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TMI Blog2024 (5) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the person liable to pay duty had been involved in obtaining of authorization or in the exports that enabled transfer. There is no such finding and the consequence of invalidation is not only restricted to imports effected against those authorizations but also barred from being deployed for recovery by lapse of normal period of limitation. According to the adjudicating authority, actual use attaches to the inputs, covered by the norms, at the time of export which is to mirrored even after the export obligation has been fulfilled and licence endorsed for transfer. Thus, it is the case of the adjudicating authority that the pre-export entitlement remains unaltered post-export and even after fulfillment of export obligation; impliedly, the incentive is nothing more or less than that would entitle as drawback. We have set out supra that the generality of description in standard input output norms (SION) is intended to assist the policy objective of providing incremental incentive for export and, while that may not be entirely impossible in pre-export importation, such possibility of alternative product being cleared in post-export importation is not exactly not remote. The ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence of a creature of Customs Act, 1962, owing its existence to section 3 therein, to interpret policy, and its offspring instrument thereof, enabled under the authority of the Foreign Trade (Development Regulation) Act, 1992 beyond its jurisdictional ambit of the twin limbs of assessment - rate of duty and value - under section 17 of Customs Act, 1962, with contingent recourse to recovery under section 28 of Customs Act, 1962, and to interdict clearance of saffron for home consumption from empowerment to deter entry of prohibited goods. 2. This is not a case of saffron having been mis-declared. Nor is this a case of saffron having been undervalued. Computation of import duty on saffron is also not in question. Nor is there any allegation that import of saffron is subject to any prohibition. And yet, Commissioner of Customs-IV (Export), Air Cargo Complex (ACC), Mumbai found it conscionable to hold that saffron , valued at ₹ 70,19,96,270 and imported between October 2010 and May 2013, was liable to confiscation under section 111(d) and section 111(o) of Customs Act, 1962 and to direct recovery of ₹ 25,22,83,817 under section 28(4) of Customs Act, 1962 as duty not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., certification of exports and clearance of imported goods, too were entrusted to customs administration through the notification, affording exemption to goods imported against authorizations for manufacture and export, under Customs Act, 1962. And like other schemes of its ilk, it was also not necessary to import goods for manufacture and export with goods importable after exportation for being transferred or the right itself transferable subject to approval from the licencing authority. Here, the importer had, at the time of assessment, furnished eligibility, as transferee of authorizations duly approved by the competent authority, to benefit of exemption. That, according to the appellant-importer, should have been satisfactory closure as far as the goods were concerned; and that it was not is the cavil of the appellants. 4. The original holders of the authorizations , issued by the Directorate General of Foreign Trade (DGFT) with condition of actual use , were required to fulfill export obligation committed by them in their applications preferred under the Foreign Trade Policy (FTP); that they had, indeed, exported biscuits / assorted confectionery to the extent of their ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequences in the impugned order is about retention of actual use condition in the transferred authorizations owing to the restrictive intent of standard input output norms (SION) that had, allegedly, been suppressed at the time of import to obtain benefit of exemption notification without being eligible. 5. It has ever been the claim of importers that they were strangers to the exporters and entirely unconcerned with the goods exported by them and that the authorizations had been obtained through brokers. They further held out that the impugned imports were entirely in the clear both as to erasure of actual use condition through amendments before they were put in possession of, or had not ever been entailed in, the authorizations and by conceivable use of saffron as food flavour and food colour in edible goods. And yet, that the impugned order did wend its way, through the contours of investigation trails , to illegitimacy of claim for benefit of the duty free import authorization (DFIA) scheme in the Foreign Trade Policy (FTP) is the grievance. 6. It was held in the impugned order that, with the exporters to a person having admitted to not having used saffron in manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous computation of duty liability or/and of the goods being prohibited at the time of clearance for home consumption that, somehow, slipped past the proper officer enjoined with responsibility by section 47 of Customs Act, 1962. However, the recovery of duty, here, is not predicated on incorrect assessment under section 17 of Customs Act, 1962 inasmuch as it was the assessed duty foregone that, uncontestably, had been adopted for recovery and confiscation has not been predicated on goods being prohibited for import which could not have been as one of the two prompts invoked in the impugned order for confiscation of the impugned goods also happens to be one among the only four therein not related to dutiable or prohibited goods but to any goods (d) which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by, or under this Act or any other law for the time being in force; in section 111 of Customs Act, 1962. Read in conjunction with the (23) import , with its grammatical variations and cognate expressions, means bringing from a place outside India in section 2 of Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 28 and/or section 111 of Customs Act, 1962, to debar privilege assured in terms of a scheme espoused in the Foreign Trade Policy to incentivize foreign trade under the authority of Foreign Trade (Development Regulation) Act, 1992. The empowerment has been appropriated in the belief that the remit flows from tax exemption afforded thereby without pausing to consider that the privilege did not flow from a concession or exemption incorporated in the tax policy of the Central Government but ensconced within the rubric of a trade policy initiative. The substantive distinction is that tax policy sets out effective rates of duty in pursuance of some object enabled by the taxing statute while trade policy incentivizes exports by offering benefits that are not otherwise due. 10. Exemption from import duties, and indeed all levies, is built into exports of every sort and the entirety of chapter X of Customs Act, 1962 is devoted to neutralization of taxes in the costing of export goods. Thus, exemption from taxes are not an incentive singular to design of schemes in the Foreign Trade Policy and any consequence predicated on a contrary assumption is anathema to the raison d etre of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh a benchmark that has not even been hinted at in the inter-departmental correspondence adduced in the impugned order or even in the intra-departmental communication referred to. The collation of opinion of exporters on eligibility to import saffron and the insinuation that any clarification/amendment pertaining to the impugned authorizations, instead of being accepted as proper exercise of empowerment by a statutorily competent licencing authority, were obtained by subterfuge and false pretences was strongly resisted by Learned Counsel as improper attempt at interpretation of instruments of governance that was well beyond the competence of adjudication proceedings statutorily confined to the framework of section 28 and section 111 of Customs Act, 1962. 12. Learned Counsel referred to the correspondence emanating from the licencing authority, as well as the amendment sheets attached to the impugned authorizations , to demonstrate that the adjudication had erred in presuming to determine the manner in which the office of licencing authority should function. It was contended that the adjudicating authority had, without valid basis, padded up, or read down, the deliberate exclusions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority did not deem it proper to impose any liability. If that has not been imposed and the process by which it has to be read is as above, then, the Tribunal s finding of fact cannot be termed as perverse or vitiated by any error of law apparent on the face of the record. and on 28. The appellant was right in their contention that so long it is not in dispute 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 ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould appear that the adjudicating authority has proceeded to find against the appellants on an entirely inappropriate premise and without ascertainment of the empowerment, and competence, of licencing authorities to conform with section 12 of Customs Act, 1962 in discharging its functions under Foreign Trade (Development Regulation) Act, 1992. The provision under Customs Act, 1962 is authority for determining the rate of duty to be charged on goods upon occurrence of taxable event; the principles governing classification for identification of the tariff line describing imported goods most accurately is set out in Customs Tariff Act, 1975 only for that exercise. And all of this is for the specific purpose of assessment to duty. The assessment undertaken under section 17 of Customs Act, 1962 has not been disputed in the impugned order. The Indian Trade Classification (Harmonized System) Code, while largely aligned with the Schedules to Customs Tariff Act, 1975, has not been enacted as a statute and alterations thereto are also not subject to legislative enactment as no statutory levy hinges thereby. It is a classification code that is handmaid for administrative convenience and consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the licencing authority is with reference to notes below the relevant product group in the standard input output norms (SION) and does not offer insights into the impugned authorizations for tenable conclusions therefrom. Furthermore, Learned Counsel has drawn our attention to letter dated 8th March 2017 attesting to validity of the revisions in the impugned authorizations and which finds no reference in the impugned order. Both the presumed retention of actual use condition, notwithstanding the amendments to that effect, as well the restriction on alternative product premised on costing of exported goods, float in the ether of statutory vacuum and, in the absence of express intent, elaborated in clarification from the licencing authority, deployment to disadvantage of importer in proceedings under section 28 and section 124 of Customs Act, 1962 jeopardizes the validity of the findings and outcome therein. 