DFIA exemption for corrosion inhibitor imports upheld where Ascorbic Acid was capable of use and no extra statutory condition applied.

A DFIA permitting import of a corrosion inhibitor was interpreted to cover Ascorbic Acid, because the item was shown by technical material and laboratory opinion to be capable of use in the relevant industrial process. The exemption under Notification No. 40/2006-Cus was therefore available, and customs could not deny it merely because the chemical had other uses or because a different substance was traditionally used. The then-operative SION no longer contained the earlier value restriction, so no breach was established. The absence of a separate drugs-regime NOC or waiver also did not invalidate the import, since an administrative instruction could not add a condition not found in the governing statute or rules.

---

---

Issues: (i) whether Ascorbic Acid imported under a transferred Duty Free Import Authorisation could be treated as a permitted Corrosion Inhibitor and claim exemption under Notification No. 40/2006-Cus; (ii) whether the Standard Input Output Norms imposed a value restriction preventing the import; (iii) whether the absence of a separate NOC or waiver under the drugs regime defeated the import.

Issue (i): whether Ascorbic Acid imported under a transferred Duty Free Import Authorisation could be treated as a permitted Corrosion Inhibitor and claim exemption under Notification No. 40/2006-Cus.

Analysis: The imported item was found, on the basis of the laboratory opinion relied upon by the Revenue as well as the technical material on record, to be capable of use as a corrosion inhibitor in the relevant industrial process. The scheme permitted import of inputs that are actually used or capable of being used in the export product. Once the DFIA described the permissible input as a corrosion inhibitor, the customs authorities could not deny the benefit merely because the item also had other applications or because a different chemical was conventionally used in the process.

Conclusion: The import of Ascorbic Acid as a corrosion inhibitor was permissible and the exemption under Notification No. 40/2006-Cus was available; the finding was in favour of the assessee.

Issue (ii): whether the Standard Input Output Norms imposed a value restriction preventing the import.

Analysis: The relevant public notices showed that the earlier restriction on the value of the concerned input category was removed before the date of the DFIA. On the date of the authorization, the operative norm did not contain the limiting factor relied upon by Revenue, and the Handbook of Procedures did not independently impose a restriction where the SION itself did not provide one.

Conclusion: No breach of the SION value restriction was established; the finding was in favour of the assessee.

Issue (iii): whether the absence of a separate NOC or waiver under the drugs regime defeated the import.

Analysis: The materials showed that substances not meant for medicinal use were treated differently under the drugs framework, and the requirement of an executive NOC could not be superimposed where the statutory scheme did not insist on it. An administrative instruction or circular could not add a condition that the governing statute and rules did not impose.

Conclusion: The absence of a separate NOC or waiver did not invalidate the import; the finding was in favour of the assessee.

Final Conclusion: The Revenue failed to establish any violation of the DFIA scheme, the applicable customs exemption, or the governing import-control conditions, and the impugned order allowing release of the goods was sustained.

Ratio Decidendi: Where a DFIA and the governing exemption scheme permit import of inputs that are capable of being used in the export product, customs cannot deny the benefit by insisting on actual use, by importing a restriction that no longer exists in the operative norms, or by adding an extra statutory condition through circulars or administrative directions.

---