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Issues: (i) Whether the duty demands, confiscation, penalties, and cancellation of the private bonded warehouse licence were sustainable on the facts and evidence on record; (ii) Whether the adjudicating authority could fasten liability on the assessee for alleged procedural lapses relating to customs escort, vessel status, and alleged diversion of goods without tangible evidence; (iii) Whether the impugned order was vitiated for relying on untested statements and for travelling beyond the show cause notices.
Issue (i): Whether the duty demands, confiscation, penalties, and cancellation of the private bonded warehouse licence were sustainable on the facts and evidence on record.
Analysis: The sales from the duty-free shop were conducted under customs supervision and were attested by bond officers. The record did not establish clandestine removal, diversion to the domestic market, or any tangible import into the customs barriers for home consumption. The allegations under the various heads of demand were found to rest largely on assumptions, incomplete particulars, or mechanical findings, while the assessee's explanations and reconciliations were not properly displaced. In the absence of proof of improper importation or domestic diversion, duty liability could not be sustained.
Conclusion: The demands, confiscation, penalties, and licence cancellation were unsustainable and were set aside in favour of the assessee.
Issue (ii): Whether the adjudicating authority could fasten liability on the assessee for alleged procedural lapses relating to customs escort, vessel status, and alleged diversion of goods without tangible evidence.
Analysis: The licence conditions and operational procedure showed that the assessee was required to sell goods under the prescribed safeguards, but the obligation to place items on board under preventive escort was not cast on the assessee in the manner assumed in the order. The evidence also showed that the status of vessels, the customs supervision of sales, and the role of bond officers were central to the transactions. The department did not establish any seizure from the local market or credible proof of diversion, and the adjudicating authority could not substitute conjecture for evidence.
Conclusion: No liability could be imposed on the assessee on the basis of the alleged escort-related or vessel-status lapses.
Issue (iii): Whether the impugned order was vitiated for relying on untested statements and for travelling beyond the show cause notices.
Analysis: Statements relied upon by the department were not properly tested in adjudication, and the assessee's right to cross-examination was not effectively honoured. The adjudicating authority also introduced a new basis of liability by denying benefit on grounds not found in the show cause notices, which was impermissible. Such reliance on unexamined material and expansion of the case beyond the notices undermined the validity of the adjudication.
Conclusion: The impugned order was vitiated on these procedural and evidentiary grounds as well.
Final Conclusion: The Tribunal held that the department failed to discharge the burden of proving duty liability, confiscability, or penalty exposure, and the de-novo order could not be sustained. The appellant's appeals were allowed with consequential relief, and the licence was directed to be restored.
Ratio Decidendi: In customs adjudication, duty, confiscation, and penalty cannot be sustained on conjecture or untested statements; the department must establish tangible evidence of liability, and an adjudicating authority cannot travel beyond the show cause notice.
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