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2022 (12) TMI 374 - AT - CustomsRecovery of customs duty foregone on the inputs allowed to be imported under 7 DFIA licences - correctness or otherwise of classification of Maize (corn) Starch declared by the appellant to customs for claiming export benefit under DFIA scheme - Notification No. 98/2009-Cus dated 11-9-2009 and 19/2015-Cus dated 01-04-2015 under section 28AAA of the Customs Act, 1962 - HELD THAT - It can be seen from show cause notice and the impugned order that there is no dispute to the fact that the export item namely liquid glucose concentrate (food grade) was manufactured from using starch slurry which is essentially a starch albeit in slurry form. Starch is a necessary input for manufacture of liquid glucose is evident even from the technical material relied upon by learned AR appearing for the Revenue and from the extract of book titled Glucose Syrups, Technology and Applications of Peter Hull published by Wiley-Blackwell relied upon by the appellant. However, the case of the revenue is that since Starch is manufactured out of Maize which is the base input, correct SION for the export item-liquid glucose is Maize specified under SION Entry E76 and not Starch specified under SION Entry E22 and that appellant has mis-classified its product in order to claim undue benefit of DFIA Scheme. There is no dispute to the classification of export item in the present case. The dispute relates to import item-input. One of the specified import items under E22 is Starch whereas Maize is the specified import item under SION E76. Since undisputedly Starch slurry is used as immediate input by the appellant in manufacturing of its export item-liquid glucose concentrate, it cannot be said that starch was not appellant s input for export item. Further Starch is in turn manufactured from Maize is also an undisputed fact and equally qualify to be the input for the aforesaid export item under E76. It can be seen that subsequent to the exports by the appellant, SION Entry E22 was deleted by DGFT upon recommendation of internal committee on the premise that E22 was being mis-used by the exporters. This goes on to show that earlier exporters were eligible to claim any of the inputs under the respective entries as export item-liquid glucose essentially remained the same under both the entries. It can be seen that maize may be the original material used at the beginning of the manufacturing process but the input for manufacturing of liquid glucose concentrate was that one which was used directly for manufacturing export product. For export and also for exemption for goods manufactured in India a concept of immediate parentage is well recognized and accordingly the immediate parent material was relevant to decide which input was used for manufacture of the exported goods - In the present case, the immediate parent material was starch slurry i.e. starch and not maize and therefore case of the department that SION E76 was the correct norm cannot be sustained. Since the immediate parent material for manufacturing the exported goods was starch falling under SION E22 , it is clear that the Starch was the correctly applicable SION. Considering the ratio of the decisions of Tribunal in DHRUVCO PRINTERS (P) LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, NEW DELHI 1995 (5) TMI 176 - CEGAT, NEW DELHI , COLLECTOR OF C. EX., BOMBAY VERSUS VIJAY FLEXIBLE CONTAINERS (P) LTD. 1996 (9) TMI 211 - CEGAT, NEW DELHI and COMMISSIONER OF C. EX., MUMBAI-II VERSUS JAYNA PACKAGING PRIVATE LTD. 2000 (8) TMI 136 - CEGAT, MUMBAI , denying the benefit under DFIA on the ground that Starch is not the original input and that Maize is the original input which alone is eligible for the benefit of DFIA is bereft of any legal basis. Jurisdiction of customs to demand duty from the appellant invoking section 28AAA of the Act - HELD THAT - It is undisputed fact that all the 7 DFIA licences were granted by the DGFT are valid and subsisting and further no proceedings for cancellation or suspension of any of these authorizations have been initiated by the DGFT. It thus follows that DGFT which is the proper authority to determine classification of goods under DFIA claim has not disputed and has accepted the classification of import item under E22 of SION. Further, considering the above analysis, appellant has correctly classified its product under SION E22. In the circumstances, finding of the commissioner that appellant resorted to mis-declaration and suppressed facts cannot be sustained. It has been further held in the said decision of AXIOM CORDAGES LTD. VERSUS COMMISSIONER OF CUSTOMS, NHAVA SHEVA-II 2020 (9) TMI 478 - CESTAT MUMBAI that when the assessment of shipping bills filed by the appellant has attained finality as department has not filed appeal against the same under section 128 of the Act; classification of goods cannot be questioned subsequently by the customs by way of issuance of show cause notice. The impugned order cannot be sustained and is liable to be set aside - Appeal allowed.
Issues Involved:
1. Correctness of classification of 'Maize (Corn) Starch' under SION Entry E22 or E76 for DFIA benefits. 2. Jurisdiction of customs to demand duty under Section 28AAA of the Customs Act, 1962. Issue-wise Detailed Analysis: 1. Correctness of Classification of 'Maize (Corn) Starch': The appellant, engaged in manufacturing various starch products, exported "Liquid Glucose Concentrate (Food Grade)" under DFIA, declaring "Maize (Corn) Starch" as the import item. The department contended that the actual raw material used was 'Maize,' not 'Maize Starch,' and thus the correct SION Entry should be E76, not E22. The appellant argued that liquid glucose concentrate is manufactured from starch slurry, which is chemically equivalent to starch powder, and hence, SION Entry E22 was applicable. They relied on definitions under FTP 2015-20 and case laws supporting the concept of immediate parentage in manufacturing processes. The Tribunal noted that both SION Entries E22 and E76 cover liquid glucose, with E22 specifying starch and E76 specifying maize. The appellant used starch slurry as the immediate input, making starch the relevant input under E22. The Tribunal observed that subsequent deletion of E22 by DGFT indicated earlier eligibility under both entries. The Tribunal emphasized that opting for a beneficial entry does not constitute mis-declaration, supported by judgments in Share Medical Care v. UOI and CCE, Bhopal v. Minwool Rock Fibres Ltd. The Tribunal concluded that 'Maize (Corn) Starch' was correctly classified under SION E22, as starch slurry was the immediate parent material used in manufacturing the export product. 2. Jurisdiction of Customs to Demand Duty under Section 28AAA: The Tribunal examined the validity of DFIA licenses granted by DGFT, noting that none were canceled or suspended. It emphasized that DGFT, as the competent authority, had not disputed the classification under E22. The Tribunal cited Titan Medical Systems Pvt Ltd v. Collector of Customs, New Delhi, asserting that customs cannot refuse exemption if the licensing authority has not questioned the license. The Tribunal referred to Axiom Cordages Ltd v. CC, Nhava Sheva - II, highlighting that Section 28AAA applies only if licenses were obtained through collusion, wilful misstatement, or suppression of facts. Without DGFT's action against the appellant, customs lacked jurisdiction to invoke Section 28AAA. The Tribunal further noted that export benefit schemes fall under the jurisdiction of DGFT, not customs, and that the finality of shipping bill assessments precludes subsequent questioning by customs. Conclusion: The Tribunal set aside the impugned order, allowing the appeals with consequential relief, as the appellant correctly classified the input under SION E22, and customs lacked jurisdiction to demand duty under Section 28AAA.
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