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2018 (10) TMI 174 - HC - CustomsDuty Free Import Authorizations (DFIA) Scheme - Restriction on duty free import of Bearings - benefit of customs notification No.98/2009-cus dated 11.09.2009 - restriction placed on the ground that the imported goods are not covered by the DFIA and that the imported goods must be actually used in the manufacture of export goods. On 2.8.2013, Circular No.3 (RE 2013) / 2009-14 was issued with the approval of respondent No.2, laying emphasis on para 4 which stipulates that inputs actually used in manufacture of export product should only be imported under the authorization. Similarly, inputs actually imported must be used in export product . The petitioners are aggrieved by the said policy Circular dated 2.8.2013 (Annexure P/11). Held that - In terms of Clause 4.2.6 of the FTP, once transferability is endorsed, the authorization holder may transfer DFIA or duty free inputs except fuel and any other item(s) notified by DGFT. Meaning thereby, once the export obligation is discharged and transferability endorsement is made by the officers of the respondent No.1, the license and goods imported there under without payment of duty become freely transferable except the fuel and any other goods notified by the DGFT. In the case in hand, the resultant product is Agricultural Tractors which is not specified under para 4.32.2 of HBP and therefore, the petitioners are not required to correlate the technical specification, quality and characteristics of the imported goods. The Transfer Letter issued by Pushpanjali Floriculture Ltd to Global Exim clearly indicates that transfer of DFIA which is permitted as per the provision of Para 4.2.6 of the FTP-(2009-14). The DFIA licenses are freely transferable and accordingly, the DFIA holder transferred the DFIA to Pushpanjali Floriculture Ltd., who in turn re-transferred the said DFIA to Global Exim as per Annxures P/2 and P/3 - In any event, insistence of actual use in the export product is contrary to the provision of Para 4.2.6 of Foreign Trade Policy (2009-14). The said para stipulates that once transferability is endorsed, authorization holder may transfer the DFIA or duty free inputs, except fuel and any other items notified by DGFT. Once the imported goods are covered under the description, quantity as mentioned within the overall CIF value allowed in the DFIA, irrespective of the ITC (HS) Nos, there is no necessity to satisfy the requirement of Para 4.1.15 of FTP- (2009-14) and notification No.90 dated 21.08.2014. The petitioner is a bona-fide transferee of the said transferable DFIA cannot be denied exemption from payment of duties on the goods on the ground that only those actually used as inputs in the export product shall only be permitted for import which is applicable to a DFIA holder. Once the DFIA is made transferable by the licensing authorities, the Petitioner is not bound to show the actual use of the imported goods in the export product and is free to import any goods covered under the description and quantity mentioned within the overall CIF value allowed in the DFIA, (as amended upon competition of export), there is no necessity to satisfy the requirements of para 4.1.15 of FTP- (2009-14) - The petitioner No.1 is a DIFA transferee is entitled to import Alloy Steel Rods/Rounds/Billets and Hot Rolled/Cold Rolled Sheet/Wide Coils) covered under the DFIA s without showing actual use in the export product . Petition allowed.
Issues Involved:
1. Denial of duty-free import of Bearings under DFIA. 2. Applicability of Para 4.1.15 of FTP to DFIA transferee. 3. Requirement of correlation of imported goods with export products. 4. Legality of DGFT Notification No.31 dated 01.08.2013 and related public notices. 5. Transferability of DFIA and its implications. Detailed Analysis: 1. Denial of duty-free import of Bearings under DFIA: The petitioners challenged the action of respondent No.3 for not allowing the import of Bearings under Duty Free Import Authorizations (DFIA) as per Foreign Trade Policy (FTP) 2009-2014. The respondents argued that the imported goods must be actually used in the manufacture of export goods and match the technical specifications, quality, and characteristics of the inputs used in the export product. The court found that the petitioners, as transferees of the DFIA, were entitled to import goods described in the DFIA, and once the conditions of description, quality, and value were met, the respondents had no jurisdiction to deny the exemption. 2. Applicability of Para 4.1.15 of FTP to DFIA transferee: The respondents denied the benefit of customs notification No.98/2009-Cus dated 11.09.2009 based on DGFT notification No.31 dated 01.08.2013, which stipulates that only inputs actually used in export products are eligible for import under the DFIA Scheme. The court held that Para 4.1.15 of FTP, inserted by notification No.31 dated 01.08.2013, was not applicable to DFIA transferees. The court emphasized that once the export obligation is discharged and transferability is endorsed, the DFIA license and goods imported thereunder become freely transferable, except for fuel and other items notified by the DGFT. 3. Requirement of correlation of imported goods with export products: The court noted that the resultant product, 'Agricultural Tractors,' was not specified under para 4.32.2 of HBP, and therefore, the petitioners were not required to correlate the technical specifications, quality, and characteristics of the imported goods. The court found that the insistence on actual use in the export product was contrary to Para 4.2.6 of FTP, which allows for the transferability of DFIA or duty-free inputs once the export obligation is fulfilled. 4. Legality of DGFT Notification No.31 dated 01.08.2013 and related public notices: The court referred to the judgment of the Punjab and Haryana High Court in the case of Pushpanjali Floriculture Ltd. v. Union of India, which struck down Clause 4 of Notification No.31 (RE:2013)/2009-14 dated 01.08.2013, Clause 2 of PN35 (RE:2013)/2009-14 dated 30.10.2013, and Clause 3 of Notification No.90 (RE:2013)/2009-14 dated 21.08.2014. The court held that these provisions were not applicable to DFIA transferees and that the requirement of actual use of inputs in the export product was manifestly absurd and reflected non-application of mind by the authorities. 5. Transferability of DFIA and its implications: The court emphasized that once the DFIA is made transferable by the licensing authorities, the transferee is not bound to show the actual use of the imported goods in the export product. The court held that the petitioner, as a bona fide transferee of the transferable DFIA, could not be denied exemption from payment of duties on the goods on the grounds applicable to the original DFIA holder. The court concluded that the terms 'generic inputs' and 'alternative inputs' stipulated in Para 4.1.15 of FTP were not defined under Chapter 9 of the Foreign Trade Policy and were not applicable to DFIA transferees. Conclusion: The writ petition was allowed in part, following the law laid down by the Punjab and Haryana High Court in the case of Pushpanjali Floriculture Ltd. The court held that the petitioners, as DFIA transferees, were entitled to import the specified goods without showing actual use in the export product, and the respondents' denial of duty-free import was unsustainable in law.
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