2015 (11) TMI 1019 - AT - Customs

Benefit of duty-free exemption under DFIA scheme has been denied primarily on the ground that the import took place after the issue of the policy circular dated 31.1.11 - appellant contended that, the policy circular no 13 dated 31.1.2011 did not amend the SION norms otherwise there was no need to amend the same on 1.2.2011 - notification No 98/0 - Held that - Letter was issued to a particular party but the Policy Circular 72 mentioned above still prevailed in general. Support is had from the Madras High Court judgement in the case of Hoewitzer Organic Chemical Ltd (2013 (6) TMI 303 - MADRAS HIGH COURT) holding that the clarification dated 23.9.2010 and the Policy Circular dated 31.1.2011 is concerned, the same may not apply to a valid license, the transferability of which is endorsed. It is to be noticed that the clarification issued by the Ministry of commerce dated 31.7.2008 and the DGFT policy circular dated 24.3.2009, which were enforced prior to issuance of license in question dated 15.4.2010, will be made applicable to the license, as it extends the benefits of flexibility to import the alternative input/product mentioned in the SION and that appears to be the main tenor of the petitioners seeking release of the lactose stating that the clarification and the circular which were in force at the time of issuance of license will be applicable to the goods imported and not the subsequent clarifications. Even if the actual user condition was brought in in 2011, fact remains that this condition has been deleted. The spirit of the judicial pronouncement is that the license has to be accepted as it is. And Customs cannot deny the benefit unless the DFIA is amended. Significantly, till date, the DFIA licenses have not been cancelled nor has any evidence been produced that the Customs have approached the DGFT for the same. - appellants are entitled to the benefit of Notification No. 98/2009-Cus. in terms of the DFIA presented to customs - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of import regulations regarding the import of lactose against DFIA licenses.
2. Applicability of policy circulars and notifications in determining duty-free import eligibility.
3. Consideration of technical specifications and expert opinions in import decisions.
4. Validity of DFIA licenses and transferability post-policy changes.
5. Compliance with export obligations under the DFIA scheme.

Issue 1: Interpretation of import regulations regarding the import of lactose against DFIA licenses:
The case involved the appellant importing lactose against DFIA licenses issued for the export of biscuits and Metamitron. The dispute arose from conflicting interpretations of SION norms and circulars issued by DGFT regarding the permissibility of importing lactose as an input against the export of sugar-based products. The appellant argued that the term "sugar" in SION norms encompassed lactose as well, citing technical specifications and expert opinions supporting this view.

Issue 2: Applicability of policy circulars and notifications in determining duty-free import eligibility:
The crux of the matter was the timing of policy circulars vis-a-vis the issuance of DFIA licenses. The appellant contended that the policy circulars in question did not amend the SION norms at the time of license issuance, thus entitling them to duty-free import benefits. The Tribunal analyzed the sequence of circulars, notifications, and judicial precedents to determine the retrospective application of policy changes on import eligibility.

Issue 3: Consideration of technical specifications and expert opinions in import decisions:
The appellant relied on technical specifications, expert opinions, and past clarifications from DGFT to support their claim that importing lactose against the DFIA licenses was permissible. The Tribunal evaluated these technical aspects in conjunction with the prevailing import regulations to ascertain the validity of the appellant's arguments.

Issue 4: Validity of DFIA licenses and transferability post-policy changes:
A significant aspect of the case was the impact of policy changes on the validity and transferability of DFIA licenses. The Tribunal examined whether changes in import regulations post-license issuance could retroactively affect the eligibility of the appellant for duty-free imports. Judicial pronouncements and precedents were crucial in determining the rights conferred by the DFIA licenses in light of subsequent policy amendments.

Issue 5: Compliance with export obligations under the DFIA scheme:
The Tribunal also addressed the issue of compliance with export obligations under the DFIA scheme. The appellant's fulfillment of export obligations within the stipulated timeline was a key factor in determining their entitlement to duty-free import benefits. Procedural aspects related to export obligations and their linkage to import privileges under the DFIA scheme were thoroughly scrutinized.

In conclusion, the Tribunal ruled in favor of the appellant, holding that they were entitled to the benefit of duty-free import under the relevant customs notification. The impugned order was set aside, and the appeals were allowed based on the detailed analysis of import regulations, policy circulars, technical specifications, and compliance with export obligations under the DFIA scheme.