TaxTMI 
TaxTMI 
2023 (9) TMI 1264
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....N OF "AUTOMOTIVE BATTERY" MENTIONED IN TRANSFERABLE DFIA NO.S 3011001800 DATED 22.02.2022, 3011001172 DATED 07.02.2022, 3011001775 DATED 11.02.2022 & 3011001785 DATED 15.2.2022 AGAINST EXPORT OF AGRICULTURAL TRACTORS THE IMPORTED GOODS LITHIUM ION CELL IS NOT MENTIONED IN THE DFIA AGAINST DESCRIPTION OF AUTHOMATIVE BATTERY. YOU HAVE NOT SHOWN WHETHER LITHIUM ION CELL IS ACTUALLY USED IN EXPORT GOODS AS MANDATED UNDER PARA 4.12(1) AND 4.12(11) OF FTP THE MATERIAL PERMISSTTED TO BE IMPORTED SHALL BE OF SPECIFIC NAMES/DESCRIPTION OR QUANTITY RESPECTIVELY AS THE MATERIAL USED IN EXPORT OF RESULTANT PRODUCT. FURTHER ITC(HS) NUMBER MENTIONED IN THE IS 85076000 DIFFERS FROM THE ITC(HS) MENTIONED IN THE DFIA AGAINST AUTOMOTIVE BATTERY WHICH IS 85071000.YOUR CLAIM FOR BCD EXEMPTION UNDER THE SAID TRASNFERABLE DFIA CANNOT BE EXTENDED. THE SAID B/E MAY BE ASSESSED ON MERIT. Query raised by 10xxxxxx Group:SA" 2. Aggrieved by, the above query raised by the Deputy Commissioner of Customs, Mundra, the appellant filed appeal on various grounds before Commissioner (Appeals), who vide his order dated 11.04.2023 rejected the same. Aggrieved by the said order, appellants have filed the present appe....
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.... use as per the description of goods given in DFIA, the same would be eligible for exemption and actual use in the export goods need not be proved, particularly when the importer is a transferee of the DFIA: a) Shalimar Precision Enterprises P. Ltd v CC-2022 (9) TMI 228- CESTAT NEW DELHI: In this case the DFIA was granted for import of Syntan (Synthetic Tanning Agent) against export of Leather goods and the imported goods were Melamine. The Hon'ble Tribunal held that it is evident from literature that Melamine finds use in leather goods as Syntan and is therefore covered by the DFIA and it is not necessary for the importer to establish that the Melamine was actually used in the export product, b) Shah Nanji Nagsi Exports P. Ltd v UOI- 2019 (4) TMI 146- BOMBAY HC: In this case the DFIA was granted for import of "Maize" against export of "Maize Starch Powder" and the imported goods were Pop Corn Maize. The Hon'ble High Court held that since DFIA is transferable there is no condition of "Actual Use". It was held that though Pop Corn was not actually used in the export of Maize Starch Powder, it can be used to manufacture Maize Starch powder ....
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.... 2.5 On the other hand, the Learned DR reiterates the findings as below of Commissioner (Appeals). 5.4 On perusal of the appeal memorandum, it is observed that the assessing officer, vide query dated 10.03.2023, has proposed to deny claim for exemption on following grounds: 1. Lithium Ion Cell is not mentioned in the DFIA against the description of Automotive Battery. 2. ITC (HS) number mentioned in the Bill of Entry is 85076000 differs from the ITC (HS) number 85071000 mentioned in DFIA against Automotive Battery. 3. Appellant has not shown whether Lithium Ion Cell is actually used in Export Goods as mandated under Para 4.12 (i) and 4.12 (ii) of FTP, as the material permitted to be imported shall be of specific names/description or quantity respectively as the material used in export of resultant product. 5.5 In view of the above, the assessing officer had observed that the exemption under the transferable DFIA cannot be extended to the appellant. It is against this observation, the appellant is contesting in the present appeal. Therefore, the issue for determination before me in the present appeal is whether the appellant is eligible....
