DFIA exemption for imported Sodium Saccharin upheld where no correlation with exported product was required.

Sodium Saccharin imported under a transferable DFIA was treated as eligible for exemption under Notification No. 40/2006-Cus because the item had been recognised as a corrosion inhibitor by the Norms Committee in consultation with CECRI-CSIR, and the licence did not impose quality specifications beyond quantity and value limits. The benefit could not be denied on the basis of alleged mismatch with the exported product, as Board circulars and DGFT clarification stated that correlation between imported inputs and exports is unnecessary for DFIA clearance except for items covered by paragraph 4.55.3 of the Handbook of Procedures. The import therefore qualified for DFIA benefit.

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Issues: Whether Sodium Saccharin imported under a transferable DFIA was eligible for exemption under Notification No. 40/2006-Cus when treated as a corrosion inhibitor, and whether denial of benefit was justified on the ground of mismatch in quality specifications or absence of correlation with the exported product.

Analysis: The imported material was treated as a corrosion inhibitor by the Norms Committee of the Ministry of Commerce in consultation with CECRI-CSIR. The licence did not prescribe any quality criteria beyond quantity and value limits, and those limits were not exceeded. The Board's circular and the DGFT clarification indicated that, except for items covered by paragraph 4.55.3 of the Handbook of Procedures, correlation between inputs imported and the exported product need not be established for DFIA clearance. Since the item imported did not fall within that restrictive paragraph, the benefit could not be denied on the ground of technical specifications or alleged mismatch.

Conclusion: The import was held eligible for the DFIA benefit under Notification No. 40/2006-Cus, and the Revenue's challenge failed.

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