'Decalcified Fish Scale' Import Covered Under Advance Authorisation Scheme; Customs Cannot Deny Benefit: Kerala High Court

The advance authorization scheme enables duty free import of inputs/raw materials required for manufacture of export goods.

Justices A.K. Jayasankaran Nambiar and P.M. Manoj observed that during the period subsequent to the period covered by the show cause notice, the assessee has obtained advance authorization for importing the same product this time under the nomenclature 'decalcified fish scale' and no objection has been taken by the Revenue to such import.

In the absence of any objection by the licensing authority or cancellation of the advance authorization, the Department could not have denied the benefit of the notification to the assessee, added the bench.

In this case, the assessee/appellant used to manufacture collagen peptide from Bovine Bone protein. Later, the assessee proposed to manufacture collagen peptides from fish protein. Accordingly, fish protein obtained by decalcification of fish scales were imported from countries like China and Japan.

It is the case of the assessee that the item referred to as 'decalcified fish scale for collagen' is a rich source of the particular protein that is required for the purposes of manufacture of collagen peptides which are then exported by the assessee.

It would appear that while the initial imports effected by the assessee classified the input as 'fish protein' for the purposes of the advance authorization scheme, during an inspection of the goods imported vide Bill of Entry No.5034927 dated 25.04.2016, it was found that the imported products were tagged in polypropylene bags having the marks 'decalcified fish scale for collagen (fish protein)'.

The Revenue found that the declaration of the goods as 'fish protein' was incorrect as the goods were found to be processed/de-mineralized fish scale classifiable under Customs Tariff Heading 0511 9190.

The Appellate Tribunal concluded that the imported goods were correctly classifiable as 'decalcified fish scale' under Custom Tariff Heading 3504 0099. The Tribunal set aside the the differential duty demand, redemption fine and penalty in respect of the past consignments imported by the assessee.

However, the Tribunal confirmed the differential duty demand in respect of the live transactions.

The bench opined that “in as much as the classification of the imported items had no bearing on the legality of imports for the purposes of the advance authorization scheme, and the authorities entrusted with the administration of the said scheme have not viewed the different descriptions used by the assessee at the time of import of the product under the advance authorization scheme to be in breach of the terms and conditions of the advance authorization, the stand of the Revenue that the assessee would lose the benefit of the notification in question, cannot be accepted.”

The imports effected by the assessee had to be seen as covered by the notification that permitted an import at nil rate of duty so long as the goods were imported in terms of the advance authorization scheme, added the bench.

In view of the above, the bench allowed the appeal filed by the assessee.

Case Title: Nitta Gelatin India Ltd. v. Commissioner of Customs

Case Number: CUS. APPEAL NO.2 OF 2025

Counsel for Appellant/ Assessee: V. Sridharan, Dhananjay Sethuraj, Karthik S. Nair and R. Raghavan

Counsel for Respondent/ Department: R. Harishankar

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