TaxTMI 
TaxTMI 
TaxTMI 
2024 (5) TMI 838
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....tence of a creature of Customs Act, 1962, owing its existence to section 3 therein, to interpret policy, and its offspring instrument thereof, enabled under the authority of the Foreign Trade (Development & Regulation) Act, 1992 beyond its jurisdictional ambit of the twin limbs of assessment - rate of duty and value - under section 17 of Customs Act, 1962, with contingent recourse to recovery under section 28 of Customs Act, 1962, and to interdict clearance of 'saffron' for home consumption from empowerment to deter entry of 'prohibited' goods. 2. This is not a case of 'saffron' having been mis-declared. Nor is this a case of 'saffron' having been undervalued. Computation of import duty on 'saffron' is also not in question. Nor is there any allegation that import of 'saffron' is subject to any prohibition. And yet, Commissioner of Customs-IV (Export), Air Cargo Complex (ACC), Mumbai found it conscionable to hold that 'saffron', valued at Rs. 70,19,96,270 and imported between October 2010 and May 2013, was liable to confiscation under section 111(d) and section 111(o) of Customs Act, 1962 and to direct recovery of Rs. 25,22,83,817 under section 28(4) of Customs Act, 1962 as duty no....
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....uthorization (DFIA)' scheme, viz., certification of exports and clearance of imported goods, too were entrusted to customs administration through the notification, affording exemption to goods imported against 'authorizations' for manufacture and export, under Customs Act, 1962. And like other schemes of its ilk, it was also not necessary to import goods for manufacture and export with goods importable after exportation for being transferred or the right itself transferable subject to approval from the licencing authority. Here, the importer had, at the time of assessment, furnished eligibility, as transferee of 'authorizations' duly approved by the competent authority, to benefit of exemption. That, according to the appellant-importer, should have been satisfactory closure as far as the goods were concerned; and that it was not is the cavil of the appellants. 4. The original holders of the 'authorizations', issued by the Directorate General of Foreign Trade (DGFT) with condition of 'actual use', were required to fulfill export obligation committed by them in their applications preferred under the Foreign Trade Policy (FTP); that they had, indeed, exported 'biscuits'/'assorted con....
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....tenable support of claim that such extinguishment was, indeed, certified. Thus, the dispute over the consequences in the impugned order is about retention of 'actual use' condition in the 'transferred' 'authorizations' owing to the restrictive intent of 'standard input output norms (SION)' that had, allegedly, been suppressed at the time of import to obtain benefit of exemption notification without being eligible. 5. It has ever been the claim of importers that they were strangers to the exporters and entirely unconcerned with the goods exported by them and that the 'authorizations' had been obtained through brokers. They further held out that the impugned imports were entirely in the clear - both as to erasure of 'actual use' condition through amendments before they were put in possession of, or had not ever been entailed in, the 'authorizations' and by conceivable use of saffron as 'food flavour' and 'food colour' in edible goods. And yet, that the impugned order did wend its way, through the contours of 'investigation trails', to illegitimacy of claim for benefit of the 'duty free import authorization (DFIA)' scheme in the Foreign Trade Policy (FTP) is the grievance. 6. It was....
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....r as well as on the brokers - of licences and for clearances - in the impugned order. It would not have been so had the adjudicating authority determined erroneous computation of duty liability or/and of the goods being prohibited at the time of clearance for home consumption that, somehow, slipped past the 'proper officer' enjoined with responsibility by section 47 of Customs Act, 1962. However, the recovery of duty, here, is not predicated on incorrect assessment under section 17 of Customs Act, 1962 inasmuch as it was the assessed 'duty foregone' that, uncontestably, had been adopted for recovery and confiscation has not been predicated on goods being prohibited for import which could not have been as one of the two prompts invoked in the impugned order for confiscation of the impugned goods also happens to be one among the only four therein not related to 'dutiable or prohibited goods' but to 'any goods' (d) ...which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by, or under this Act or any other law for the time being in force;' in section 111 of Customs Act, 19....
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....g imported goods to assessment of duty to be discharged and to ascertainment of not being 'prohibited goods' supra before being cleared for home consumption with deficiency thereof to be rectified by recourse to section 28 and/or section 111 of Customs Act, 1962, to debar privilege assured in terms of a scheme espoused in the Foreign Trade Policy to incentivize foreign trade under the authority of Foreign Trade (Development & Regulation) Act, 1992. The empowerment has been appropriated in the belief that the remit flows from tax exemption afforded thereby without pausing to consider that the privilege did not flow from a concession or exemption incorporated in the 'tax policy' of the Central Government but ensconced within the rubric of a 'trade policy' initiative. The substantive distinction is that 'tax policy' sets out effective rates of duty in pursuance of some object enabled by the taxing statute while 'trade policy' incentivizes exports by offering benefits that are not otherwise due. 10. Exemption from import duties, and indeed all levies, is built into exports of every sort and the entirety of chapter X of Customs Act, 1962 is devoted to neutralization of taxes in the cos....
