Advance licence diversion and unmet export obligation justify denial of complete pre-deposit waiver in customs dispute

Duty-free imports under advance licences were treated as subject to strict use and export-obligation conditions, and alleged diversion of aluminium scrap together with missing stock records supported denial of a complete waiver of pre-deposit. The article notes that the natural justice challenge failed because notice, reply and personal hearings had been given. It also rejects reliance on a belated request for DGFT relaxation after expiry of the export period, and holds that excise duty payment and credit on domestic clearances could not offset customs duty arising from diversion of duty-free imports. Complete waiver was declined and a partial deposit was directed, with recovery stayed on compliance.

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Issues: Whether the applicants were entitled to complete waiver of pre-deposit and stay of recovery in a case involving import of duty-free raw material under advance licences, alleged diversion of goods, and non-fulfilment of export obligation.

Analysis: The imported aluminium scrap was received under advance licences subject to the condition that it be used in manufacture of export goods and not diverted. At the time of visit, neither the imported raw material nor the finished products were found in the factory, and the record of receipt and utilization was not maintained. The plea of violation of natural justice was rejected because show-cause notice was issued, reply was filed, and three personal hearings were granted. The request to await possible DGFT relaxation was found unconvincing because the export obligation period had already expired long earlier and the application for extension was made belatedly after the goods were no longer available. The plea based on payment of excise duty and availment of credit was also rejected because those payments related to domestic clearances and could not be adjusted against the customs duty demand arising from diversion of duty-free imports. The cited precedents were distinguished on facts.

Conclusion: Complete waiver was declined. The applicants were directed to deposit 50% of the duty confirmed, after giving credit for the amount already deposited during investigation, and recovery of the balance duty, interest and penalties was stayed on compliance.

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