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2025 (2) TMI 965 - AT - CustomsClassification of imported goods - Aluminium Foil 50 MIC - 10% - to be classified under CTH 7607 19 91 of Customs Tariff or not - whether the goods imported by the appellant under AAs are permitted for duty free import under Advance Authorization Scheme? - HELD THAT - It is not disputed that the importer was issued Advance Authorizations for import of raw material viz. Aluminium Foil to Mic /-10% for export of Alu/Alu Foil (PVC 60 MIC/OPA 25) the final goods have been exported by the appellant and the competent authority i.e. DGFT has also issued the EODCs in this regard. It has to be appreciated that the DGFT functioning under the aegis of the Ministry of Commerce and Industry is responsible for formulating and implementing the Foreign Trade Policy for promoting India s exports. The Advance Authorization Scheme is one such scheme under which the appellant has imported the raw material subsequent by exported the final products. The Hon ble Supreme Court in Titan Medical Systems Private Limited vs. Collector of Customs New Delhi 2002 (11) TMI 108 - SUPREME COURT held that As regards the contention that the appellants were not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority it was fairly admitted that there was no requirement for issuance of a licence that an applicant set out the quantity or value of the indigenous components which would be used in the manufacture. Undoubtedly while applying for a licence the appellants set out the components they would use and their value. However the value was only an estimate. In the instant case also the licensing authority viz. DGFT has accepted the fulfilment of export obligation and issued 7 Export Obligation Discharge Certificates to the appellant. The 8th was pending at the time of hearing. These EODCs discharge the appellants from any further export obligation. That being the position the Customs authorities cannot deny the benefit of Customs duty exemption under the notifications governing the Advance Licensing Scheme. The customs authorities if had been of the opinion that the appellant had violated any of the terms and conditions of the licences the matter should have been referred to the licensing authority for appropriate action rather than demanding duty in the inputs/raw materials. Conclusion - The appellant correctly availed the benefits under Notification No. 18/2015-Cus and the customs authorities could not demand duty based on a reclassification of the imported goods. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core issue in the present appeal is whether the imported goods, specifically Aluminium Foil 50 MIC +- 10%, classified under CTH 7607 19 91, are eligible for duty-free import under the Advance Authorization Scheme, despite the department's contention that they should be classified under CTH 7607 11 90, which would render them ineligible for the said benefit. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework revolves around the Customs Act, 1962, specifically Section 112(a)(ii), and the Advance Authorization Scheme under the Foreign Trade Policy, supported by Notification No. 18/2015-Cus. The appellant relied on precedents such as PSL Ltd. vs. Commissioner of Customs and decisions by the Supreme Court in cases like Commissioner vs. Ratnamani Metals & Tubes Ltd., which establish that the customs tariff classification of imported materials is not relevant for allowing exemption from customs duty if the materials are covered by the Advance Authorizations issued to the assessee. Court's Interpretation and Reasoning The Tribunal emphasized that the classification provided in the Advance Authorization is indicative. The DGFT, as the nodal authority, can revise or correct this classification if objected to by customs authorities. The Tribunal noted that the description of goods in the Advance Authorizations matched the imported items, irrespective of classification differences. The Tribunal also highlighted that once the Export Obligation Discharge Certificate (EODC) is issued by DGFT, customs authorities cannot deny the benefits of the notification. Key Evidence and Findings The appellant had obtained EODCs for seven out of eight Advance Authorizations, confirming the fulfillment of export obligations. For the remaining authorization, the appellant had completed the export obligation and was in the process of obtaining the EODC. The DGFT had amended the classification in two Advance Authorizations to include the customs tariff classification, supporting the appellant's position. Application of Law to Facts The Tribunal applied the principles from previous judgments, notably that customs authorities should not question the classification once the licensing authority has certified the fulfillment of export obligations. The Tribunal found that the appellant had correctly availed of the benefits under Notification No. 18/2015-Cus, as the imported goods were covered by the Advance Authorizations, and the description matched the goods imported. Treatment of Competing Arguments The Tribunal considered the department's argument that the imported goods were not further worked upon and thus should fall under CTH 7607 11 90. However, the Tribunal found that the processes undergone by the goods, such as slitting, annealing, and packaging, meant they were appropriately classifiable under CTH 7607 19 91. The Tribunal also noted that the DGFT's role and the issuance of EODCs were crucial in determining the eligibility for duty exemption. Conclusions The Tribunal concluded that the appellant was entitled to the duty exemption under the Advance Authorization Scheme, as the imported goods were covered by the authorizations and the export obligations had been fulfilled. The Tribunal set aside the impugned order, allowing the appeal. SIGNIFICANT HOLDINGS The Tribunal reinforced the principle that the customs tariff classification of imported materials is not relevant for exemption purposes if the materials are covered by Advance Authorizations. The Tribunal cited the Supreme Court's stance that customs authorities cannot deny exemption benefits once the licensing authority has certified the fulfillment of export obligations. The Tribunal's decision emphasized the role of the DGFT as the competent authority in matters of export obligation and classification under the Advance Authorization Scheme. Final Determinations on Each Issue The Tribunal determined that the appellant correctly availed the benefits under Notification No. 18/2015-Cus, and the customs authorities could not demand duty based on a reclassification of the imported goods. The Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.
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