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TMI Blog2017 (3) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned even in these 3 DFIA Licenses. - There is no merits in the arguement of revenue that the amendments in the DFIA licenses have been obtained through fraudulent means and suppression of facts before the licensing authorities. The duty exemption cannot be denied by construing Para 4.1.3 of the FTP to mean that only food flavour was actually used in the export product is allowed for import. Even the RTI information reveals that in the absence of specification of saffron under Para 4.32.2 of HBP means no nexus is required to be established with earlier exported products - The exporter have discharged the stipulated export obligation as mentioned in the DFIA Licenses issued by several regional licensing authorities. Therefore the contention that the license brokers in collusion with exporters fraudulently obtained transferability endorsement from licensing authorities by manipulating serial nos. 5 (d) to serial no 8 to escape the actual user condition is totally misplaced. The exporters have no role in the imports once the DFIA has been endorsed with transferability and sold in the market for a consideration. Therefore there is no justification in imposing penalty upon the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e condition that the amount of penalty so determined is also paid within the said period of 30 days; 11.4 I refrain from imposing penalty under Section 112(a) of the Customs Act, 1962, on M/s Dharampal Premchand Ltd. since penalty has been imposed under Section 114(A) of the Customs Act, 1962 in terms of last provisio to Section 114A. 11.5. I impose penalty of ₹ 5,00,000/-(Rupees Five Lakhs only) on M/s Dharampal Premchand Ltd. under Section 114AA of the Customs Act, 1962. 11.6. I impose a penalty of ₹ 25,00,000/- (Rupees Twenty Five Lakhs only) on Shri Nilesh Mota of M/s. Jash Mercantile LLP and M/s. Mota Trading Pvt Ltd, Mumbai under Section 112(a) of the Customs Act, 1962. 11.7. I impose a penalty of ₹ 10,00,000/- Rupees Ten Lakhs only) on M/s. Global Exim, Mumbai under Section 112(a) and under Section of the Customs Act, 1962. 11.8. I impose a penalty of ₹ 10,00,000/- (Rupees Ten Lakhs only) on M/s. Jani Co, the CHA No. 11/971 under Section 112(a) and under Section of the Customs Act, 1962. 11.9. I impose a penalty of ₹ 6,00,000/- (Rupees Six Lakhs only) on M/s Laxmi International under Section 114(iii) and under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective Regional Licensing Authorities and transferred the same to third parties in terms of the provisions of the policy and procedure. 3. The appellant procured the said DFIA Licenses for a consideration and utilised same for their import clearance of Saffron by claiming exemption of duty under Custom Notification No. 40/2006-Cus dated 01.05.2006 and Notification No. 98/2009-Cus dated 11.09.2009. The relevant imports were effected during the period from 20.04.2011 to 26.12.2012. 4. The SIIB department of Air Cargo Complex, Mumbai on the basis of certain intelligence report, initiated investigation in respect of the said import of Saffron under the description of Food Flavour which culminated into the issue of SCN. SIIB/GEN-51/2014 ACC (X)// SIIB/INV-12/2014-15 ACC (X) dated 07.03.2016 proposing to demand duty and penalties on the appellant and others which included License Brokers, Customs Brokers and Exporters under relevant Sections of the Customs Act, 1962. 5. It was the contention of the department that as per SION E-5 for the export of Biscuits to read with Public Notice No. 84 dated 23.07.2010 issued by DGFT, new Delhi, import of Food Flavour appearing against S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Commissioner in the impugned order stated that the cancellation of DFIA is in process and already some DFIA s are cancelled. Accordingly it was contended that order of Hon ble Tribunal in the case of USMS and by the Hon. High Court of Bombay proceeded on the ground that no action to amend or cancel the DFIA s taken by DGFT. 9. Shri Prakash Shah, Ld. Counsel appearing for the appellants made the following submissions- (i) The impugned order is contrary to binding decision of this Tribunal s Final Order No. 1134 to 1136/15-CB dated 01.05.2015 and judgement of Hon ble High Court of Bombay vide order dated 15.02.2016 in the case of USMS Saffron Co. Inc. In the said decision, this Hon ble Tribunal, in Para 7.6, examined each of the conditions of the Customs Notification No. 98/2009-Cus dated 11.09.2009 and recorded a specific findings that it did not find any violation of the conditions of the notification. The previous notification No. 40/2006 dated 01.05.2006 was identical to Custom Notification No. 98/2009 since the said notification was issued to cover the policy period (2004-2009) whereas Customs Notification No. 98/2009 was issued to cover Policy Period (2009-2014). