Per B.S.V. Murthy :

Appellants imported bearings and claimed exemption under the Notification No. 40/2006-Cus. on the strength of a transferred Duty Free Import Authorisation (DFIA). It is a condition of the notification that if the resultant export products are specified in paragraph 4.55.3 of the handbook of procedures, the imported materials have to be of the same quality, technical characteristics and specifications as the materials used in the said resultant products. In the case of the appellant, the exported products were electric motors and imported materials are bearings. On the ground that the quality, technical characteristics and specifications of the bearings used in the exported motors were not available in detail and therefore it could not be confirmed that the imported bearings were similar to the ones used for the manufacture of motors, exemption was denied. Hence the appellants are in appeal.

2. Shri J.C. Patel, learned advocate, on behalf of the appellants made the following submissions:

Bearing is described as one of the items under the sensitive list of items appearing under paragraph 4.55.3 of handbook of procedure of Foreign Trade Policy. It is stipulated that technical characteristics, quality and specifications of the imported product are to be correlated with the input item used in the export product. The DGFT had also issued a Policy Circular No. 50/2009 [reported in 2009 (90) RLT M24] along with Customs Circular No. 46/2007 [reported in 2007 (84) RLT M14] in this regard. The only technical specification mentioned in the license against bearings is the size of the bearings which has to be below 50 mm diameter. Apart from this specification there is no other condition stipulated in the authorization. The condition of notification no. 40/2006 is fulfilled by importing bearing 'upto 50 mm Dia' and therefore there is no violation of any of the conditions stipulated in Custom Notification No. 40/2006. Further, in the case of Jay Engg. Works Vs. CC, Chennai and reported in 2003 (163) ELT 680 (ANNEXURE G) the Hon. Tribunal had held that since the license is based on SION, the physical incorporation of the input in the export product is not required. The export product is a motor. Bearings are capable of being used in the motor. The Board in its Circular No. 1/94 dated 5.1.94, (ANNEXURE 'H') had clarified that the word 'required' does not mean that goods imported must be physically incorporated in the export product. The learned Commissioner failed to appreciate that 'transferability' endorsements are made by the licensing authorities after verifying the shipping bills and other export documents which is again verified by the customs department before allowing imports. Therefore the only condition attached to the bearings "i.e., upto 50 mm dia" has to be fulfilled. There is no stipulation in the authorization that only a particular size of bearings are allowed to be imported. The sizes of bearings are completely irrelevant in this case because the licensing authorities have not indicated any such condition in the authorization. Under the DFIA Scheme there is no individual CIF value required to be mentioned against each input item. The only condition is that the value of inputs are not to exceed the overall CIF value required to be mentioned against each input item. The only condition is that the value of inputs are not to exceed the overall CIF value allowed in the license. The price of the input items are not the governing factors in determining the admissibility of allowing imports under the authorization scheme. The Madras High Court in the case of Tamilnadu Dadha Pharmaceuticals Ltd. Vs. Union of India and reported in 2008 (226) ELT 490 (Mad)/(ANNEXURE 'J') had held that the license was issued for importation of the inputs specified in the license without prescribing CIF value of each input and on the contrary the CIF value has been given without reference of each of the inputs. It has been held that h