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....ng order was given by this Tribunal: "We however find that the authorities below have sought to deny the benefit of duty free import of inshellalat against the DFIA issued for export of biscuit on the ground that CTH mentioned in the Annexure -A to DFIA are different from the CTH mentioned in the BE" This view was upheld by Hon'ble Bombay High Court in case of USMS Saffron Co. Inc (supra) reported in 2016 (331) ELT 155. Therefore, merely because CTH was not mentioned or ITC (HS) is not matching so far description covers the goods imported. the benefit is available to the assessee." 5.8 I find that in the above decision, Hon'ble Tribunal, Ahmedabad has relied upon the judicial pronouncements made by Hon'ble High Court and a Tribunal. I also find that the SION declared by DGFT itself does not prescribe any CTH for the inputs. It merely gives the name/ description of the inputs that can be imported under the DFIA and the export goods. Therefore, I am of the considered view that the difference in CTH cannot be a criteria to deny the benefit of DFIA and the observation made by the assessing officer is not legally tenable. 5.9 The appellant....
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....nderstand what it means, Naturally Cereal is generic term which covers all its types like corn, oat, wheat. rice etc. However, when the term maize is used, it is a specific class of cereal apart from its inter se varieties, therefore, the term maize can be well construed as a specific term and therefore, the provision of para 4.12(i) would not apply." 5.11 On perusal of the above, I find that Hon'ble High Court has observed that the imported goods namely "maize" can be construed as specific term and therefore, the provision of Para 4.12(i) would not apply. In the present case the description "Automotive Battery" is a generic term as discussed above, and therefore provisions of Para 4.12(i) would be applicable in the facts of the case. 5.12 Further, I have also perused the judgment of Hon'ble Tribunal in case of M/s Pace Ventures Pvt. Ltd. Vs. C.C., Ahmedabad, Final Order No. A/11615/2019 dated 30.08.2019, wherein the petitioner had imported Green Cardamom against the description "Relevant Food Additives' and "Flavouring agent"mentioned in the DFIA. The Hon'ble Tribunal had in this case held that clearance of Green Cardamom is eligible under DFIA li....
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....he above case, it can be seen that even though the Licence was bearing description or "Relevant Fruit Juice/Pulp/Puree" and the objection was raised that the imported goods is "Apple Juice Concentrate" and the same is not covered under the description in the Licence, however, Hon'ble Tribunal interpreting the description given a finding taken a view that it cannot be justified as how "Apple Juice Concentrate" would not be covered under the description "Relevant Fruit Juice/Pulp/Puree" when the fact that "Apple Juice Concentrate" can interalia be used in the manufacture of export product in DFIA(Sorted Confectionary and Biscuits). Therefore, taking the ratio of said judgment in the present case also the description of relevant Food Additives/ or Food Flavouring clearly covers the Green Cardamom, therefore, it cannot be said that only because the specific name of Green Cardamom is not mentioned, the benefit will not be given........." 5.14 Similarly in case of M/s VKC Nuts Vs. C.C. Jamnagar (Prev.), Final Order No. A/11365/2020 dated 08.12.2020, petitioner had imported Inshell Walnut and had sought clearance against three different generically described inputs namely, Fr....
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....ied, one cannot understand what it means. Naturally Cereal is generic term which covers all its types like corn, oat, wheat, rice etc. However, when the term maize is used, it is a specific class of cereal apart from its inter se varieties, therefore, the term maize can be well construed as a specific term and therefore, the provision of para 4.12(1) would not apply. 23. Respondents would submit that the general norms would indicate that, the items which are imported should be used for manufacturing resultant exportable items. The object of the scheme is to be looked upon to understand whether there exist actual user condition. For this purpose, respondents attracted our attention to the "general notes for all export products groups". Note-1:- "1. The norms have been published in this book with a view to facilitate determination of the proportion of various inputs which can be used or are required in the manufacture of different resultant products. In many cases, the resultant products and the inputs required have been described in generic terms. The applicants shall therefore, ensure that the goods sought for import and actually imported are those. which....
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....Import of popcorn maize was also allowed after arriving at the conclusion that popcom maize is capable of being used in the manufacturing of export goods namely maize starch powder. Relying on the above ratio, I find that imported item may not actually be used as inputs in the export goods, but it should be capable of use analogous to the use of imported Input mentioned in the DFIA licence. 5.19 It is the contention of the appellant that the imported goods 'Lithium Ion Cell' are covered by the description of Automotive Battery". In support of their contention they have submitted that they have annexed a few technical references downloaded from the internet indicating that Lithium Ion cells are used as EV application battery. They have also submitted a printout of a technical opinion from Indian Institute of Technology, Kharagpur on EV Batteries. The relevant paragraph of the opinion is reproduced as under: "Automotive Batteries are of two types. The batteries of conventional automotive Internal Combustion Engine based vehicles are of Lead- Acid type and supply the auxiliaries when the engine is off. Electric or Hybrid Electric vehicles on the other hand us....
