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2025 (1) TMI 1220 - AT - CustomsClassification of import goods - whether the Appellant could have imported internal combustion engines meant for use in medium and heavy commercial vehicles covered under SION category C1059 by utilizing this transferrable DFIA license? - HELD THAT - The exemption from Customs duty in respect of imports against DFIA licences are governed by N/N. 98/2009--Cus dated 11.09.2009. To the extent relevant this notification stipulates that the exemption shall be granted provided that the description value and quantity of materials imported are covered by the authorization and the authorization is produced before the proper officer at the time of clearance. Certain additional restrictions are in place in respect of products specified in paragraph 4.32.3 of the Handbook of Procedures (Vol. I) of the Foreign Trade Policy (FTP). The SION category does not find any mention in the authorization at all. It is true that the export item name which is set out in a separate table titled item(s) details is identical to the description of the SION Category C969. However the category code itself finds no mention in the authorization. Further if anything the category restriction is relevant only to the goods exported. There appears to be nothing on the authorization restricting the category of goods imported. It might be true as the Revenue contends that in the application for the authorization the importer sets out the categories of goods to be exported and imported. However the language or particulars of the application cannot be read into the authorization so as to restrict the scope of the authorization to a field narrower than that which the words of the authorization themselves contemplate. Circular No. 46/2007 dated 20.12.2007 of the CBEC indicates that it is only in respect of product specified in paragraph 4.55.3 of the Handbook that a correlation of technical characteristics quality and specification of the inputs with the export products is required to be established. The circular goes so far as to say that such correlation is not required to be established in other cases unless the SION prescribe the same. Conclusion - The Appellant cannot be expected to correlate its imports with the exports of the person to whom the license was originally issued. It is further found that there is nothing in the license which restricts the import of internal combustion engines only to such internal combustion engines as would have been used in the goods which are permitted to be exported by the authorization. No such restriction can be read in where the words of the authorization do not themselves create such a restriction. The impugned order therefore deserves to be set aside - appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal question considered was whether the Appellant could import internal combustion engines meant for medium and heavy commercial vehicles under a Duty Free Import Authorization (DFIA) license originally issued for importing parts of agricultural tractors, specifically under SION category C969, when the Appellant's exports were categorized under SION category C1059. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The exemption from customs duty for imports under DFIA licenses is governed by Notification No. 98/2009-Cus dated 11.09.2009. This notification stipulates that the exemption is contingent upon the description, value, and quantity of materials imported being covered by the authorization, and the authorization must be presented to the proper officer at the time of clearance. Additionally, certain restrictions are detailed in paragraph 4.32.3 of the Handbook of Procedures (Vol. I) of the Foreign Trade Policy (FTP). Circular No. 46/2007 dated 20.12.2007 of the CBEC and Circular No. 50 (RE-08)/2004-2009 dated 06.01.2009 were also relevant, indicating that technical correlation between inputs and export products is only necessary for products specified in paragraph 4.55.3 of the Handbook. Court's Interpretation and Reasoning The Tribunal examined the authorization document and found that it permitted the import of "internal combustion engine complete" without specifying that these engines must be used exclusively for agricultural tractors. The Tribunal noted that the SION category was not explicitly mentioned in the authorization, and any category restriction appeared relevant only to the goods exported, not imported. The Tribunal emphasized that the language or particulars of the application for the authorization could not be used to narrow the scope of the authorization beyond what its words explicitly stated. The Tribunal also referenced the CBEC Circulars, which clarified that correlation between imports and exports is not required unless specifically prescribed by the SION. Key Evidence and Findings The Tribunal found that the authorization allowed the import of 181 units of internal combustion engines without restricting their use to agricultural tractors. The absence of any mention of SION categories in the authorization supported the Appellant's position. Application of Law to Facts The Tribunal applied the legal framework and precedents to the facts, concluding that the Appellant was not required to correlate its imports with the exports of the original license holder. The Tribunal found no basis in the authorization to restrict the import of internal combustion engines to those used in agricultural tractors. Treatment of Competing Arguments The Respondent contended that the DFIA license was limited to parts for agricultural tractors under SION category C969. However, the Tribunal rejected this argument, stating that the authorization did not impose such a restriction, and the language of the application could not be used to limit the authorization's scope. Conclusions The Tribunal concluded that the Appellant was entitled to import internal combustion engines for medium and heavy commercial vehicles under the DFIA license, as the authorization did not restrict such imports to agricultural tractors. The impugned order denying the exemption was set aside, and the appeal was allowed. SIGNIFICANT HOLDINGS The Tribunal held that the DFIA license did not restrict the import of internal combustion engines to those used in agricultural tractors, as the authorization's language did not impose such a limitation. The Tribunal emphasized that the scope of an authorization should not be narrowed based on the application particulars unless explicitly stated. The Tribunal established the principle that correlation between imports and exports is not required unless specifically mandated by the SION or relevant circulars. This principle was supported by precedents from the Madhya Pradesh High Court and a co-ordinate bench of the Tribunal. The final determination was that the Appellant's appeal was allowed, and the order denying the customs duty exemption was set aside.
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