2025 (1) TMI 1220 - AT - Customs

Tribunal Permits Import of Engines for Commercial Vehicles Under DFIA License, Overturns Restrictive Customs Order.

M/s. Volvo India Private Ltd. Versus The Commissioner of Customs, Salai, Custom House, Chennai

M/s. Volvo India Private Ltd. Versus The Commissioner of Customs, Salai, Custom House, Chennai - TMI ISSUES PRESENTED and CONSIDEREDThe core legal question considered was whether the Appellant could import internal combustion engines meant for medium and heavy commercial vehicles under a Duty Free Import Authorization (DFIA) license originally issued for importing parts of agricultural tractors, specifically under SION category C969, when the Appellant's exports were categorized under SION category C1059.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe exemption from customs duty for imports under DFIA licenses is governed by Notification No. 98/2009-Cus dated 11.09.2009. This notification stipulates that the exemption is contingent upon the description, value, and quantity of materials imported being covered by the authorization, and the authorization must be presented to the proper officer at the time of clearance. Additionally, certain restrictions are detailed in paragraph 4.32.3 of the Handbook of Procedures (Vol. I) of the Foreign Trade Policy (FTP).Circular No. 46/2007 dated 20.12.2007 of the CBEC and Circular No. 50 (RE-08)/2004-2009 dated 06.01.2009 were also relevant, indicating that technical correlation between inputs and export products is only necessary for products specified in paragraph 4.55.3 of the Handbook.Court's Interpretation and ReasoningThe Tribunal examined the authorization document and found that it permitted the import of 'internal combustion engine complete' without specifying that these engines must be used exclusively for agricultural tractors. The Tribunal noted that the SION category was not explicitly mentioned in the authorization, and any category restriction appeared relevant only to the goods exported, not imported.The Tribunal emphasized that the language or particulars of the application for the authorization could not be used to narrow the scope of the authorization beyond what its words explicitly stated. The Tribunal also referenced the CBEC Circulars, which clarified that correlation between imports and exports is not required unless specifically prescribed by the SION.Key Evidence and FindingsThe Tribunal found that the authorization allowed the import of 181 units of internal combustion engines without restricting their use to agricultural tractors. The absence of any mention of SION categories in the authorization supported the Appellant's position.Application of Law to FactsThe Tribunal applied the legal framework and precedents to the facts, concluding that the Appellant was not required to correlate its imports with the exports of the original license holder. The Tribunal found no basis in the authorization to restrict the import of internal combustion engines to those used in agricultural tractors.Treatment of Competing ArgumentsThe Respondent contended that the DFIA license was limited to parts for agricultural tractors under SION category C969. However, the Tribunal rejected this argument, stating that the authorization did not impose such a restriction, and the language of the application could not be used to limit the authorization's scope.ConclusionsThe Tribunal concluded that the Appellant was entitled to import internal combustion engines for medium and heavy commercial vehicles under the DFIA license, as the authorization did not restrict such imports to agricultural tractors. The impugned order denying the exemption was set aside, and the appeal was allowed.SIGNIFICANT HOLDINGSThe Tribunal held that the DFIA license did not restrict the import of internal combustion engines to those used in agricultural tractors, as the authorization's language did not impose such a limitation. The Tribunal emphasized that the scope of an authorization should not be narrowed based on the application particulars unless explicitly stated.The Tribunal established the principle that correlation between imports and exports is not required unless specifically mandated by the SION or relevant circulars. This principle was supported by precedents from the Madhya Pradesh High Court and a co-ordinate bench of the Tribunal.The final determination was that the Appellant's appeal was allowed, and the order denying the customs duty exemption was set aside.