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease to be the binding precedent. (vii) In the case of USMS, the learned AR had relied upon the letter dated 16.10.2014 of the Licensing Authority that the benefit of transferability must be denied, due recovery be made and penal action be taken in respect of DFIA No. 0310597237 dated 15.10.2010 issued to Laxmi International and copy of SCN dated 30.03.2015 issued by DGFT to Laxmi International proposing to cancel the said DFIA was produced before this Hon'ble Tribunal. This Hon ble Tribunal, in paragraphs7.1 and 7.2 of its order, rejected the contention of revenue relying upon binding precedents of the Hon ble Apex Court in the case of Sneha Sales Corporation- 2000 (121) ELT 577 and the Hon ble Bombay High Court in the case of A V Industries 2005 (187) E.L.T. 9 (Bom.) and held that the show cause notice issued to Lakshmi International cannot have any impact on the importer whose action is bona fide. (viii) The impugned order and in particular paragraphs 7.7.4, 7.7.5 and 7.11 thereof will clearly indicate that the learned Commissioner referred to the order of this Hon ble Tribunal and the Hon ble Bombay High Court and the learned Commissioner did not follow the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons filed by the revenue referring to a DGFT clarification that Para 4.1.3 shall be applicable for DFIA scheme also . On a perusal of the said provisions it is seen that DFIA is initially issued with AU condition. However on discharge of export obligation, DFIA is made transferable in terms of provision of Para 4.2.6 of FTP and Para 4.36A of Hand Book. In the instant case the exporter has exported goods by utilising indigeneous inputs. No imports are made by the exporter. Since no imports have been made by the exporter, requirement of physical incorporation does not arise at all. Once the DFIA is endorsed with transferability the DFIA and inputs are freely transferable under relevant customs notification. Since exporter has not imported saffron under the relevant DFIA there cannot be any physical incorporation of saffron in the export product. (xiii) It is submitted that provisions of paragraph 4.2 or 4.1.3 of the FTP cannot be a discovery of new facts. (xiv) In any event, the learned Commissioner is bound by the ratio of the judgment of the Hon ble Bombay High Court and his refusal to follow the binding judgment by relying upon paragraph 4.2.2 of the FTP is clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals), after considering the opinion of the Chemical Examiner, office of the Joint Director, Customs House Lab, New Customs House, Mumbai and Institute of Chemical Technology, University of Mumbai, held that Saffron comes under the category of Food Flavour and is permitted to be imported against the DIFA issued for export of Biscuits. (xx) The above order of the Commissioner of Customs (Appeals) was accepted by the Committee of Commissioners on merits. The impugned order wrongly holds that the above order was not accepted on merits and the same was accepted on the basis of monetary limit as prescribed by the CBEC. Note sheet giving reasons for accepting the order of the Commissioner (Appeals) by the Committee of Commissioners made available under RTI. (xxi) It is submitted that once the above order was accepted on merits by the Committee of Commissioners, it was binding on the learned Commissioner. The decision in the case of Eastern Silk Industries Limited-2016 (336) E.L.T. 141 (Tri. - Kolkata) cited on behalf of the revenue has no application to the facts of the present case. In that case, there is finding that there was a mis-declaration of export goods by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Global Exim v CC-2010 (253) ELT 417 which has been upheld by the Hon ble Bombay High Court in 2010 (259) ELT A139. (xxv) When all that the Customs Notification requires is that the imported goods must answer the description of item given in the DFIA and admittedly the imported goods (Saffron) answer the description Food Flvaour given in the DFIA, the duty exemption cannot be denied by construing Para 4.1.3 of the FTP to mean that only that Food flavour which was actually used in the export product is allowed for import. The FTP cannot be so read as to be inconsistent with the Customs Notification