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TMI Blog2010 (7) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferee of the DFRC, imported what was described as "cotton fabrics (55% cotton and 45% polyester)" in the relevant bill of entry. They also claimed the benefit of the above Notification. The bill of entry was provisionally assessed with the above benefit and accordingly the goods were allowed to be cleared. In finalisation of the provisional assessment, the original authority denied the benefit of the DFRC and the Notification to the assessee and confirmed demand of duty of Rs. 4,57,852/- against them. This decision of the Deputy Commissioner of Customs was taken in appeal to the Commissioner (Appeals) and the latter allowed the same. Hence the present appeal of the Revenue. 2. The learned SDR for the appellant reiterates the grounds of this appeal and submits that the respondent did not satisfy condition No. 2(c) of Notification 48/2000-Cus. ibid. The Notification exempted certain materials from payment of basic customs duty as well as CVD subject to the following conditions :- (1) That the importer has been granted DFRC by the licensing authority for import of the said material in terms of para 7.4 of the Export and Import Policy and the said cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that, before allowing imports against DFRC, the Customs shall verify that the details of the exports as given on the DFRC are as per their records. According to the learned SDR, implied in this provision of the Handbook of Procedures is the responsibility of the importer to get the details of the exports verified by the proper officer of Customs before making the import. Had this verification been done, the present issue would not have arisen. The learned SDR has also relied on the DGFT's letter dated 1-7-2002 which communicated to the respondent the decision of the Advance Licence Committee (ALC) to reject their request for permission to import processed cotton fabric containing 55% cotton and 45% polyester under the subject-DFRC. In this connection, the learned SDR submits that the decision of the DGFT is binding on the importer under para 4.13 of the EXIM Policy, which reads as follows :- "4.13 If any question or doubt arises in respect of the interpretation of any provision contained in this Policy, or regarding the classification of any item in the ITC(HS), Handbook (Vol. 1), Handbook (Vol. 2), the said question or doubt shall be referred to the Director General of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Notice No. 4 dated 1-4-2002 did not have retrospective effect inasmuch as it expressly stated that it should come into effect from 1st April 2002. It is submitted that, prior to 1-4-2002, there was no requirement that the technical characteristics, quality and specifications should be declared by the exporter in the shipping bill or that similar particulars of the input should be mentioned by the licensing authority in the DFRC. The DFRC issued by the DGFT described the export goods as 'processed cotton made-ups other than grey'. It did not specify the chemical composition of the material. According to the learned counsel, any textile fabric composed predominantly of cotton is understood to be cotton fabric as is evident from the various entries of the Standard Input Output Norms (SION). In this connection, the learned counsel has drawn our attention to the relevant part of the SION. Against item Nos. J257-264, the outputs are boys garments and the corresponding input, in all cases, is 100% cotton fabric. Similar other instances also have been indicated by the counsel, whose endeavour is to show that, where the policy-making authority required input to be 100% cotton fabric corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decisions of this Tribunal, viz. Global Exim v. CC, Mumbai - 2010 (253) E.L.T. 417 (Tri.-Mumbai) and CC, Mumbai v. Matriaco (I) Ltd. - 1999 (114) E.L.T. 99 (T). While in the former case, this Tribunal held that the benefit of Notification 40/2006-Cus. was available to the importer on the strength of Duty Free Import Authorisation (DFIA) issued by the DGFT, the Tribunal in the latter case granted the benefit of Notification 203/92-Cus. to the importer who imported cotton denim fabric and exported gents shirts manufactured out of the fabric. In the two cases, the specifications of the export goods as given in the DFIA or the advance licence, as the case may be, were held to be sufficient in the absence of departmental verification leading to contra findings. According to the learned counsel, the ratio of the decision of the Tribunal in the aforesaid cases is squarely applicable to the instant case. 4. The learned counsel has also referred to the clarifications issued by the DGFT. He has conceded that the opinion given by the DGFT on the reference made by the respondent is adverse to them. It is submitted that the clarification offered by the DGFT is not binding on this Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of the Notification, the Revenue is agreeable for granting them the benefit of the Notification. The relevant condition, which is in the centre stage of the controversy in this case, is condition No. 2(c) which stipulates that the DFRC should contain endorsements by the licensing authority specifying "quality, technical characteristics, specifications and quantity of the materials used in the resultant product which are allowed to be imported duty-free". The DFRC in question merely described the input item as "processed cotton fabrics" and the resultant product as "cotton processed made-ups other than grey". The question agitated before us is as to whether the above input description would suffice the purpose of condition No. 2(c) of the Notification. 