Tribunal Overturns Duty and Penalties on Lasco Chemie Pvt. Ltd., Upholds DFIA License Use

CESTAT finds lack of conclusive evidence regarding epoxy resin classification, dismisses customs duty and penalties.

In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi Principal Bench, has overturned the duty demand and penalties imposed on M/s. Lasco Chemie Pvt. Ltd. and its director, Shri Amit Kumar Jain, concerning the import of epoxy resin under Duty Free Import Authorization (DFIA) licenses. The Tribunal found that the imported epoxy resin could not be conclusively proven to fall outside the scope of impregnating resin, leading to the dismissal of the allegations.

The appeals stemmed from an order-in-original dated August 31, 2017, confirmed by the Commissioner (Appeals) on November 19, 2019, which held that the epoxy resin imported by Lasco Chemie was not covered under the DFIA licenses. This order was based on conflicting expert opinions regarding whether epoxy resin qualifies as impregnating resin.

The case, initiated by the Directorate General of Revenue Intelligence (DRI), alleged that Lasco Chemie misused DFIA licenses by importing epoxy resin, which was purportedly not covered under the category of impregnating resin as specified in the licenses. The DRI relied heavily on a report from the Central Leather Research Institute (CLRI) that claimed epoxy resin is not an impregnating resin, contrary to a previous certification by the Central Revenue Control Laboratory (CRCL) for a similar product.

The Tribunal, presided over by Justice Mr. Dilip Gupta and Mr. P.V. Subba Rao, found that no samples of the imported goods were tested during the investigation, resulting in a lack of definitive evidence. The judgment emphasized that without such testing, the allegations could not be substantiated.

Additionally, the Tribunal criticized the reliance on Wikipedia as a source of evidence, underscoring its unreliability due to its open-source nature. It also noted that statements recorded under Section 108 of the Customs Act were not admitted as evidence per the procedure outlined in Section 135B, further weakening the case against Lasco Chemie.

Ultimately, the CESTAT set aside the demand of Rs. 33,29,154 in customs duties and the associated penalties, granting consequential relief to the appellants. This decision underscores the importance of concrete evidence in customs adjudication and the necessity for rigorous procedural adherence in the admission of expert testimonies.

Bottom Line:

Epoxy resin imported under Duty Free Import Authorization (DFIA) licenses not conclusively proven to be outside the scope of impregnating resin; expert opinions were conflicting, and samples were not tested during investigation. Demand of duty and penalties imposed on importer and its director cannot be sustained.

Statutory provision(s): Customs Act, 1962 Sections 28(1), 114A, 114AA, 112, 111(m), 111(o), 135B, 108

M/s. Lasco Chemie Pvt. Ltd. v. Commissioner of Customs (Export), (CESTAT)(New Delhi Principal Bench) : Law Finder Doc Id # 2793844