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.... furnished any evidence to show that the imported goods are capable of use as automotive battery and can be used in the export product. On the contrary, it is observed that while filing the Bill of the appellant has submitted a declaration dated 22.2.2023 addressed to the Asstt./ Deputy Commissioner of Customs, Customs House, Mundra, stating that the Lithium Ion Cell 32700 imported vide Invoice No. BLX2301008-1 dated 03.01.2023 is used in Electronics products only. Since the exemption under the DFIA against SION C969 is for Automotive battery, and the imported goods have uses in electronic product. I am of the considered view that the appellant is not entitled to claim exemption. Hon'ble Supreme Court in the case of M/s Dilip Kumar and Company Vs. Commissioner of Customs (Import), Mumbai [2018 (361) E.L.T. 577 (S.C.)] held that exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. In view of the above discussions, the appellant has failed to establish the use of goods imported by them, i.e. Lithium Ion Battery, as aut....
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....rt products would also cover such entities which are not only directly used or usable as such in the manufacturing process but also which could be used with some processing" inter alia held by Hon'ble Supreme Court in the case of Commissioner of Customs Cal Vs. G.C. Jain 2011(269) ELT 307 (SC . 2.10 Following the ratio of judgement of Hon'ble Supreme Court in the case of Commissioner of Customs , Kolkotta Vs. G.C. Jain and followed by this Tribunal in the case of Unibourne Food Ingredients LLP Vs. Commissioner of Customs , Mundra reported 2022(381) ELT 810 (Tri- Ahd) the term 'Materials' used in Notification No. 19 of 2015 are "raw material, components, intermediates, consumables, catalysts and parts which are required for manufacture of resultant product " are identically worded notification as referred in the Hon'ble Supreme Court judgement . 2.11 It is submitted that the Technical Opinion dated 31.03.2023 of IIT, Kharagpur that EV batteries are typically made up of multiple rechargeable lithium-ion cells connected together to form battery pack. It is opined that Electric batteries (EV) are "Automotive Batteries' used in Buses/Cars etc are also capable of being used in Agri....
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..... The Central Board of Excise & Customs vide Circular No. 46 of 2007 and DGFT Policy Circular No./ 50 of 2008 has clarified the above position of law. 2.16 It is submitted that the vide DGFT Policy Circular No. 72 dated 24.03.2009, flexibility is granted to import alternative inputs either used in the export product or are capable of using in the export goods. The appellant relies upon the following judgements:- • Commissioner of Customs (Export), Nhavasheva Vs. Sparkling Traders Pvt. Ltd., - 2019 (368) ELT 962 (Tri-Mumbai). • Final Order No. A/10255/2022 dated 17.03.2022 passed by the Hon'ble Appellate Tribunal (Ahmedabad) in the case of Unibourne Food Ingredients LLP Vs. Commissioner of Customs, Mundra. • Sachin Pandey Vs. UOI - 2020(371) ELT 34 (All.) . 2.17 It is submitted that the Hon'ble High Court (Allahabad) in the case of Sachin Pandey Vs. UOI , under Para 16, it was inter alia held that " We see no reason to take a different view to take away the benefits otherwise available under DFIA Scheme under the Foreign Trade Policy, whether 2009-14 or 2015- 20, merely satisfy the petitioner. According to us the aforesaid judgements of t....
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....d following the ratio of judgements which are identical to the present case, the imported goods 'EV Ion cells' and/or 'EV Batteries' are covered by the description of 'Automotive Battery' mentioned in the DFIA and are eligible from claiming Exemption from payment of Customs Duty under Notification No. 19 of 2015 and the decision of the lower authority to deny the benefits under the said notification is not correct and legal. 2.23 It is submitted that lower authorities may be directed to issue a certificate for the purpose of revalidation in terms of provision of Para 2.20 of Hand Book as held by this Hon'ble Tribunal in the case of Pushpanjali Floriculture Ltd., Vs. Commissioner of Customs, Nhavasheva - 2015 (327) ELT 0077 (Tri-Mum). 3. Considered contrarian submissions made by both the parties. At the heart of the issue is the controversy emanating from Lithium Ion Cells not having been specifically used in export goods under paras 4.12 (i) (ii) of Foreign Trade Policy. Party had exported automotive batteries classifiable under Tariff Heading 85071000, as against Lithium Ion Cells being classified under Tariff Heading 85076000, being the import item. The party has relied upo....