7. In this context, references have been made by both sides to certain "clarifications" offered by the DGFT (licensing authority). There are three such "clarifications" of the DGFT available on record.' In a letter dated 23-5-2001, the DGFT informed the Deputy Commissioner of Customs that his reference had been considered in the ALC meeting dated 3-5-2001 and a decision not to allow import of the material in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DFRC. In the reference made by the Deputy Commissioner of Customs, the DGFT offered contradictory clarifications, one of these being in favour of the importer. In the reference made by the party through the Deputy Commissioner, the DGFT's "clarification" was against the party. The authority given to the DGFT under para 4.13 ibid. was not to be exercised in a trifling manner inasmuch as it is an authority conferred exclusively on the DGFT for clearing doubts or questions arising out of conflicting interpretations of the provisions of the EXIM Policy. To construe the provisions of the EXIM Policy correctly in keeping with the legislative intent underlying the Policy is a function of paramount importance and the same has to be exercised with judicious application of mind. We think, this is the reason why the law makers did not permit the DGFT to delegate this power to any other authority. In two of the above three cases, the DGFT appears to have delegated this authority to the ALC and it was the ALC's decision which was communicated by the DGFT. In this context, we find that the function given to the ALC in the Directorate-General of Foreign Trade was only to recommend grant of lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities in terms of Notifications issued under Section 25 of the Customs Act and that is how the present dispute arose before the lower authorities. The question/doubt which arose in this case, as we have already noted, directly touched upon the scope of the expression "processed cotton fabrics" used in the DFRC issued by the DGFT. The respondent interpreted this expression in such a way as to claim the benefit of Notification 48/2000-Cus. before the Customs authorities. The Customs authorities interpreted the above expression in a different way so as to deny the benefit of exemption to the party. It was in this scenario that both the Deputy Commissioner of Customs and the party were constrained to approach the DGFT for his clarification. Such clarification, where it is offered in proper exercise of authority under para 4.13 of the EXIM Policy, is final and binding not only on the other authorities under the Ministry of Commerce but also on the Customs authorities. This is the reason why we have rejected the aforesaid arguments of the counsel. Nevertheless, on the facts of this case, we are not in a position to accept as final and binding any of the "clarifications" offered by the DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utput items mentioned in the DFRC could be a blend of cotton with a different textile material, cotton, of course, having to be the predominant constituent. The Revenue, in this case, has accepted the importer's declaration as "cotton fabrics (55% cotton and 45% polyester). Obviously, what was imported by the respondent was a consignment of fabrics composed predominantly of cotton. Considering the basis of classifying inputs and outputs in the SION, we hold that the expression "processed cotton fabrics" used for the import item in the DFRC should be construed so as to include such fabrics composed predominantly of cotton. The learned counsel has usefully referred to certain tariff entries also. Heading 52.08 of the CTA Schedule covers woven fabrics of cotton, containing 85% or more by weight of cotton, weighing not more than 200 g/m2. Heading 52.10 covers woven fabrics of cotton, containing less than 85% by weight of cotton, mixed mainly or solely with man-made fibres, weighing not more than 200 g/m2. Heading 52.11 covers woven fabrics of cotton, containing less than 85% by weight of cotton, mixed mainly or solely with man-made fibres, weighing more than 200 g/m2. It would thus app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there should be verification of records to ensure that the details of the exports given on the DFRC tally with the Customs records. The Customs verification should be made before allowing any import against the DFRC. These provisions of para 7.62 of the Handbook of Procedures 1997-2002 would indicate that sufficient safeguards should be taken by the licensing authority and the Customs authorities to ensure that any import made against a DFRC issued by the DGFT is in accordance with the records maintained by the Customs. It would, therefore, appear that the records maintained by the Customs in respect of export of the resultant product should be sufficient for the proper officer of Customs dealing with a subsequent import of input to verify whether such input is of the same quality, technical characteristics and specifications as those of the input actually used in the resultant product exported earlier. In our view, in a case of this kind, the Customs authorities should have maintained records pertaining to quality, technical characteristics and other specifications of the export goods, which they could have easily maintained through the process of sampling and testing. It appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tariff also. It appears to us that, under the DEEC scheme, gents cotton shirts must have been exported in fulfilment of export obligation vis-a-vis import of cotton fabrics. The cotton fabrics imported by the party were of "denim" pattern but the cotton shirts exported in the case were described only to be cotton shirts. The question, therefore, arose as to whether the exported goods were also of the same weaving pattern (denim). This Tribunal found no evidence on record of the Customs authorities to indicate that the gents shirts exported were not of denim. Again, what emanates from this decision of the Tribunal is that the importer should not be denied the benefit of the Exemption Notification on the ground of breach of any condition attached thereto where the Customs authorities had not, at the relevant stage, maintained the proper records to establish correlation between export goods and import goods. 12. The respondent's arguments are very much supported by the decisions in Global Exim case and Matriaco case. 13. The format of DFRC presently in vogue has also been shown to us, from which it appears that the licensing authority has started specifying the compositio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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