which in any event would prevail in case of inconsistency with the Policy as laid down in Global Exim v CC-2010 (253) ELT 417 . (xxvi) In response to the application filed by one Mr. Janardan Ghule under the Right to Information Act, it is revealed that the then Commissioner of Customs, (Exports) Air Cargo Complex, Sahar, Mumbai , realising that saffron is not being specified in paragraph 4.55.3 of HBP V1of FTP 2004-09, vide his letter dated 04.05.2012, requested the Joint Secretary (Drawback) CBEC that if felt appropriate the issue may be taken up with DGFT for suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. CESTAT, after hearing both sides on the matter, vide Final Order No. 1553/09, dated 29-12-2009, held as under : After hearing both the parties and on going through the written submissions, we are of the opinion that the term Flour and Powder are synonymous, and the flour can therefore be interpreted on a wider scale and cannot be restricted to any powder of a particular grain or nut. From the various dictionary meanings and other available information, it is fairly clear that the imported item Cocoa Powder is covered under the description of the input item flour as appearing under the said DFIA s. Therefore there is force in the contention of the appellant that the imported item Cocoa powder is a flour and covered under the description of the license. Therefore the only issue left before us is with regard to chapter headings which according to the appellant are of no relevance to a transferee since no CTH number are appearing on the amendment sheets, after the licenses are transferred by the licensing authorities, amending actual user conditions. We find that DFIA produced before the Commissioner covered, among others, maida/atta/flour of ITCHS code 19019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 no actual user condition can be incorporated. (xxxii) The reliance placed by the learned Commissioner on the judgement of the Hon ble Allahabad High Court in the case of Polyplex Corporation Ltd. reported in 2014 (5) TMI 60 was examined by this Hon ble Appellate Tribunal in the case of USMS (paragraph 6.2 and 7 of the order). This Hon ble Appellate Tribunal held that the ratio of the judgment of the Hon ble Allahabad High Court has no application to the facts of the present case. (xxxiii) Admittedly, the show cause notice dated 7.3.2016 , sought to demand the duty on the Saffron imported between April, 2011 to December, 2012 . The show cause notice issued admittedly beyond the normal period of one year from the relevant date. The SCN had sought to invoke the extended period. (xxxiv) It is clear from paragraph 11 of the judgment of the Hon ble Bombay High Court (supra), that the Revenue did not allege any fraud or suppression and the submission of the Revenue was restricted the requirements stipulated in the norms namely SION. In view of the submission of the revenue before the Hon ble High Court that there was no fraud or suppression in the case of USMS, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 10. On the other hand, Shri D.V. Nagvenkar, Ld. Addl. Commissioner (AR) appearing on behalf of the revenue strongly reiterates the findings of the impugned order. He also made the following submissions: (i) The Order of Bombay High Court is in appeal before the Hon. Supreme Court of India. (ii) Hence, the issue needs to be decided afresh on merits without being bound by the earlier orders on the issue. (iii) Customs Notification issued to implement Foreign Trade Policy, Customs Notification provides for duty exemption imports/exports under license regulated by FTP having a bearing on the duty exemption. Hence examination of DGFT Notifications, policy circulars, views of DGFT relevant for present case. (iv) DFIA license issued in terms of SION. Hence, license (including amendment sheets) needs to be read alongwith SION norms. Conditions on the date of issuance of license are relevant. Licenses also gives ITCHS of import item. Condition No. 12 on license condition sheet important for present dispute. (v) Saffron as food flavour was incorporated in SION E-1 w.e.f 8.08.2007 and if Saffron was intended to be included in Food Flavour in SION E5, a note simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to Actual user and accountability of actual use in the export product. The item Food Flavour is mentioned under Serial No. 5 (d) of the list of inputs and therefore are subjected to actual user condition. In other words, since the imported goods are Saffron, the appellant is permitted to import Saffron only if the said input is physically incorporated in the