Cus - Only licensing authorities can permit revalidation of freely transferable DFIAs - Denial of benefit under scheme only because of expiry of Licenses due to refusal by Customs to allow import of such goods & their resultant non-utilisation, would amount to denial of substantial benefits: CESTAT
By TIOL News Service
MUMBAI, APR 10, 2015: THE issue is revalidation of Duty Free Import Authorization (DFIA) Licenses.
The appellants are importers of various chemicals and trading thereof. They obtained transferable DFIAs issued against export of chemicals such as Soda Ash. The said DFIAs permit duty free import of, inter alia , Corrosion Inhibitors/Water Treatment Chemicals. The appellants submitted representations to Customs stating that the DFIAs could not be debited (utilized) as the department had not permitted duty free import of Sodium Saccharin, Ascorbic Acid by importers against DFIA Licences in terms of benefit under Customs Notification No. 40/2006.
This dispute regarding Saccharin was decided by CESTAT Mumbai in another case holding that the product is eligible for benefit of notification No. 40/2006-Cus. In respect of Ascorbic acid, in respect of another importer, the Bombay High Court allowed provisional release.
The appellants represented to the Customs department that they had purchased various DFIAs from the market of the above mentioned disputed items, which could not be utilized due to the ongoing litigation. During the period of litigation, the validity period of licenses expired. Therefore, they requested the department for issue of a certificate to DGFT confirming the factual position so as to enable them to apply to the DGFT for revalidation of the DFIAs in terms of Para 2.13.1 of the Handbook of Procedures of DGFT Ministry of Commerce.
The department rejected their request.
The Commissioner (Appeals) disposed of their appeal in the following words - I hold that such licenses are issued to the exporter under the export incentive schemes to boost the export and to earn the foreign exchange. In fact it is against the spirit of Import Export Policy and export incentives declared by the Government. However, I find that there are no express provisions, for issue of certificates for the licenses expired in the hands of the Importer/Exporter due to litigation raised by the customs authority. In view of the above findings, the appeal is disposed off.
The appellant is, therefore, before the CESTAT.
The Bench after considering the submissions inter alia observed -
++ At the outset, we find that the lower authorities have misread the provisions of law. As per Para 2.13.1 of the Handbook of Procedures, only the licensing authorities can permit the revalidation of freely transferable DFIAs. There is no dispute on this. But it should be fairly understood that adequate justification for revalidation has to be made available to DGFT. And this information can only be made available by Customs. The appellant has merely sought a statement for issue by Customs to the DGFT certifying that the admissibility of import of Saccharin/Ascorbic Acid against the DFIAs licenses remained in litigation. In fact the Commissioner (Appeals) acknowledges this position but comes to a conclusion that there are no express provisions for issue of certificates for revalidation.
++ The Commissioner (Appeals) accepts the fact that the licenses are to be revalidated by the licensing authority but does not acknowledge that the licensing authority has no information about the prolonged litigation the importer went through while importing the said goods under DFIAs. This information only, can help DGFT to allow revalidation.
++ From the records, we see that the appellant in its letter dt. 19.5.2010 very clearly informed the Dy. Commissioner Customs, Nhava Sheva that they are holding DFIAs that could not be utilized for the relevant import of Sodium Saccharin due to prolonged litigation. Thereafter, they made repeated requests for duty free import against the DFIAs. In the said letter dt. 19th May 2010, they requested the Deputy Commissioner to - To issue a certificate confirming the denial of duty free benefits against the relevant DFIA's; To allow debiting all the three authorizations as a single authorization.
++ It was only in 2014 that their request to issue a certificate was rejected. We fail to understand what more grounds are required to issue a certificate to the DGFT to the effect that the DFIA Licenses could not be utilized due to prolonged litigation.
++ Apart from being transferees of licenses, the appellants have also imported Saccharin and on provisional basis during the period in dispute. Therefore, it cannot be said that the appellants were only making their request on the basis of litigation undergone by other importers. In any case, the fact that the import of said goods under DFIAs was in dispute is sufficient ground for holding that the licenses could not be utilized due to litigation with customs.
++ The whole scheme of DFIAs is to allow duty free imports against exports. Denial of benefit under the scheme only because of expiry of Licenses due to refusal by Customs to allow import of such goods under the Licenses and their resultant non-utilisation, would amount to denial of substantial benefits. This is more so when the appellants have invested huge sums of money in purchasing such licenses. Now that the goods have been permitted to be imported against such Licenses by the Tribunal, the appellants must get the favour of revalidation.
Agreeing with the appellant, the Bench directed the department to issue a certificate to DGFT within two weeks of the receipt of the order for the purpose of revalidation of licenses under Para 2.13.1 of the Handbook of Procedures.
The appeal was allowed.
(See 2015-TIOL-643-CESTAT-MUM)
