2022 (9) TMI 228 - AT - Customs

Violation of judicial discipline - Denial of benefit of the Duty Free Import Authorization DFIA licence - Classification of imported Melamine - DRI received information that the appellant had mis-represented Melamine as Syntan and wrongly availed the benefit of exemption notification under the DFIA licence - whether the Melamine is a Syntan or otherwise? - HELD THAT - According to the literature provided by the learned Counsel for the appellant including a patent and extracts of chemical dictionaries, melamine can be used for tanning leather without making a condensate first. It is clear that Melamine and formaldehyde can be simultaneously used on the leather for tanning instead of making a condensate first. Since the expert opinion is contrary to the published literature the appellant sought cross-examination of the expert. The Adjudicating Authority issued letters but the expert did not appear. The Adjudicating Authority could have issued summons to him to force his appearance, but he did not do so - On cross-examination, perhaps, there would be better clarity as to how the expert held a view contrary to other technical literature. Therefore, it is found that the reliance on the expert opinion of CRCL not correct in this factual matrix. It is also found that prior to the issue of show cause notice there was an order of the Tribunal holding that Melamine qualifies as Syntan. The Additional Director of DRI and the adjudicating authority effectively said that the Tribunal was not correct. If it be their opinion, it was open for them to assail the order of the Tribunal before a higher judicial forum. Instead, the Additional Director DRI and the Assistant Commissioner have arrogated to themselves the role of a superior authority over the Tribunal and ignored the judicial precedent which is not only highly irregular, but is also in violation of judicial discipline. The lower authorities have confirmed the demand ignoring the order of this Tribunal in COMMISSIONER OF CUSTOMS, NHAVA SHEVA VERSUS DIMPLE OVERSEAS LTD. 2002 (3) TMI 636 - CEGAT, MUMBAI , ignoring all the technical literature which state that Melamine can be used directly for tanning leather, relying on the opinion of CLRI contrary to the published literature and without even allowing cross-examination of that expert, on the ground that Melamine was not used in the export products contrary to the DGFT s clarification that actual use does not matter and on the ground that the HSN codes of Syntan and Melamine were different although there is no stipulation of HSN in the licence and even contrary to the law laid down by Supreme Court in COMMISSIONER OF CUSTOMS, CALCUTTA VERSUS GC. JAIN ANR. 2011 (7) TMI 11 - SUPREME COURT that goods which are used even after same processing and not directly can be imported under the licence. The appeal is allowed.

Summary

Issues Involved:
1. Whether Melamine qualifies as a Syntan under the DFIA Scheme.
2. Validity of the expert opinion by CLRI.
3. Adherence to judicial precedents and principles of natural justice.
4. Applicability of the Supreme Court judgment in G.C. Jain.
5. Relevance of HSN codes in determining the eligibility of imported goods under the DFIA licence.

Detailed Analysis:

1. Whether Melamine qualifies as a Syntan under the DFIA Scheme:
The appellant imported Melamine under the DFIA Scheme, claiming it as a Syntan. The Tribunal had previously held in Dimple Overseas Ltd. that Melamine is a Synthetic Tanning Agent (Syntan). However, the Additional Director of DRI issued a show cause notice alleging that Melamine is not a Syntan, based on an expert opinion by CLRI. The appellant argued that Melamine qualifies as a Syntan based on technical literature and a United States Patent, which indicate that Melamine can be used directly for tanning leather. The Tribunal found that the literature provided by the appellant supported the claim that Melamine can be used directly as a Syntan, and thus qualifies under the DFIA Scheme.

2. Validity of the expert opinion by CLRI:
The show cause notice relied on an expert opinion by Dr. C. Muralidharan of CLRI, which stated that Melamine cannot be used directly as a Syntan but must be processed with formaldehyde. The appellant sought cross-examination of the expert, which was not provided as the expert did not appear despite notices. The Tribunal found that reliance on the expert opinion without cross-examination was incorrect, especially when the opinion contradicted published literature. The Tribunal emphasized that cross-examination is essential when expert opinions are contrary to other technical literature.

3. Adherence to judicial precedents and principles of natural justice:
The Tribunal noted that the Additional Director of DRI and the adjudicating authority effectively overruled the Tribunal's order in Dimple Overseas Ltd. without appealing to a higher judicial forum, which is a violation of judicial discipline. The Tribunal emphasized that lower authorities cannot ignore judicial precedents and must adhere to principles of natural justice, including providing opportunities for cross-examination.

4. Applicability of the Supreme Court judgment in G.C. Jain:
The appellant argued that even if Melamine needs to be processed with formaldehyde, it still qualifies for duty-free import under the DFIA Scheme based on the Supreme Court judgment in G.C. Jain. The judgment clarified that materials used indirectly after processing are eligible for exemption. The Tribunal found that this principle applies to the present case, and Melamine qualifies for import under the DFIA licence even if it is used after processing with formaldehyde.

5. Relevance of HSN codes in determining the eligibility of imported goods under the DFIA licence:
The Revenue argued that Melamine and Syntans have different HSN codes. However, the Tribunal found that the DFIA licence and the standard input/output norms published by DGFT do not specify HSN codes but only the materials. Therefore, as long as the goods match the description, they can be imported under the licence. The Tribunal held that customs officers cannot impose additional conditions not specified in the licence.

Conclusion:
The Tribunal set aside the impugned order dated 18.06.2019, allowing the appeal with consequential relief to the appellant. The Tribunal emphasized adherence to judicial precedents, principles of natural justice, and the proper interpretation of the DFIA Scheme in line with technical literature and the Supreme Court judgment in G.C. Jain.