2020 (9) TMI 949 - AT - Customs

Legality of import of wheat gluten amygluten 160 - production of duty-free import authorization (DFIA) licenses, permitting import of flour for the manufacture of biscuits - N/N. 40/2006-Cus dated 1st May 2006 or of notification no. 98/2009-Cus dated 11th September 2009 - period between November 2011 and September 2012 - HELD THAT - With the removal of starch from dough made of flour , the resultant product is wheat gluten. Hard wheat flour is hydrated to activate the gluten within it, processed for removal of the inherent starch by washing which, after dehydrating, is then powdered. Thus the composition of wheat, in a depleted form, in the flour does not appear, to us, to be an alteration of the essence of the product. With the threshold eligibility thus settled, the allegation pertaining to ineligibility arising from import by an entity other than actual user and of ineligibility arising from utilization of a different ingredient in the exports effected by the original license holder remain to be evaluated. The duty-free import authorizations procured by the appellant-importer had been made transferable in accordance with the provisions of the Foreign Trade Policy and there is no whiff of allegation that the said endorsements had been procured unlawfully. The prescription of actual user condition in the Foreign Trade Policy, and reflected in the corresponding notification issued under section 25 of Customs Act, 1962, cannot be said to be extended to transferees of such licences unless particularly specified, either in the policy prescriptions or in the notification, for that would be tantamount to imposing a condition that was not intended by the Central Government. Neither the adjudicating authority nor Learned Authorised Representative have been able to establish that post-export, endorsed for transfer license continued to be entailed with such actual user condition. In any case, the ultimate usage of such goods by an actual user renders the logic of Revenue to be unacceptable. There is no evidence on record that the appellants were aware of the composition of the exported goods. Hence, the appellant cannot be expected to conform to such imports as they are not cognizant of. From the available records and submissions made, we are unable to conclude if any of the inputs permitted for import to enable manufacture of biscuits are enumerated among the goods specified for conformity in the Handbook of Procedures. On the inadequacy of credible evidence of the ingredients used in the exported goods, the essential nature of the impugned goods, the apparent conformity with the conditions of the Foreign Trade Policy and the precedent decision in the dispute of the appellant herein - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Legality of import of 'wheat gluten amygluten 160' under specific notifications and DFIA licenses.

Analysis:
1. The appeals involved determining the legality of import of 'wheat gluten amygluten 160' under specific notifications using DFIA licenses. The Commissioner of Customs confirmed duty liability for recovery under the Customs Act, 1962, along with penalties on the importer and director, and penalties on other appellants.

2. The Learned Counsel contested the findings, arguing that the imported goods were permissible substitutes for 'flour' as per SION E5 norms. The adjudicating authority found the imported goods to be 'flavouring agents' not acceptable as substitutes, leading to breaches in conformity conditions.

3. The primary contention was that the import of 'wheat gluten' as 'flour' was settled by a previous Tribunal decision. The Counsel highlighted that the decision by the Commissioner of Customs (Appeals) could not be reopened as it had been accepted in review proceedings.

4. The Counsel also emphasized that expert opinions and clarifications from licensing authorities supported the importer's claim.

5. Commonly agreed facts included the importer not being an actual user and transactions occurring through intermediate entities. The original license holder did not directly transact with the importer and did not declare the composition of the export product.

6. The Authorized Representative argued that the imported goods did not qualify as 'flour' under specific regulations and codes, relying on legal principles and court decisions.

7. The Tribunal found that the Revenue misdirected itself by applying a principle in interpreting legislative intent in ambiguous circumstances. The Tribunal emphasized the need for clarity in policy formulations and compliance with exemption notifications.

8. The impugned order focused on recovery and penalties for non-compliance with exemption notifications under the DFIA scheme, without misdeclaration of classification or value.

9. The Tribunal noted unusual circumstances where recovery was based on ineligibility of the declared classification, despite no misdeclaration, and emphasized conditions of the notification as applied to the declared classification.

10. The composition of 'wheat gluten' from 'flour' was discussed to determine if it altered the essence of the product.

11. The Tribunal rejected arguments to ignore past Tribunal decisions, emphasizing that the present circumstances were different, and upheld the previous adjudication order.

12. Evaluation of ineligibility related to the importer not being an 'actual user' and using different ingredients in exports was conducted. The transferability of DFIA licenses and absence of unlawful endorsements were highlighted.

13. Circulars and instructions regarding technical specifications and quality characteristics were considered, noting the lack of details in shipping bills by the original license holder.

14. Various decisions cited by the Authorized Representative were dismissed as attempts to reopen settled Tribunal decisions.

15. The Tribunal acknowledged being bound by previous Tribunal findings and found no substantial differences in facts or law to warrant a different decision.

16. Based on the inadequacy of evidence regarding exported goods' ingredients, conformity with policy conditions, and precedent decisions, the Tribunal allowed the appeals, concluding that the impugned order could not be sustained.