2022 (5) TMI 878 - AT - Customs

Tribunal overturns order against M/s. S.A. Cashews, finding diversion allegations unsustainable. Export obligations compliance considered.

The Tribunal overturned the impugned order against the appellant, M/s. S.A. Cashews, finding the diversion allegations unsustainable. It was held that ... Advance Authorization Scheme - import of duty-free goods (Raw Cashew Nuts) by the appellants under Advance Authorization licenses, diverted to other units which were not authorized by DGFT - sale of substantial quantity of processed cashew kernels - violation of condition of the Notification No. 18/2015-Cus. dated 1.4.2015 - jurisdiction to issue SCN - HELD THAT:- It has to be stated that the learned counsel for appellant did not put forward any arguments on the issue as to whether DRI is the proper officer to issue Show Cause Notice. Though the judgment of the Hon'ble Supreme Court in the case of M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [2021 (3) TMI 384 - SUPREME COURT] was brought to his notice, he submitted that he does not wish to contest on the said issue before the Tribunal or before any other forum. Whether the diversion of RCN imported duty-free under Advance Authorization at the port of import to its unauthorized unit for processing is permissible under FTP 2015 – 20 and Handbook of Procedures 2015 – 2020? - Whether the quantity of 1149.59 MTs of RCN alleged to be diverted to unauthorized units is liable for confiscation? - HELD THAT:- Admittedly, the units to which the RCN are said to be diverted belong to the appellant. Though only the factory premises at Elamkulam, Kalluvathukkal Post, Kollam has been endorsed in Advance Authorization, all other units belong to the appellant. The department does not have a case that the other units to which the RCN was dispatched from the port belongs to any other person - clause (x) of Notification No. 18/2015 allows transfer of the imported materials to a job worker for processing subject to complying with the conditions of relevant Central Excise notifications. Again, in para 4.35 of Handbook of Procedures, it is stated that if the manufacturer / importer is not required to obtain central excise registration, it is not required to insist for endorsement of the name of supporting manufacturers in the Advance Authorization - It is stated that in such transfer of materials to the premises of job worker, whose premises are not endorsed in the license, the sole responsibility shall be of the importer. In the present case, the appellant has been issued export obligation discharge certificate. Such discharge certificate has been issued after perusing the shipping bills, whether foreign exchange was realized and also examining whether the appellant has fulfilled the conditions as per the Advance Authorization license and Customs Notification. On similar set of facts, the Tribunal in M/S. REGIN EXPORTS, SHRI REGIN P. PROPRIETOR OF M/S. REGIN AGENCY, M/S. DANIEL AND SAMUEL LOGISTICS PVT. LTD., M/S. ZION LOGISTICS VERSUS COMMISSIONER OF CUSTOMS, TUTICORIN [2018 (9) TMI 1290 - CESTAT CHENNAI] had occasion to consider whether the transfer of materials to the premises of job worker whose names have not been endorsed in the license would be permissible or not. The Tribunal in the said case after noting condition (x) of Notification No. 18/2015 had observed that the allegation of diversion cannot sustain. The allegation raised in the Show Cause Notice and the consequent confiscation of goods and duty demand cannot sustain - Appeal allowed - decided in favor of appellant. Issues: Alleged diversion of duty-free imported goods under Advance Authorization licenses, violation of actual user condition, confiscation of goods, customs duty, penalty under Customs Act, 1962, compliance with conditions of Notification No. 18/2015-Cus.Analysis:1. The appellant, engaged in processing Raw Cashew Nuts (RCN) into cashew kernels for sale/export, faced allegations of diverting duty-free imported RCN to unauthorized units and violating conditions of Advance Authorization licenses. The Directorate of Revenue Intelligence conducted searches and recorded statements, leading to a Show Cause Notice being issued.2. The department alleged that the appellant diverted RCN to unauthorized units, violating actual user conditions specified in the Foreign Trade Policy (FTP) 2015-20 and Customs Notification No. 18/2015. Only a fraction of the imported RCN reached the authorized unit, leading to non-compliance with relevant provisions.3. The original authority held the appellant accountable for non-compliance, ordering confiscation of goods, imposition of customs duty, and penalties under the Customs Act, 1962. The appellant contended that dispatching imported RCN to their own units for processing did not constitute diversion or sale, as the title remained with them.4. The appellant argued that as per Notification No. 18/2015, transfer to job workers for processing was permissible, with the importer remaining responsible for fulfillment of export obligations. The appellant had been issued an Export Obligation Discharge Certificate (EODC), indicating compliance with conditions.5. The Tribunal, considering previous judgments and the appellant's explanation, found that the diversion allegations were unsustainable. Citing the case of Regin Exports, the Tribunal concluded that transferring materials to job workers not endorsed in the license was permissible, overturning the impugned order against the appellant.6. The Tribunal set aside the impugned order against the appellant, M/s. S.A. Cashews, allowing the appeal with consequential relief. The decision was pronounced in open court on 18.5.2022, providing a favorable outcome for the appellant in the case.