2019 (6) TMI 223 - AT - Customs

Advance licence of DEEC Scheme - duty exemption on import of goods - export obligation was met on the ground of mismatch between input and output of goods - HELD THAT - Hon ble Apex court in TITAN MEDICAL SYSTEMS PVT. LTD. VERSUS COLLECTOR OF CUSTOMS, NEW DELHI 2002 (11) TMI 108 - SUPREME COURT while extending benefit of duty exemption, had held that objective of Duty Exemption Scheme and eligibility was for the advancement of export and once advance licence is issued, the Customs authority cannot refuse exemption on an allegation that there was misrepresentation and therefore, it was the licencing authority who can take steps on that behalf and not the Customs authority. In the instant case, it is the Commissioner of Customs who hold a finding that benefit of duty exemption cannot be granted to the whole lot of products as exemption notification was not applicable to the imported goods despite the fact that benefit of licence was supposed to be extended as per clarification issued by Commerce Ministry and Export Commissioner concerning interchangeability of both the raw materials and Appellant was issued inspection certificate by the Central Silk Board that goods exported were 100% natural silk fabrics. Appellant is entitled to duty exemption in full for the whole lot of inputs - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refusal of duty exemption on import of goods with advance licence of DEEC due to mismatch between input and output of goods.

Analysis:
1. The appellant imported Mulberry Raw Silk after completing the export obligation and claimed duty exemption based on the advance licence of DEEC. The Collector of Customs denied duty exemption on the full quantity of Raw Materials imported, segregating Mulberry Dupion Silk fabric from Mulberry Raw Silk fabric. The appellant challenged this decision citing a public notice merging Mulberry Raw Silk and Dupion yarn into a single category of raw material.

2. The Collector of Customs relied on notification no. 159/90 instead of the earlier public notice to determine duty exemption eligibility. The Collector emphasized that duty-free inputs must have identical specifications and technical characteristics as those used in the exported products. The Collector's order mistakenly equated "identical specification" with "same product," overlooking that "identical" can mean "similar" and not necessarily the same.

3. The appellant's counsel argued that Mulberry Raw Silk and Dupion yarn were merged into one category by public notice 104-ITC, supported by Appendix 13C of the Import/Export policy. The distinction between the two was deemed artificial, with no legal basis, as per the counsel. The counsel also referenced a notification withdrawing interchangeability between Mulberry Raw Silk and Dupion yarn and a clarification from the Export Commissioner allowing importers to choose either material. The counsel relied on a Supreme Court judgment to assert that duty exemption should be granted to advance licence holders for export advancement, emphasizing that Customs cannot refuse exemption based on misrepresentation.

4. The Tribunal allowed the appeal, setting aside the Collector's order and granting duty exemption in full for the disputed inputs. The decision was based on the appellant's arguments regarding the interchangeability of Mulberry Raw Silk and Dupion yarn, supported by legal provisions and the Supreme Court precedent highlighting the purpose of Duty Exemption Schemes.