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....ch ambiguity has been brought on record by the department, which can be interpreted in their favour. Therefore, the reliance on M/s. Dilip Kumar & Company by the department is rather mis -placed. To the contrary after having discussed various case law cited by the appellant, Commissioner (Appeals) has denied benefit only on the ground and by playing on the words "used in electronics only" in B/E, despite appellants agitating through out with opinions and literature that impugned batteries were automotive and capable of use in E.V tractors. A substantive benefit in any case cannot be denied on such ground, specially when it is known that EV tractors use various chip based and lithium based sub assemblies of electronics. Leaned Advocate for the appellant emphasised that under DFR Scheme there is no prescription of actual user condition nor is one to one co-relation between the product exported and the product imported is required, and this is the uniqueness of the scheme. It was also pointed out by the learned Advocate and we agree with the proposition that impugned Customs Notification No. 19/2015 was under challenge and that the Hon'ble Allahabad High Court in Sachine Pandey case (....
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.... used for manufacture of export product i.e Maize Starch Powder. The Hon'ble High Court of Bombay held that so long as export goods and import items correspond to description given in SION, it could not be held to be invalid by adding something else which is not in policy. The materials and technical opinion produced by the party in the instant case clearly show that lithium batteries can be used in e-agri tractors, and therefore are in the nature of automative batteries though may or may not be in the from of traditional batteries. This can also be stated in the light of decision in M/s. Shalimar Precision Enterprises Pvt as reported in 2022 (9) TMI 228 (CEATAT-Del.), wherein consignment of melamine imported by the appellants was allowed duty free import against description of Syntan the term "syntan" referred to synthetic agent. The findings which are relevant for the purpose of the present dispute and are therefore reproduced below: "21. The undisputed facts are that the appellant had imported Melamine declaring it Melamine and claiming the benefit of exemption under DFIA licence which permitted import of "Syntan". The short question which arises is whether the Melamine....
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....ffectively said that the Tribunal was not correct. If it be their opinion, it was open for them to assail the order of the Tribunal before a higher judicial forum. Instead, the Additional Director DRI and the Assistant Commissioner have arrogated to themselves the role of a superior authority over the Tribunal and ignored the judicial precedent which is not only highly irregular, but is also in violation of judicial discipline. 24. Another ground in the show cause notice was that the original exporter from whom the appellant purchased the licence had not used Melamine in manufacture of exported products. As has already been recorded in the show cause notice itself DGFT had clarified that the imported material need not have been used and it is sufficient if it is capable of being used in the manufacture of final products. In our considered view, neither the Additional Director DRI who issued the show cause notice, nor the adjudicating authority who confirmed the demand or the Commissioner (Appeals) have a jurisdiction to modify the scope of the licence when it is clarified by the licensing authority DGFT itself. So long as Melamine can be used as Syntan which appears to be ....
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....nd will still qualify for exemption under licence was not brought to the attention of the Tribunal. Thus, both on the substantial question of law, which was laid down by the Supreme Court in G.C. Jain and the technical literature were not placed before the Tribunal in that case. In this context that the Tribunal had passed the order. 29. The present case is distinguishable inasmuch technical literature has been provided by the appellant to assert that the expert opinion was not correct and cross-examination was sought, but it was not provided for the reason the expert did not show up despite notices by the Adjudicating Authority. In this case, the judgment of the Supreme Court in G.C. Jain has also been brought to our notice. 30. Further it has already been clarified that DGFT itself had clarified that the material need not have actually been used but so long as it is capable of being used in the manufacture of final products it clarifies under the licence. 31. To sum up, the lower authorities have confirmed the demand ignoring the order of this Tribunal in Dimple Overseas Ltd., ignoring all the technical literature which state that Melamine can be used d....