Alleged DFIA Authorization Misuse for Textile Imports: CESTAT remands Matter considering conflict with test report of CRCL with Textile Committee [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Mumbai, has remanded to the original authority the matter involving M/s Titanium Ten Enterprises Pvt. Ltd.’s alleged misuse of DFIA authorization for importing 29,506 metres of 100% cotton fabrics.

The assessee, Titanium Ten Enterprises had imported cotton fabrics under the Duty-Free Import Authorization (DFIA) scheme of the Foreign Trade Policy. The Textile Committee had issued a test certificate affirming that samples drawn complied with the authorized description, thereby permitting duty-free clearance.

However, a subsequent re-examination by a Deputy Chief Chemist at CRCL revealed material discrepancies in fabric specifications not captured in the original report.

On first appeal, the Commissioner of Customs (Appeals), Mumbai-II, upheld the initial demand for differential duty of ₹ 4,96,186 and confiscation of the goods under Sections 111(d) and 111(m) of the Customs Act, 1962, while allowing redemption on payment of a ₹ 3 lakh fine and imposing a further penalty of ₹ 2 lakh under Section 112.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The assessee Titanium Ten Enterprises challenged this order before the CESTAT solely on the ground that the CRCL report relied upon to deny DFIA benefits had not been subjected to adequate testing procedures, nor had the concerned CRCL official been cross-examined.

The two-member bench comprising Members C.J. Mathew (Technical) and Ajay Sharma (Judicial) held that the conflict between the Textile Committee’s test report and subsequent analysis by the Central Revenue Control Laboratory (CRCL) gave rise to serious questions of natural justice, that require a fresh, conclusive testing before any duty-assessment could be confirmed.

The Bench observed that “the acceptance of the subsequent CRCL report for arriving at the impugned decision without ascertaining its unqualified veracity runs contrary to the principles of natural justice”.

It noted the direct conflict between the Textile Committee’s positive certification and the CRCL’s adverse findings, remarking that such a disparity called for definitive resolution through fresh testing by the Director, CRCL.

Consequently, the CESTAT “set aside the impugned order and remanded the matter back to the original authority for referring the samples to the Director, Central Revenue Control Laboratory (CRCL) for undertaking final and definitive tests before deciding the assessment afresh”.

The appeal was thus allowed by way of remand, with directions to complete the testing and proceed in accordance with law.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates