2020 (9) TMI 366 - AT - Customs

DFIA Scheme - Legality of import of sweet whey powder - Actual User Condition - exemption under notification no. 40/2006-Cus dated 1st May 2006 or no. 98/2009-Cus dated 11th September 2009 - HELD THAT - It would appear that, despite availability of cheaper alternatives, it is not unknown for whey powder to be deployed as leavening agent in the baking industry. The adjudicating authority appears to have taken a contrary position on the basis of statements recorded from employees of the original holder of the license as well as those of the importer. This, as pointed out supra, is without good authority - Furthermore, the disinclination on the part of customs authorities to accept the clarifications issued by the licensing authority is mystifying. It is not the case of the adjudicating authority that there has been misdeclaration of the classification, or value, of the goods implying that the essentials for assessment have, thus, been complied with. Consequently, there is no finding of differential duty attributable to re-assessment. The impugned order fastens recovery, and other detriment, for non-compliance, in terms of eligibility and fulfilment of conditions, with exemption notifications issued for the purposes of implementing the duty-free import authorization (DFIA) scheme in the Foreign Trade Policy notified by the Directorate General of Foreign Trade under Foreign Trade (Development Regulation) Act, 1992. The eligibility for import of sweet whey powder , as leavening agent for manufacture of biscuits, should not, therefore, have given cause for doubt after receipt of clarifications from the license issuing authority. With the threshold eligibility thus settled, the allegation pertaining to ineligibility arising from import by an entity other than actual user and of ineligibility arising from utilization of a different leavening agent in the exports effected by the original license holder remain to be evaluated. The duty-free import authorizations procured by the appellant-importer had been made transferable in accordance with the provisions of the Foreign Trade Policy and there is no whiff of allegation that the said endorsements had been procured unlawfully. The prescription of actual user condition in the Foreign Trade Policy, and reflected in the corresponding notification issued under section 25 of Customs Act, 1962, cannot be said to be extended to transferees of such licences, except where specified otherwise, either in the policy prescriptions or in the notification, for that would be tantamount to imposing a condition that was not intended by the Central Government. We are also constrained to note that the original holder of license had not indicated such details in the relevant shipping bills. The statement of the employee of the exporter is the sole evidence relied upon by the adjudicating authority to conclude that an entirely different input had been utilized. There is no evidence on record that the appellants were aware of the composition of the exported goods. Hence, the appellant cannot be expected to conform to such imports as they are not cognizant of. From the available records and submissions made, we are unable to conclude if any of the inputs permitted for import to enable manufacture of biscuits are enumerated among the goods specified for conformity in the Handbook of Procedures. On the inadequacy of credible evidence, nature of the impugned goods and apparent conformity with the conditions of the Foreign Trade Policy, the impugned order cannot be sustained - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Legality of import of 'sweet whey powder' under duty-free import authorization licenses.
2. Conformity of 'sweet whey powder' with the description of 'leavening agent'.
3. Compliance with exemption notifications under Customs Act, 1962.
4. Eligibility of importer as a transferee of duty-free import authorizations.
5. Relevance of technical specifications between export and import products.
6. Interpretation of actual user condition in Foreign Trade Policy for license transferees.

Analysis:
1. The case involved appeals regarding the legality of importing 'sweet whey powder' under duty-free import authorization licenses. The importer claimed exemption under specific notifications but faced duty liability confirmed by the Commissioner of Customs.
2. Customs authorities argued that 'sweet whey powder' did not match the description of 'leavening agent' under the licenses, emphasizing the statements of officials and importers admitting to breaches.
3. The impugned order noted that the imported product did not align with the classification for entitlement under the cited notifications, referencing a Tribunal decision and SION E-5.
4. It was established that the importer was not an actual user and was a transferee of the original license holder, raising questions about compliance with export commitments and license transfers.
5. The adjudication order was scrutinized for rejecting clarifications from the licensing authority and technical literature supporting 'whey powder' as a leavening agent, challenging reliance on statements and lack of sample analysis.
6. The judgment emphasized the eligibility of 'sweet whey powder' as a leavening agent, questioned the imposition of actual user conditions on license transferees, and highlighted the lack of evidence regarding technical specifications between export and import products.

This comprehensive analysis of the judgment delves into the intricate legal issues surrounding the import of 'sweet whey powder' under duty-free import authorization licenses, providing a detailed breakdown of the arguments, findings, and conclusions presented in the case.