit for obvious reasons. The appellants cannot be expected to present Licenses for debit when the department continued to refuse duty free import against the said Licenses. - Commissioner (Appeals) himself held that once matter is in litigation it is not in the hands of the importer or the Customs Authorities to finalize the issue within the time frame of the licenses. In fact, the licenses remained in constructive custody of customs because customs refused to debit the licenses for duty free import of such goods by all importers. - Decided in favour of assessee.

Summary

Issues: Revalidation of Duty Free Import Authorization (DFIA) Licenses.

Analysis:

Issue 1: Revalidation of DFIA Licenses
The appellants appealed against the rejection of their request for revalidation of Duty Free Import Authorization (DFIA) Licenses by the Customs department. The appellants imported various chemicals under transferable DFIAs, but due to ongoing litigation regarding the admissibility of certain items like Sodium Saccharin and Ascorbic Acid against the licenses, they could not utilize them before the expiration of the licenses. The Commissioner (Appeals) held that there were no express provisions for the issue of certificates for revalidation in such cases. However, the appellants sought confirmation from Customs regarding the ongoing litigation to enable them to apply for revalidation as per Para 2.13.1 of the Handbook of Procedures of DGFT Ministry of Commerce. The Tribunal observed that only the licensing authorities could permit revalidation of DFIAs, but Customs needed to provide factual confirmation to DGFT for revalidation. The Commissioner (Appeals) acknowledged the litigation but concluded that there were no provisions for issuing certificates for revalidation. The Tribunal disagreed, emphasizing that Customs needed to confirm the ongoing litigation to facilitate revalidation.

Issue 2: Jurisdiction for Revalidation
The Customs department rejected the appellants' request for revalidation, arguing that the licenses were not in their physical custody, and only DGFT had the jurisdiction to revalidate licenses. The Tribunal clarified that while revalidation could only be permitted by licensing authorities, Customs needed to provide necessary information to DGFT for revalidation. The Tribunal rejected the Customs' argument that physical custody was required for revalidation, noting that the licenses were not presented for debit due to ongoing litigation and Customs' refusal to allow duty-free imports against them. The Tribunal directed the department to issue a certificate to DGFT within two weeks for the revalidation of licenses under Para 2.13.1 of the Handbook of Procedures, emphasizing that denial of benefits due to the expiration of licenses resulting from Customs' refusal would be unfair, especially when substantial investments were made in purchasing the licenses.

Conclusion:
The Tribunal allowed the appeal, highlighting the importance of confirming ongoing litigation to facilitate revalidation of DFIA licenses and directing the Customs department to issue the necessary certificate to DGFT for revalidation within a specified timeframe. The judgment emphasized the need to ensure that denial of benefits under the scheme due to Customs' actions would not result in unfair consequences for the importers who had invested significantly in acquiring the licenses.