DFIA exemption for wheat gluten and endorsed licence transferees underlines limits on actual user and input correlation restrictions.

DFIA import entitlement was discussed in relation to wheat gluten amygluten 160, with the analysis treating the product as derived from flour and within the intended flour-based exemption for biscuit manufacture. The commentary rejects denial of benefit on a narrow reading of the description and notes that the earlier coordinate bench view was treated as binding. It also explains that, for a validly endorsed DFIA transferee, the original actual user restriction does not continue unless the policy or notification expressly says so, and exact input-correlation was not treated as universally mandatory. On that reasoning, the duty demand and penalties were unsustainable.

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Issues: (i) Whether wheat gluten amygluten 160 could be treated as flour for the purpose of DFIA-based import exemption under the customs notifications; (ii) Whether the actual user restriction and input-correlation requirement could be enforced against a transferee of an endorsed DFIA licence.

Issue (i): Whether wheat gluten amygluten 160 could be treated as flour for the purpose of DFIA-based import exemption under the customs notifications.

Analysis: The imported product was examined in the context of the DFIA scheme and the notified import entitlement for flour used in the manufacture of biscuits. The reasoning treated wheat gluten as a product derived from flour after removal of starch and found that its essential character remained linked to wheat flour. The attempt to deny the benefit by applying ejusdem generis was rejected because the policy framework itself provided an avenue for clarification and the classification accepted at import was not disputed. The earlier coordinate bench decision in the same dispute was treated as binding.

Conclusion: The imported wheat gluten was held to fall within the intended import entitlement and the exemption could not be denied on the ground that it was not flour in substance.

Issue (ii): Whether the actual user restriction and input-correlation requirement could be enforced against a transferee of an endorsed DFIA licence.

Analysis: The licence had been validly transferred in accordance with the Foreign Trade Policy and there was no finding that the endorsements were unlawfully procured. The actual user condition was held not to travel to transferees unless expressly continued by the policy or notification. The record also did not establish that the appellants knew the exact composition of the exported inputs, and the available circulars were treated as supporting the view that exact correlation of technical specifications was not universally mandated.

Conclusion: The actual user restriction and the alleged correlation defect were held not to defeat the appellants' claim to the DFIA benefit.

Final Conclusion: The duty demand and connected penalties could not be sustained, and the appeals succeeded.

Ratio Decidendi: A transferee of a validly endorsed DFIA licence cannot be denied exemption benefits by importing goods that answer the substantive entitlement under the scheme unless the policy or notification expressly continues the original actual user restriction or insists on exact input correlation.

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