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....f 'biscuits' or 'assorted confectionery', it was contended that the generality of description, affording procurement of alternative goods that, uncontestably, is not to be denied in 'post-exportation' import, has been sought to be discarded through a benchmark that has not even been hinted at in the inter-departmental correspondence adduced in the impugned order or even in the intra-departmental communication referred to. The collation of opinion of exporters on eligibility to import 'saffron' and the insinuation that any clarification/amendment pertaining to the impugned authorizations, instead of being accepted as proper exercise of empowerment by a statutorily competent licencing authority, were obtained by subterfuge and false pretences was strongly resisted by Learned Counsel as improper attempt at interpretation of instruments of governance that was well beyond the competence of adjudication proceedings statutorily confined to the framework of section 28 and section 111 of Customs Act, 1962. 12. Learned Counsel referred to the correspondence emanating from the licencing authority, as well as the amendment sheets attached to the impugned 'authorizations', to demonstrate that ....
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....isions enabling imposition and recovery of tax for duty have to be cleared. In the present case, the DFIA in question did not contain any entry restricting Saffron. That is how and in the absence of any further amendments to these authorisations that the Licensing Authority did not deem it proper to impose any liability. If that has not been imposed and the process by which it has to be read is as above, then, the Tribunal's finding of fact cannot be termed as perverse or vitiated by any error of law apparent on the face of the record.' and on '28. The appellant was right in their contention that so long it is not in dispute that saffron imported by the appellant is food flavour, it qualifies for duty free import under DFIA. There is no further requirement that only food flavour which was actually used by the exporter can be imported by the transferee of DFIA. Such a restriction that only the input of the same specification, quality and technical characteristics as used in the export product should be imported under DFIA applies only to the sensitive item mentioned in para 4.32.2 of Hand Book. This also flows from the plain terms of Notification No. 40/2006 and 98/2009. The appe....
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....mport of 'saffron' classified under heading 0910 2090 of First Schedule to Customs Tariff Act, 1975 and, therefore, of having availed the benefit of notification no. 40/2006-Cus dated 1st May 2006 and notification no. 98/2009-Cus dated 11th September 2009 without eligibility thereon. It would appear that the adjudicating authority has proceeded to find against the appellants on an entirely inappropriate premise and without ascertainment of the empowerment, and competence, of licencing authorities to conform with section 12 of Customs Act, 1962 in discharging its functions under Foreign Trade (Development & Regulation) Act, 1992. The provision under Customs Act, 1962 is authority for determining the rate of duty to be charged on goods upon occurrence of taxable event; the principles governing classification for identification of the tariff line describing imported goods most accurately is set out in Customs Tariff Act, 1975 only for that exercise. And all of this is for the specific purpose of assessment to duty. The assessment undertaken under section 17 of Customs Act, 1962 has not been disputed in the impugned order. The Indian Trade Classification (Harmonized System) Code, while....
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...., has not considered. That inference, thus, lies in the sphere of speculation and speculation is no ground for fastening detriment in an adjudication proceeding. No clarification has been sought on the specifics of the impugned amendments and intent thereof; the clarification of 20th July 2015 from the Mumbai office of the licencing authority is with reference to notes below the relevant product group in the 'standard input output norms (SION)' and does not offer insights into the impugned 'authorizations' for tenable conclusions therefrom. Furthermore, Learned Counsel has drawn our attention to letter dated 8th March 2017 attesting to validity of the revisions in the impugned 'authorizations' and which finds no reference in the impugned order. Both the presumed retention of 'actual use' condition, notwithstanding the amendments to that effect, as well the restriction on 'alternative product' premised on costing of exported goods, float in the 'ether of statutory vacuum' and, in the absence of express intent, elaborated in clarification from the licencing authority, deployment to disadvantage of importer in proceedings under section 28 and section 124 of Customs Act, 1962 jeopardiz....
