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2018 (11) TMI 1404 - HC - CustomsInterpretation of Statute - Notification No. 40/2006-Cus dated 01.05.2006 - ara 4.55.3 of the Handbook of Procedure for Export and Import - export of goods - pan masala - gutka - DFIA Scheme - According to the Revenue the effect of the HBP and the exemption notification was that the assesse had to mention the technical characteristics quality and specifications of the perfumes/essential oils/ aromatic chemicals used by it in its shipping bills. Held that - This court is of the considered view that the revenue s argument is merited and deserves acceptance. The DFIA scheme was intended to permit duty free import of inputs used in the manufacture of exported goods. The licenses issued by the DGFT thereunder are subject to the conditions stipulated in the HBP. Insofar as the license is in respect of the products specified in paragraph 4.55.3 thereof the licensee is required to furnish a declaration with regard to the technical characteristics quality and specification in the shipping bill. Interpretation advanced by the assessee (and accepted by the Tribunal) is that the declaration requirement of the exemption notification is applicable only if the exported goods are included in the list of items enumerated in paragraph 4.55.3. This contention cannot be accepted - The consequence of the assessee s interpretation would render it impossible to correlate the duty-free imports made under the DFIA with the inputs used in the exported products. Further if the resultant products are those enumerated in paragraph 4.55.3 then this interpretation would require a declaration of the quality technical characteristics and specification of the materials used in those items. Such a construction in this court s opinion is unreasonable as the DFIA is intended to exempt inputs used in production of other goods in India and is not concerned with the materials that have been used in the production of those inputs. The questions of law framed are answered in the affirmative i.e. in favour of the revenue and against the assessee - Appeal allowed.
Issues Involved:
1. Interpretation of Notification No. 40/2006-Cus dated 01.05.2006. 2. Compliance with para 4.55.3 of the Handbook of Procedure for Export and Import. 3. Requirement of technical specifications, quality, and declaration in shipping bills. 4. Validity of redemption fine and penalty imposed by the Commissioner of Customs. 5. Question of limitation raised before the Tribunal. Detailed Analysis: 1. Interpretation of Notification No. 40/2006-Cus dated 01.05.2006: The primary issue was whether the Customs Excise and Service Tax Appellate Tribunal (CESTAT) erred in its interpretation of Notification No. 40/2006-Cus. The Tribunal held that the requirement was for the technical specifications of the resultant product, not the inputs, to be mentioned on the shipping documents. The High Court, however, found that the notification and the Handbook of Procedure (HBP) required declarations for the inputs listed in para 4.55.3, including perfumes/essential oils, which were used in the manufacture of the exported goods. The court concluded that the "resultant product" mentioned in the notification refers to the goods produced using the imported inputs under the DFIA scheme. 2. Compliance with para 4.55.3 of the Handbook of Procedure for Export and Import: The Tribunal's interpretation was that the declaration requirement applied only to the resultant products listed in para 4.55.3. The High Court disagreed, stating that the DFIA scheme and the exemption notification required the technical characteristics, quality, and specifications of the inputs to be declared in the shipping bills. The court emphasized that this interpretation was necessary to correlate duty-free imports with the inputs used in the exported products. 3. Requirement of technical specifications, quality, and declaration in shipping bills: The Tribunal had relied on its previous decisions in Global Exim and Sicpa India Ltd., which interpreted the notification as requiring declarations only for resultant products. The High Court found this interpretation flawed, asserting that the declarations were necessary for the inputs used in the manufacture of the exported goods. The court noted that the DFIA scheme and the exemption notification should be read harmoniously to ensure compliance with the conditions stipulated in the HBP. 4. Validity of redemption fine and penalty imposed by the Commissioner of Customs: The Commissioner of Customs had imposed fines and penalties on the assessee for failing to declare the technical characteristics of the essential oils used in the manufacture of pan masala and gutka. The Tribunal set aside these fines and penalties based on its interpretation of the notification. However, the High Court reversed this decision, holding that the assessee was required to make the necessary declarations and had failed to do so, justifying the fines and penalties imposed by the Commissioner. 5. Question of limitation raised before the Tribunal: The High Court acknowledged that the Tribunal had not addressed the issue of limitation raised by the assessee. Consequently, the court remanded the case back to the Tribunal for reconsideration of this issue and any other unresolved matters, directing the Tribunal to dispose of the appeal in accordance with the High Court's judgment. Conclusion: The High Court allowed the revenue's appeal, set aside the Tribunal's judgment, and remanded the case to the Tribunal for further consideration of the limitation issue and other unresolved matters. The court emphasized that the declarations required under Notification No. 40/2006-Cus and para 4.55.3 of the HBP pertain to the inputs used in the manufacture of exported goods, not just the resultant products.
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