2023 (9) TMI 1264 - AT - Customs

Denial of exemption of DFIA benefits - Purchase of 1050 No.s of Lithium Ion Cells through High Seas Sales - N/N. 19/2015-CUS. - Lithium Ion Cells not been specifically used in export goods under paras 4.12 (i) (ii) of Foreign Trade Policy - HELD THAT - Generally exemption notification is to be construed strictly but exemption notification dealing with export benefit schemes are liable to be liberally construed. Further a notification at threshold while deciding applicability is required to be liberally construed, same after the applicability threshold is passed, is liable to be construed strictly as a matter of interpretation. A substantive benefit in any case cannot be denied on such ground, specially when it is known that EV tractors use various chip based and lithium based sub assemblies of electronics. Leaned Advocate for the appellant emphasised that under DFR Scheme there is no prescription of actual user condition nor is one to one co-relation between the product exported and the product imported is required, and this is the uniqueness of the scheme. It was also pointed out by the learned Advocate and we agree with the proposition that impugned Customs Notification No. 19/2015 was under challenge and that the Hon ble Allahabad High Court in SACHIN PANDEY VERSUS U.O.I. THRU. SECY. MINISTRY OF COMMERCE INDUSTRIES AND ORS. 2019 (10) TMI 1057 - ALLAHABAD HIGH COURT upheld non-correlation as one the feature of the DFIA Scheme. To the extent a particular material is capable of use even in any industry due to new patented or innovations in technology, the same shall be permitted to be imported against export of any specified material. It will be advisable to approach and decide the issue by the adjudicating authority keeping in mind that the DFIA Scheme unlike some other export scheme in the past which required some kind of a correlation in Tariff Heading does not require so as per various judicial pronouncements as well as by the application of the relevant notification - While the legislative purpose and intent of policy makers is not required to be looked into for interpreting any notification, it can be broadly analysed that if at any stage policy makers want to encourage innovation and advent of new technologies including usage of new materials, then such broad based imports within an industry and within same SION may be require to be encouraged, rather than persisting with old technologies and materials which can only restrict innovation. Appeal allowed.

Summary

Issues Involved:
1. Eligibility for Duty-Free Import Authorization (DFIA) benefits for Lithium Ion Cells under the description "Automotive Battery".
2. Interpretation of exemption notifications and actual use conditions in the context of DFIA.

Summary:

Issue 1: Eligibility for DFIA Benefits for Lithium Ion Cells
The appellants imported Lithium Ion Cells and sought exemption under DFIA, claiming these cells fall under the description of "Automotive Battery" used in Agricultural Tractors. They provided technical opinions and brochures to support their claim that Lithium Ion Cells are used in electric tractors. The Commissioner (Appeals) acknowledged the technical opinions but denied the exemption, arguing that the appellant failed to show the actual use of Lithium Ion Cells as automotive batteries in the export product.

Issue 2: Interpretation of Exemption Notifications and Actual Use Conditions
The appellants argued that it is settled law that a transferee of DFIA does not need to prove actual use of imported goods in the export product, as long as the goods are capable of such use. They cited several judicial decisions supporting this interpretation, including cases like Shalimar Precision Enterprises P. Ltd v CC and Shah Nanji Nagsi Exports P. Ltd v UOI. These cases established that the capability of use, not actual use, suffices for DFIA benefits.

The Commissioner (Appeals) held that "Automotive Battery" is a generic term and that the appellants needed to satisfy the specific names/description requirement under Para 4.12(i) of the FTP. However, the appellants countered that "Automotive Battery" is a specific term and that the provisions of Para 4.12(i) do not apply.

Tribunal's Findings:
1. Capability of Use: The Tribunal found that the imported Lithium Ion Cells are capable of being used as automotive batteries in electric tractors, supported by technical opinions and literature.
2. Generic vs. Specific Terms: The Tribunal disagreed with the Commissioner (Appeals) and held that "Automotive Battery" could include Lithium Ion Cells, especially given the advancements in technology.
3. No Actual Use Condition: The Tribunal reiterated that there is no requirement for actual use under the DFIA scheme, aligning with previous judicial pronouncements.
4. Exemption Notification Interpretation: The Tribunal found no ambiguity in the exemption notification that could be interpreted against the appellants. They emphasized that export benefit schemes should be liberally construed.

Conclusion:
The Tribunal allowed the appeal, granting the appellants the benefit of the DFIA exemption for the imported Lithium Ion Cells, recognizing them as "Automotive Batteries" used in electric tractors. The decision underscored the importance of technological capability over actual use in interpreting DFIA benefits.

Appeal is allowed with consequential relief.