2024 (5) TMI 838 - AT - Customs

Benefit of exemption - Duty Free Import Authorisations - DFIA scheme - Import of saffron / saffron pushali B - food flavour and food colour in edible goods - actual use condition and disclosure - HELD THAT - No clarification emerges from that order to impact any of the other authorizations impugned in this appeal. It is pertinent to note that reliance on this development strikes at the very pillar on which the impugned proceedings have been erected as none of the other authorizations were similarly proceeded against and must be deemed, for want of similar outcome, as validated. In the light of importer being a transferee of authorizations invalidated subsequent to its use, the detriment, flowing thereby from processing subsequent to transfer by the two entities who were issued with it, is hit by the bar of limitation in the absence of any finding that the person liable to pay duty had been involved in obtaining of authorization or in the exports that enabled transfer. There is no such finding and the consequence of invalidation is not only restricted to imports effected against those authorizations but also barred from being deployed for recovery by lapse of normal period of limitation. According to the adjudicating authority, actual use attaches to the inputs, covered by the norms, at the time of export which is to mirrored even after the export obligation has been fulfilled and licence endorsed for transfer. Thus, it is the case of the adjudicating authority that the pre-export entitlement remains unaltered post-export and even after fulfillment of export obligation; impliedly, the incentive is nothing more or less than that would entitle as drawback. We have set out supra that the generality of description in standard input output norms (SION) is intended to assist the policy objective of providing incremental incentive for export and, while that may not be entirely impossible in pre-export importation, such possibility of alternative product being cleared in post-export importation is not exactly not remote. The rigour of the expression actual use , to the extent inferred by the adjudicating authority, does not rule out such possibility It is the case of the adjudicating authority that only the first aspect may be varied though neither the Foreign Trade Policy (FTP) nor the corresponding exemption notification contain anything that may suggest such limited perspective of actual use which, with fulfillment of export obligation, implicitly and literally, does not continue to insist that the importer must deploy it in production or that it should be deployed in the very product that is specified in the authorization for domestic sale instead of being exported. There is no percentage in such insistence on one aspect of actual use , and conveniently selected, when such is not sanctioned either by the Foreign Trade Policy (FTP) or in the exemption notification without insisting on the other two aspects. The adjudicatory jurisdiction should not have been extended beyond the contents of the authorizations which were themselves to be evaluated only in terms of claim of the appellant that saffron is capable of use as food flavour and food colour which were the descriptions in the impugned authorizations. These are not disputed in the proceedings and the test of commercial viability, adopted in the impugned order, is not conceptually intrinsic to export promotion schemes in the Foreign Trade Policy (FTP) and, thus, undoing the foundation of both confiscation and recovery of duty in the impugned order. Thus, the impugned order is set aside to allow the appeals.

Summary

Issues Involved:
1. Statutory competence of Customs authorities to interpret Foreign Trade Policy (FTP).
2. Validity of confiscation of saffron under section 111(d) and 111(o) of Customs Act, 1962.
3. Recovery of duty under section 28(4) of Customs Act, 1962.
4. Imposition of penalties under sections 114A, 114AA, and 112(a) of Customs Act, 1962.
5. Jurisdictional oversight of customs authorities in interpreting authorizations for duty-free import.

Summary:

1. Statutory Competence of Customs Authorities:
The Tribunal examined whether Customs authorities, under section 3 of the Customs Act, 1962, have the jurisdiction to interpret policy and instruments under the Foreign Trade (Development & Regulation) Act, 1992. It was determined that such interpretation should not fall within the remit of Customs authorities, whose jurisdiction is limited to assessment of duty and value under section 17 and recovery under section 28 of the Customs Act, 1962.

2. Validity of Confiscation of Saffron:
The Tribunal noted that the case did not involve mis-declaration, undervaluation, or prohibition of saffron. The Commissioner of Customs-IV (Export) had ordered confiscation of saffron under sections 111(d) and 111(o) of the Customs Act, 1962, and recovery of duty foregone, along with penalties. The Tribunal found that the confiscation under section 111(d) was without basis in law as saffron was not prohibited under the Customs Act, 1962 or any other law.

3. Recovery of Duty:
The recovery of duty under section 28(4) of the Customs Act, 1962, was based on the purported invalidation of authorizations despite endorsement as duly transferred by licensing authorities. The Tribunal emphasized that post-importation conditions intended for ensuring adherence to export obligations should not entail the importer with additional conditions.

4. Imposition of Penalties:
Penalties under sections 114A, 114AA, and 112(a) of the Customs Act, 1962, were imposed on the importer and others. The Tribunal found no basis for these penalties as there was no misdeclaration or undervaluation, and the goods were not prohibited.

5. Jurisdictional Oversight:
The Tribunal highlighted that the Customs authorities had overstepped their jurisdiction by interpreting the Foreign Trade Policy (FTP) and the associated authorizations. The Tribunal referenced previous judicial decisions, including the Bombay High Court's ruling in Commissioner of Customs (Export) v. USMS Saffron Co Inc, which held that the licensing authority's decision on authorizations should not be second-guessed by Customs authorities.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals, and emphasized that the Customs authorities should not interpret or invalidate authorizations under the Foreign Trade Policy (FTP). The recovery of duty and confiscation of goods were found to be unjustified, and the penalties were deemed invalid.