DFIA correlation requirement applies only to listed resultant products; later restrictive changes cannot operate retrospectively.

Under the DFIA scheme, correlation of technical characteristics, quality and specifications between inputs and the export product applies only to resultant products listed in paragraph 4.55.3 of the Handbook of Procedures. The text states that pan masala / pan masala gutkha was not one of those listed resultant products, while perfumes and essential oil were inputs, not eligible resultant products for that correlation requirement. It also notes that the 2013 policy change could not be applied retrospectively to completed exports and a transferred DFIA. On those facts, the confiscation, redemption fine and penalty were treated as unsustainable.

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Issues: Whether the exported goods were liable to confiscation and whether redemption fine and penalty were sustainable where the DFIA authorisation had been transferred and the export product was not one of the resultant products specified in paragraph 4.55.3 of the Handbook of Procedures.

Analysis: The notification governing DFIA permitted a declaration of technical characteristics, quality and specifications only in respect of resultant products specified in paragraph 4.55.3 of the Handbook of Procedures. The export product in the present case was pan masala / pan masala gutkha, whereas the items relied upon by the Revenue, namely perfumes / essential oil, were inputs and not resultant products specified in that paragraph. The earlier circular and tribunal decisions consistently treated the correlation requirement as confined to the listed resultant products, and the later policy change introduced in 2013 could not be applied retrospectively to completed exports and a transferred DFIA. On the facts, no objection had been raised at the time of export or transfer of the licence, and the conditions of the earlier notification stood complied with.

Conclusion: The proceedings were not sustainable, the confiscation and consequential redemption fine and penalty could not be maintained, and the relief was in favour of the assessee.

Ratio Decidendi: Under the DFIA scheme, the requirement to correlate technical characteristics, quality and specifications of inputs with the export product applies only to resultant products specifically listed in paragraph 4.55.3 of the Handbook of Procedures, and a later restrictive amendment cannot be given retrospective effect to completed transactions.

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