DGFT interpretation binds customs, and a clarificatory public notice can operate retrospectively to deny DFRC benefit.

Under the Exim Policy, DGFT's interpretation is final and binding where policy or handbook questions arise, so customs authorities must give effect to that clarification. On the facts, the imported goods were 55% cotton and 45% polyester, while the DFRC entitlement related to cotton processed made-ups; the technical characteristics and quality parameters required by Notification No. 48/2000-Cus. were therefore not met. The later public notice was clarificatory and operated retrospectively, reinforcing the denial of DFRC benefit. The customs demand was accordingly sustainable.

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Issues: Whether the importer was entitled to DFRC benefit on the goods declared as processed cotton fabrics, and whether the DGFT clarification and the later public notice bound the customs authorities.

Analysis: Under Para 2.3 of the Exim Policy, where a question arises on interpretation of the policy or the handbook, the DGFT's decision is final and binding. The imported goods contained 55% cotton and 45% polyester, while the DFRC covered export items described as cotton processed made-ups. The condition in Notification No. 48/2000-Cus. that the imported goods should correspond to the technical characteristics and quality parameters of the exported goods was not satisfied. The DGFT clarification declining to allow the import under DFRC could not be disregarded. The later Public Notice No. 4 dated 1-4-2002 was clarificatory and therefore operated retrospectively.

Conclusion: The importer was not entitled to DFRC exemption, and the customs demand was sustainable.

Ratio Decidendi: Where the export-import policy makes the DGFT's interpretation final and binding, customs authorities must give effect to that interpretation, and a clarificatory public notice applies retrospectively to pending matters.

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