CESTAT – DFIA License Misuse & Epoxy Resin Import Case

Headnote:

CESTAT allowed the appeals of M/s Lasco Chemie Pvt. Ltd. and its Director Shri Amit Kumar Jain, setting aside the order-in-appeal dated 19.11.2019. The Tribunal held that there was no conclusive evidence to establish that the imported Epoxy Resin was not an impregnating resin covered under the DFIA licenses. The Department’s reliance on statements under Section 108 of the Customs Act, expert opinion of CLRI without testing the actual samples, and Wikipedia references were insufficient to deny DFIA benefits or impose penalties. Consequently, differential duty, confiscation, and penalties were set aside.

Background:

1. Appellants: M/s Lasco Chemie Pvt. Ltd. and its Director Shri Amit Kumar Jain
2. Import: Epoxy Resin under freely transferred DFIA licenses originally issued to leather exporters.
3. Issue: Alleged wrongful import of epoxy resin as “impregnating resin” to claim DFIA exemption.
4. SCN issued: 29 January 2015, proposing:
5. Duty demand under Section 28(1) – Rs. 33,29,154/–
6. Penalties under Sections 114A, 114AA, 112 – on appellant and Director
7. Confiscation under Sections 111(o) & 111(m) – Rs. 1,28,77,505/-
8. Order-in-Original: 31 August 2017 (Joint Commissioner)
9. Order-in-Appeal: 19 November 2019 (Commissioner of Customs Appeals) – upheld original order

Appellant’s Contentions:

1. Epoxy Resin is a type of impregnating resin and is allowed under DFIA licenses.
2. DFIA licenses used were issued prior to Notification No. 31/2013, hence not applicable retrospectively.
3. Clearance of goods under DFIA was done by Customs after assessment.
4. Expert report of CLRI, relied upon by Department, did not test actual imported samples.
5. Amount deposited during investigation (Rs. 33,29,153/-) should be refunded.

Revenue Contentions:

1. Epoxy Resin is not impregnating resin; import violated DFIA licenses.
2. CLRI expert opinion and exporter statements confirmed non-use in leather processing.
3. Importer misdeclared high-value epoxy resin as low-value impregnating resin.
4. Differential customs duty, confiscation, and penalties justified.

Tribunal Findings:

1. Key issue: Whether Epoxy Resin imported is covered under DFIA licenses for impregnating resin.

Evidence gaps:

No testing of imported samples by CLRI or CRCL.

Statements under Section 108 not admissible under Section 135B (witnesses not examined).

Wikipedia references cannot form a basis for adjudication.

Test reports of another importer (M/s Hazel Mercantile) confirmed that epoxy resin can be classified as impregnating resin.

Department failed to provide conclusive proof that appellant’s imports were not covered.

Decision:

Impugned order set aside.

Appeals allowed with consequential relief to the appellants.

Differential duty, confiscation, and penalties under Sections 114A, 114AA, 112, 111(o), 111(m) are not sustainable.

Legal Provisions Discussed:

1. Sections 28(1), 114, 114A, 114AA, 112, 111(o), 111(m), 135B, Customs Act, 1962
2. Notification No. 98/2009-Cus, DFIA License scheme
3. Reliance on expert opinion vs. evidence (CLRI/CRCL reports)
4. Admissibility of statements under Section 108 vs. Section 135B