17. Much has been made of order, dated 7th January 2016, reversing entitlement contained in the authorization issued to M/s Laxmi International and M/s Rama Exports in adjudication proceedings of the licencing authority. The restoration of restrictive conditions therein is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatements confirmed that the exporters whose DFIA Licences were used by the Noticee No. 1 M/s. USMS Saffron Co Inc, have never used Saffron in any form i.e. either in the form of flavour or in the form of colour in the manufacture of biscuits and assorted confectionery. All the exporters in their respective statements admitted that import of saffron under the subject DFIA licences is not permissible under SION norms and related Public Notices, since they have not used saffron in the manufacture of the export product. of the impugned order when it was the claim of 5.5.2 all licences were got amended changing the status AU to Transferable and the entry Food Flavour has been reflected in the amendment sheet, hence the goods were imported the transferee. that once the licence has been issued by DGFT, it means all export conditions have been fulfilled by the exporter. Otherwise DGFT might not have issued import licence against the exports; that they do not know whether saffron was actually used as an input, they do not have the export supporting documents, they do not know who made the licence amendments. as recorded in the impugned order that should have been taken up for ascertainment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draw upon even the authority by which customs officialdom is tethered to the scheme the exemption notification is telling enough of the intent of the Foreign Trade Policy (FTP) to keep such handicapping of authorizations by arrogating of authority to interpret licences and schemes in trade policy - at bay. An import for achieving contracted export obligation and an import unencumbered by such obligations cannot be on level even if in the same exemption notification and the essentiality of compliance with conditions that attaches to the former as its singular characteristic must, necessarily and for that very reason, be detached from the latter for equitability and sensibility. Bereft of that, transferability is but a silent bark with no dog and trade policy confined by tax policy to the doghouse. 20. It is on the assumption that the conditions attaching to pre-export importation also attend upon post-exportation import that (o) any goods exempted, subject to any condition, from duty or prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Trade Policy. The question begging answer is the scope and extent to which actual use is intended, at least, insofar as post-exportation imports are concerned, to be enforced. In other words, it is the proposition of selective application , implicit in condition of manufacture for export and use in manufacture for entitlement to import both devolving on original holder that is limited only to the second, while discarding the first, for evaluating the authorizations as entitlement of transferree, that must stand the test of legislative intent. 21. According to the adjudicating authority, actual use attaches to the inputs, covered by the norms, at the time of export which is to mirrored even after the export obligation has been fulfilled and licence endorsed for transfer. Thus, it is the case of the adjudicating authority that the pre-export entitlement remains unaltered post-export and even after fulfillment of export obligation; impliedly, the incentive is nothing more or less than that would entitle as drawback. We have set out supra that the generality of description in standard input output norms (SION) is intended to assist the policy objective of providing incremental incent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doled out from, statutory provision. It is articulation of optimism that, if taken in conjunction with being worked in the true spirit by the agency of the State and the commercial stakeholder, can achieve the intended purpose. In this contextual framework, the words and expressions are articulation of intent unlike, as deployed in a taxing statute, with purpose of ensuring conformity of the charging and assessment provision with the tax objective. It affords verbosity comparatively more, and less of reliance on literal intent for interpretation, than a taxing provision. The rigour adopted by the adjudicating authority is better suited to resolution of tax dispute than of a policy interpretation. It is for that reason that tax adjudications are not expected to foray into 19. .The definition of importer in Section 2(26) of the Customs Act is not really relevant to the question of title. It only defines the expression importer . The first respondent, does not claim to be the importer. The provision upon which strong reliance is placed by the appellants in this behalf is the one contained in Clause 5(3)(ii) of the Imports (Control) Order . Condition (ii) - which is the provision relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till they are cleared through Customs. This fiction is created for the proper and effective implementation of the said order and the Imports and Exports (Control) Act. The fiction however cannot be carried beyond that . But certainly he cannot be treated as the owner of the goods even in such a case. Holding otherwise would place the exporter in a very difficult position; he loses the goods without receiving the payment and his only remedy is to sue the importer for the price of goods and for such damage as he may have suffered. This would not be conducive to international trade. We can well imagine situations where for one or other reason, an importer chooses or fails to pay for and take delivery of the imported goods. He just abandons them. (We may reiterate that we are speaking of a case where the import is not contrary to law). It is only with such a situation that we are concerned in this case and our decision is also confined only to such a situation .. as held by the Hon ble Supreme Court in Union of India v. Sampat Raj Dugar [1992 (58) ELT 163 (SC)] even as the affirmation of jurisdiction to investigate rendered by the Hon ble Supreme Court thus 10. We do not find in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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