export product in terms of the provision of Para 4.2.2 of the FTP provides that provisions of Para 4.1.3 shall be applicable. The Para 4.1.3 reads as Advance Authorisation is issued to allow duty free import of inputs which are physically incorporated in export product (making normal allowance for wastage). On the other hand, the appellant states that the export obligation has been discharged and transferability has been endorsed in the relevant DFIA Licenses. Once the DFIA is endorsed with transferability, there is no Actual user condition since the DFIA and inputs are freely transferable after the discharge of export obligation in terms of the DFIA notification No. 40/2006-Cus dated 01.05.2015 and Notification No. 98/2009 -Cus dated 11.09.2009 which incorporates provisions of Para 4.2.6 read with Para 4.36A of Hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and not on monetary grounds. 21. As regards, the issue of ITC (HS) classification, it was the contention of the revenue that Saffron imported by the appellant falls under Chapter 9, whereas food flavour of Chapter 21 or 33 as mentioned in DFIA Licenses. 22. We find merits in the argument of the appellant that neither the SION refer to any ITC (HS) Number nor the amendment sheets issued after the endorsement of transferability in the relevant DFIA License specify any ITC (HS) No. The case law relied upon by the appellant in the case of USMS Saffron (Final order No. A/3267/15/CB dated 08.10.2015) is relevant wherein it was held that the appellant is entitled to import Saffron as a food flavour irrespective of ITC (HS) classification mentioned in DFIA. 23. We find that the out of 11 DFIA s, 7 DFIA s were issued prior to Public Notice No. 84/2010 dated 23.07.2010 and 1 DFIA was issued after the SION E-5 was amended vide PN 93 dated 01.02.2012. There is no actual user condition in existence prior to the issue of PN 84 dated 23.07.2010 and after 01.02.2012. 24. As regards the Balance 3 DFIA Licenses during the period on which Public Notice No. 84/2010 dated 23.07.2010, no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that saffron imported by the appellant is food flavour, it qualifies for duty free import under DFIA. There is no further requirement that only food flavour which was actually used by the exporter can be imported by the transferee of DFIA. Such a restriction that only the input of the same specification, quality and technical characteristics as used in the export product should be imported under DFIA applies only to the sensitive item mentioned in para 4.32.2 of Hand Book. This also flows from the plain terms of Notification No. 40/2006 and 98/2009. The appellant is right in his arguement that the only requirement of notification is that the improted goods must answer the description of the item mentioned in the DFIA. Neither the Biscuits nor the Saffron or Food Flavour fall in Para 4.32.2 of Hand Book. Therefore it is not necessary to correlate the technical specification, quality and characteristics of the imported goods with those used in export product. 29. The duty exemption cannot be denied by construing Para 4.1.3 of the FTP to mean that only food flavour was actually used in the export product is allowed for import. Even the RTI information reveals that in the absence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. Similarly, We find that there is no merits in the argument that Shri Nilesh Mota of Jash Mercantile and Mota Trading Pvt Ltd., and partners of Global Exim has deliberately and consciously planned and executed an act of fraud on the revenue with an intention to avail ineligible duty benefits. We find from the debit sheets of the relevant DFIA Licenses that the some of the DFIA Licenses have been partly transferred for other importers also for importing inputs other than saffron. We therefore find no basis in the argument of the revenue that they did not hand over the physical possession of the licenses and the importer had to approach them whenever import had taken place and license was temporarily handed over to the CHA only for debit purpose. 35. We also find that the revenue did not allege any fraud or suppression before the Hon. High Court of Bombay in the matter of USMS Saffron Co. Inc on the very same issue wherein one of the DFIA License No. 310597237 dated 15.10.2010 issued to Laxmi International was common in both the cases. The amendments are made by the regional licensing authorities and therefore it cannot be alleged that license brokers, exporters and importers h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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