2026 (2) TMI 298 - AT - Customs

Import of dried cranberry duty-free entitlement upheld; licensing authority directed to restore and revalidate lapsed DFIA

Import entitlement for 'dried cranberry' was affirmed because the product falls within the generic category 'fruit' and denial of exemption lacked factual ... Import of ‘dried cranberry’ - entitlement to import without payment of duty - Transferable post-export Duty Free Import Authorization (DFIA) not subject to an actual user condition - inapplicability of actual use requirement to transferees of post-export authorisations - invalidity/inapplicability of a public notice imposing a value cap without gazette notification - failure to issue a speaking order in terms of section 17(5) - obligation on licensing authority to restore/revalidate lapsed DFIA where denial of entitlement was without factual basis - HELD THAT:- The appellant had sought the benefit of the authorizations for ‘dried cranberry’ and the argument on behalf of respondent is that ‘fruit’ therein, being generic, is no ground for requiring ‘specific’ description in the corresponding shipping bills. There is no finding on the actual details entered in those shipping bills. Denial of exemption without such ascertainment is irresponsible adjudication; placing the onus on an importer, who is not the exporter, by unfounded presumption is not approved by any legally established procedure. As ‘dried cranberry’ is, doubtlessly, ‘fruit’, the entitlement to exemption is undeniable. Before we part with the matter, there is one submission that, necessarily, must be dealt with. The authorizations have since lapsed and the appellant put to severe financial detriment in consequence. The fault is not that of the appellant but overreach, without an iota of factual foundation to dispute entitlement to exemption, or any measure of legal authority to cast doubts on the eligibility, on the part of the assessing authority who was also derelict in adhering to his obligation under law. The first appellate authority, too, did not consider it necessary to insist on placing a reasoned order of the original authority to the test of being legal and proper; he, too, chose to decide against eligibility for exemption without any basis as we have set out above. Certainly, restitution is called for and we may forbear from doing so only on peril of encouraging extra-legal impediments to foreign trade and instigating defiance of settled law. We do not intend that; the jurisdictional Commissioner is, hereby, directed to request the licencing authorities for restoration of validity of the licence for the unexpired period commencing with presentation of bill of entry. In doing so, we are guided by the decision of the Hon’ble High Court of Punjab & Haryana in Pushpanjali Floriculture Pvt Ltd v. Union of India [2016 (7) TMI 628 - PUNJAB & HARYANA HIGH COURT] held that - ' It is seen that the DFIA is issued with a limited validity of 24 months. Due to the actions of the respondents the DFIAs could not be utilised by the petitioner. The Hon’ble Supreme Court in the matter of Sandeep Exports Ltd., 2004 (9) SCC 128, had directed the respondents to issue certificate for the purpose of revalidation of expired licences due to disputes raised by the department. We are satisfied that due to the impugned invalid notifications/Public Notice/Circular, licences could not be utilised by the petitioner. The petitioner cannot be expected to present licences for debit in such circumstances. Therefore, a case for directing revalidation of the licence is made out.’ We set aside the impugned order to allow the appeals along with the direction supra. Issues: (i) Whether the 'actual user' condition and technical/quality correlation in SION apply to post-export transferable Duty Free Import Authorisations (DFIA) claimed by a transferee importing 'dried cranberry'; (ii) Whether a value-cap imposed by a public notice can limit entitlement under the customs notification; (iii) Whether relief by restoration/revalidation of expired authorisations is warranted where denial of exemption was without lawful basis and without issuance of a speaking order under section 17(5) of the Customs Act, 1962.Issue (i): Whether the DFIA authorisations (post-export and transferable) relied upon by the appellant could be denied on the ground of non-establishment of 'actual use' of imported 'dried cranberry' in the exported goods.Analysis: The DFIA scheme is a post-export, transferable instrument governed by SION entries and FTP provisions; precedents interpreting transferable DFIAs treat actual-user conditions as inapplicable except where SION specifically prescribes such condition. The assessing authority denied exemption on a cryptic assertion of non-use without factual examination of the shipping bills, and failed to issue a speaking order as required by section 17(5) of the Customs Act, 1962. The first appellate authority expanded the original ground without record-based enquiry. Circular and case-law cited clarify that correlation of technical characteristics is required only for inputs listed in FTP paragraph 4.29; for other entries only the name and quantity (and where applicable SION-prescribed conditions) are material. The assessing and appellate authorities did not perform the necessary factual verification or follow the statutory procedural requirement before denying benefit.Conclusion: The 'actual user' condition does not apply to the appellant's post-export transferable DFIA for 'dried cranberry' absent a specific SION prescription; denial of exemption on the unspecified ground of non-use is without authority and in favour of the assessee.Issue (ii): Whether the intra-description value-cap incorporated by a public notice can restrict entitlement under Notification No. 25/2023-Cus.Analysis: Imposition of a value cap by a public notice is not a lawful mode of creating or varying delegated legislation where publication in the Official Gazette and adherence to statutory prescription are required. Recent authoritative pronouncements emphasize that delegated measures affecting rights must comply with prescribed promulgation, and a public notice cannot validly impose a restriction that has not been lawfully promulgated.Conclusion: The value-cap imposed through the public notice is inapplicable and cannot be enforced to deny the appellant's entitlement.Issue (iii): Whether revalidation/restoration of the authorisations is appropriate where denial of exemption was without lawful basis and the licences lapsed during litigation.Analysis: The appellant, being a transferee, suffered loss owing to administrative overreach and failure of the authorities to follow required procedure. Precedent supports directing restoration/revalidation of lapsed DFIAs where departmental action prevents utilisation of licences and goods were otherwise eligible under the scheme. The assessing authority's and first appellate authority's failures justify equitable restitution to prevent prejudice to the importer.Conclusion: Restoration/revalidation of the unexpired period of the authorisations is warranted and must be directed in favour of the assessee.Final Conclusion: The impugned denial of exemption is set aside; the appeals are allowed, entitlement to duty exemption is recognised for the imported 'dried cranberry', the value-cap imposed by public notice is inapplicable, and the jurisdictional Commissioner is directed to seek restoration/revalidation of the authorisations for the unexpired period.Ratio Decidendi: Transferable post-export DFIAs are not subject to an 'actual user' requirement or to SION-based technical correlation except where the SION entry expressly prescribes such condition; procedural requirements (including issuing a speaking order under section 17(5) of the Customs Act, 1962) and lawful promulgation of restrictions are preconditions to denial of entitlement under a customs exemption notification.