2018 (11) TMI 1404

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....r 'CESTAT') fall into error in its interpretation of Notification No. 40/2006-Cus dated 01.05.2006, and also with respect to para 4.55.3 of the Handbook of Procedure for Export and Import; (ii) Did the CESTAT err in law in its appreciation of specifications that the exporter had to provide and the declaration required, in terms of the above Notification No. 40/2006-Cus read with para 4.55.3 of the Handbook of Procedure for Export and Import) in the circumstances of the case?" 3. The facts giving rise to this appeal are not in dispute. During the period 2006-09, the assessee used to clear and export its goods, namely pan masala and gutka. These exports were covered by a Duty Free Import Authorization license (hereafter, "DFIA License") issued by the Director General of Foreign Trade (hereafter, "DGFT"), under the prevalent Foreign Trade Policy ("FTP" hereafter) of the Centarl Government. Based on the its records and the statement of the assessee's Director, Shri Vikram Kothari, as well as statement of perfume suppliers, the revenue issued a show cause notice (dated 21.06.2013) alleging that the assessee had contravened the provisions of Paragraph 4.55.3 of the Handbook of Procedu....

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....cation and value of the essential oil used in the manufacture of the panmasala / gutkha in their shipping bills at the time of export and thereafter while applying for the Duty Free Import Authorization Licenses Scheme Under Chapter 4 of FTP 2004-09. 5. In tandem with the para 4.55.3 handbook of procedure Vol. I (2004-09), Notifn. No. 40/2006 Customs dated 01.05.2006 also specifies the similar conditions, wherein, if perfume/ essential oil/aromatic chemical are the inputs of the export produce, the exporter shall give a declaration with regard to technical characteristics, quality and its specification in their shipping bills at the time of export. In the light of the same, exporter is bound to show nexus between the essential oil/perfume/aromatic chemicals actually used in the manufacture of export goods and the essential oil/perfume finally imported against the said exports (i.e. the DFIA license)." 5.  The Commissioner also referred to the statement of Shri Vikram Kothari under Section 108 of the Act:- "Further on being specifically asked that under para 4.55.3 handbook of procedure 2004/09 and as per the conditions specified under Notfn. No. 40/2006 Customs dated 01.05.....

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....a Oil" as he was under impression that in the DFIA scheme, his firm was entitled to get the duty free imports of the constituents as mentioned in the SION norms. Further, they had used Patchouli Oil & Menthol as stabilizer to the perfumery compounds in their export product. Patchouli Oil & Menthol are Natural Essential Oil. xxx    xxx    xxx 32.6 I also noticed that the fact i.e applicability of provisions contained 4.55.3 handbook of procedure 2U04/09 and in the light of DGFT circular No.57/2009- 14 (RE 2011) dated 06.03.2012 wherein it was emphasized that RAs should ensure that the exporter has given the details with regard to technical characteristics, quantity and specifications in the application for DFIA (as at SI. No.15 of ANF A-H) had been verified from the Office of Jt. DGFT, Kanpur and it was observed, on the basis of documents received DCFT, Kanpur, that DGFT, Kanpur had issued SCNs dated 18.07.2012 to the Exporters under Section 13 of Foreign Trade Development & Regulation (FTD&R) Act, 1992 wherein, it has been, inter-alia, alleged that the technical characteristic, quality and specifications of the essential oil used in the export prod....

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....as perfumes / essential oil are mentioned as an item (out of 22 items mentioned) in para 4.55.3 in respect of those items the appellant is required to give technical characteristics, quality and specification. As perfume/essential oil is one of the item, therefore, it is to be seen that as per notification no. 40/2006-Cus dated 01.05.2006 whether these essential oil/perfume are resultant product or not? Because as per notification no. 40/2006, the appellant is required to give specifications in respect of the resultant product mentioned in para 4.5.5.3. Admittedly, the perfume/essential oil are not the resultant product. On this understanding, no objections were raised at the time of export and no objections were raised by the DGFT while transferring the license." 9. The exemption notification is issued under Section 25(1) of the Act. It exempts materials imported into India under DFIA Licenses from customs duty, additional duty, safeguard duty and anti-dumping duty, subject to various conditions. These conditions include the following:- "(i) That the description, value and quantity of materials imported are covered by the said authorization and the said authorization is produced....

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.... are listed in paragraph 4.55.3. The Respondent's products (pan masala, guthka) not having been included in that list, the Respondent's case is that no such declaration was required. 12. This court is of the considered view that the revenue's argument is merited and deserves acceptance. The DFIA scheme was intended to permit duty free import of inputs used in the manufacture of exported goods. The licenses issued by the DGFT thereunder are subject to the conditions stipulated in the HBP. Insofar as the license is in respect of the products specified in paragraph 4.55.3 thereof, the licensee is required to furnish a declaration with regard to the technical characteristics, quality and specification in the shipping bill. 13. The revenue contended that the DFIA scheme came into force on 01.05.2006, which is also the date on which the exemption notification was issued. The exemption was evidently granted to operationalize the benefits accruing under the DFIA scheme. The condition contained in paragraph (i) of the exemption notification must therefore be read harmoniously with the provision of the HBP to which it expressly refers. Such an interpretation leads to the conclusion that th....