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....ting authority to discredit the 'authorizations', neither by recourse to the licencing agency for authoritative clarification on the scope of each authorization nor by invalidation in hands of the issuing authority, by obtaining of admission of ineligibility from the exporters and inference of scope of 'authorizations' therefrom is evident in '4.22 The above statements confirmed that the exporters whose DFIA Licences were used by the Noticee No. 1 M/s. USMS Saffron Co Inc, have never used Saffron in any form i.e. either in the form of 'flavour' or in the form of 'colour' in the manufacture of biscuits and assorted confectionery. All the exporters in their respective statements admitted that import of saffron under the subject DFIA licences is not permissible under SION norms and related Public Notices, since they have not used saffron in the manufacture of the export product.' of the impugned order when it was the claim of '5.5.2 ......all licences were got amended changing the status AU to Transferable and the entry Food Flavour has been reflected in the amendment sheet, hence the goods were imported the transferee. that once the licence has been issued by DGFT, it means all ....
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....ut to fit the measure of common logic and that the exemption notification should make provision for unencumbered import after obligation to export has been certified by the licencing authority as duly discharged is but logical progression. To insinuate continuance of conditionality, intended for obvious ends at 'pre-export' stage, in the actual circumstances, and in an adjudication proceedings that is unable to draw upon even the authority by which customs officialdom is tethered to the scheme - the exemption notification - is telling enough of the intent of the Foreign Trade Policy (FTP) to keep such handicapping of 'authorizations' - by arrogating of authority to interpret licences and schemes in 'trade policy' - at bay. An import for achieving contracted export obligation and an import unencumbered by such obligations cannot be on level even if in the same exemption notification and the essentiality of compliance with conditions that attaches to the former as its singular characteristic must, necessarily and for that very reason, be detached from the latter for equitability and sensibility. Bereft of that, transferability is but a 'silent bark' with no dog and 'trade policy' con....
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....otification no. 98/2009-Cus dated 11th September 2009 as those which were purportedly contravened to buttress an outcome otherwise jeopardized. The evidence marshalled for the purpose is about 'saffron' not being covered by the impugned 'authorizations' inasmuch as the facts militate against the 'actual use', or even potential for use, attending 'food flavour' and 'food colour' in product group E1 and E5 of 'standard input output norms (SION)' in the Foreign Trade Policy. The question begging answer is the scope and extent to which 'actual use' is intended, at least, insofar as 'post-exportation' imports are concerned, to be enforced. In other words, it is the proposition of 'selective application', implicit in condition of manufacture for export and use in manufacture for entitlement to import - both devolving on original holder - that is limited only to the second, while discarding the first, for evaluating the 'authorizations' as entitlement of transferree, that must stand the test of legislative intent. 21. According to the adjudicating authority, 'actual use' attaches to the inputs, covered by the norms, at the time of export which is to mirrored even after the export obligat....
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....r domestic sale instead of being exported. There is no percentage in such insistence on one aspect of 'actual use', and conveniently selected, when such is not sanctioned either by the Foreign Trade Policy (FTP) or in the exemption notification without insisting on the other two aspects. 23. A policy document does create 'rights' and the Foreign Trade Policy (FTP) certainly proclaims 'rights' that are claimable. It is neither an obligation that is circumscribed by, nor a statutory privilege carefully doled out from, statutory provision. It is articulation of optimism that, if taken in conjunction with being worked in the true spirit by the agency of the State and the commercial stakeholder, can achieve the intended purpose. In this contextual framework, the words and expressions are articulation of intent unlike, as deployed in a taxing statute, with purpose of ensuring conformity of the charging and assessment provision with the tax objective. It affords verbosity comparatively more, and less of reliance on literal intent for interpretation, than a taxing provision. The rigour adopted by the adjudicating authority is better suited to resolution of tax dispute than of a policy int....
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.... Exports (Control) Act, 1947. The idea is to hold the licensee responsible for anything and everything that happens from the time of import till they are cleared through Customs. The exporter is outside the country, while the importer, i.e., the licensee is in India. It is at the instance of the licensee that the goods are imported into this country. Whether or not he is the owner of such goods in law, the Imports (Control) Order creates a fiction that he shall be deemed to be the owner of the such goods from the time of their import till they are cleared through Customs. This fiction is created for the proper and effective implementation of the said order and the Imports and Exports (Control) Act. The fiction however cannot be carried beyond that....... But certainly he cannot be treated as the owner of the goods even in such a case. Holding otherwise would place the exporter in a very difficult position; he loses the goods without receiving the payment and his only remedy is to sue the importer for the price of goods and for such damage as he may have suffered. This would not be conducive to international trade. We can well imagine situations where for one or other reason, an imp....