TaxTMI 
TaxTMI 
2022 (9) TMI 228
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....ed a consignment of "Melamine" by the aforesaid Bill of Entry dated 13.03.2013 and sought clearance under DFIA Scheme availing the benefit under Notification No. 98/2009-CUS dated 11.09.2009. The consignment was cleared for home consumption by the Customs Officers. The DFIA licence was purchased by the appellant for consideration as it was transferable. The DFIA licence, inter alia, permitted duty free import of "Syntan". The term "Syntan" refers to Synthetic Tanning Agent [Syntan] used in leather processing. According to the appellant Melamine is a Syntan as held by this Tribunal in Commissioner of Customs, Nhava Sheva versus Dimple Overseas Ltd. [2002 (147) E.L.T. 1164 (Tri. - Mumbai)]. The proper officer of the Customs has cleared the consignment of Melamine accordingly holding it to be Syntan. Later, the Additional Director of DRI, Lucknow initiated an enquiry and issued a show cause notice dated 28.02.2014 alleging that Melamine is not a Syntan. According to the show cause notice, DRI received information that the appellant had mis-represented Melamine as Syntan and wrongly availed the benefit of exemption notification under the DFIA licence. DRI conducted enquiries with the i....
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....roduce polymeric melamine syntans. C. Muralidharan" 5. It is further stated in the show cause notice that the original holders of the DFIA licence were asked if they had used Melamine as Syntan in tanning or re-tanning of leather of the goods which they had exported against the licence and they had stated that they had not used Melamine as Syntan. 6. Additional Director of DRI further observed that the standard input/output norms issued by the DGFT by policy Circular No. 30 (RE-05)/04-09 dated 10.10.2005 states as follows :- "Since the objective of SION is to allow duty free import of inputs which are actually used or are capable of being used in the export products, the exporter has the flexibility to import the alternative input/product mentioned in the SION as long as the same can be used in the manufacture of all exported product under the DFRC (DFIA) Scheme". 7. From the above, the Additional Director has, in the show cause notice observed that Melamine cannot be treated as a Syntan which is permitted for import under the DFIA licence and accordingly issued a demand of duty and proposed imposition of penalty under Section 117 of the Customs Act. The ....
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....arbon tetrachloride. Nonflammable. Derivation : (1) By heating urea and ammonia. The resulting mixture of isocyanic acid and ammonia reacts over a solid catalyst at approximately 400C to form melamine (2) From cyanamide, dicyanamide, or cyanuric chloride. Method of purification : Recrystallization from water. Grade : 99% min. Hazard : Toxic by ingestion, skin, and eye irritant. Use : Melamine resins, organic syntheses, leather tanning". 10. The Chemistry & Technology of Leather Volume II published by Renhold Publishing Corporation, which show that Melamine can be used directly for tanning, relevant extract of which is as follows :- "While previously all tanning was done with methylomelamine monomer, windus showed that tanning could be done with free formaldehyde and melamine without proforming the methylol compound. He gives the following procedure for tanning : Raw Stock : Pickled goatskins, rebrined, horsed, and drained overnight Formula : Skins, drained pickle weight....... 50 lb Water at 80° F .............................. 2 gal Salt ....................................................
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....to another chemical. 13. He relied on the expert opinion of the Chief Scientists CLRI despite recording that in order to comply with the principles of natural justice, cross-examination of the said official was agreed upon in principle and notices were issued to Dr. C. Muralidharan, but he failed to comply with the notices issued to him. We do not find that he has discussed the copy of the United States Patent relied upon by the appellant, which specifically states that Melamine can be used directly on the leather for tanning without making a condensate with formaldehyde. Instead, he chose to accept the contrary expert opinion by Dr. C. Muralidharan, without even giving the appellant opportunity of cross-examining the expert. 14. On appeal, the Commissioner (Appeals) held that the expert opinion by CLRI was "unimpeachable evidence on record which differentiated Melamine and Melamine Syntan and the purposes thereof". Thus, holding, he upheld the order of lower authority. Hence, this appeal. 15. Learned Counsel for the appellant has taken us through the facts of the case and forcefully submitted as follows :- (i) The licence was issued for import of Syntan and it ha....
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....o be reacted with formaldehyde before using it as Syntan the judgment of the Supreme Court in G.C. Jain clarifies that the chemicals do not have been used directly to clarify as inputs they can be used indirectly also after some process and will still be eligible for exemption under DFIA Scheme. 16. The lower authorities have confirmed the demand by : (a) Holding that the Tribunal's order in Dimple Overseas Ltd. is not correct ; (b) Distinguishing the judgment of G.C. Jain on the ground that it was dealing with a different chemical ignoring the fact that the principle as to whether the inputs under licence have to used directly or can be used after some processes was laid down by the Supreme Court in G.C. Jain (c) Relying heavily on the expert opinion of CLRI which is contrary to the published literature holding it as "un-impeachable evidence" without even allowing an opportunity to cross-examine the expert who gave an opinion contrary to published literature. (d) Ignoring that DGFT, who is the licensing authority, has clarified that under the DFIA licence goods which are capable on being used in manufacture of the export products but which ma....
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....felt that the order of the Tribunal was not correct and therefore proceed to issue the show cause notice. The show cause notice was based on an expert opinion by CLRI stating that Melamine cannot be used directly on leather as Syntan, but a condensate can be made with formaldehyde and thereafter the condensate can be used in tanning leather. 22. According to the literature provided by the learned Counsel for the appellant including a patent and extracts of chemical dictionaries, melamine can be used for tanning leather without making a condensate first. It is clear that Melamine and formaldehyde can be simultaneously used on the leather for tanning instead of making a condensate first. Since the expert opinion is contrary to the published literature the appellant sought cross-examination of the expert. The Adjudicating Authority issued letters but the expert did not appear. The Adjudicating Authority could have issued summons to him to force his appearance, but he did not do so. Instead, he chose to rely on the expert opinion, which was contrary to the other published scientific literature produced by the appellant and confirmed the demand. In our considered view, such an approa....
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....re being used, as held by the Supreme Court in G.C. Jain it would make no difference. It still qualifies as raw material and can be imported under the licence. Adjudicating Authority has sought to distinguish G.C. Jain on the ground that the chemical in that case was different. In our considered view drawing such a distinction is highly misplaced. The question is whether materials which are used in manufacture of final products after some processing and not directly qualify for imports under the licence or not and G.C. Jain answered in affirmative and this ratio applies in this case as well. 26. Another ground on which the demand was confirmed is that the HSN headings of Syntan and HSN heading of Melamine are different. We find from the standard input/output norms published by the DGFT and also from the licence that the HSN codes are not specified when allowing imports in the licence and only the materials are indicated. So long as the goods match the description, they can be imported. The customs officers cannot add conditions to licence and insist that the inputs have to fall under a particular HSN. 27. Learned Authorized Representative has placed reliance on the order of t....