DGFT Public Notice Cannot Impose Actual User Condition On Transferable DFIA Imports: CESTAT Kolkata

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Kolkata, has held that an actual user condition imposed through a DGFT public notice cannot be enforced against imports made under a transferable Duty Free Import Authorization (DFIA). The tribunal ruled that the DFIA in question had been issued on a post-export basis.

Judicial Member Ashok Jindal and Technical Member K. Anpazhakan observed that the condition was not binding on Global Exim, which had claimed exemption from basic customs duty on imports made under a transferable DFIA.

"Therefore, we hold that mere Public Notice issued by DGFT, cannot impose the actual condition. In view of that, the actual condition is not binding on the appellant for the import made under DFIA, which was issued post export basis against the Export of Assorted Confectionary Products covered by Standard Input Output Norm. Therefore, the goods in question cannot be denied the benefit of exemption claimed by the appellant," the tribunal observed.

The dispute arose after Global Exim imported 27 metric tonnes of citric acid and claimed duty exemption under a transferable DFIA originally issued against exports of assorted confectionery products. Customs authorities denied the exemption and reassessed the bill of entry after relying on actual user conditions endorsed in the DFIA pursuant to a DGFT public notice.

Global Exim contended that the actual user condition had been introduced through a public notice and could not be enforced against a transferable DFIA.

The tribunal referred to the Rajasthan High Court's decision in Nrapen Shankar Acharya as well as the Supreme Court's ruling in Viraj Impex Pvt. Ltd., which emphasised that restrictions affecting rights under the foreign trade framework must be introduced through proper instruments

The tribunal also relied on its earlier decision in Frunuts Exim LLP, where it had examined the applicability of actual user requirements to transferable DFIAs.

"'Actual use' is redundant in the impugned scheme. The objection raised for denial of exemption by the assessing authority, and affirmed by the first appellate authority, skeptically, as it were, about 'actual use' by appellant does not have sanction of law; denial of exemption on that ground lacks authority of law," the tribunal noted while reproducing its earlier ruling.

Holding that Global Exim was not required to fulfill the actual user condition, the tribunal allowed the appeal and granted consequential benefits.

The tribunal also accepted the importer's request regarding DFIAs that expired during the pendency of the dispute and directed Customs authorities to issue a certificate to the Directorate General of Foreign Trade within two weeks to enable consideration of revalidation of the licences.

"imposing actual user condition through Public Notice is illegal and cannot be imposed on the appellant for import made under DFIAs," the tribunal held.

For Appellant: Advocate Mihir Mehta,

For Respondent: Subrata Debnath, Authorised Representative