Advance authorisation compliance upheld where duty-free raw cashew nuts were processed in own units without third-party diversion.

Transfer of duty-free imported raw cashew nuts to the assessee's own processing units did not amount to a prohibited diversion, because the goods were not sold or transferred to any third party and the scheme permitted processing through job workers. The governing notification and Handbook of Procedures did not require endorsement of supporting manufacturers where central excise registration was not needed, and the authorisation holder remained responsible for the imported goods and export obligation. The export obligation discharge certificate further indicated compliance. As the alleged breach of advance authorisation and customs conditions was not established, confiscation, duty demand, and penalty were set aside.

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Issues: Whether transfer of duty-free imported raw cashew nuts to the assessee's own unendorsed processing units violated the advance authorisation and customs notification conditions and justified confiscation, duty demand, and penalty.

Analysis: The imported goods were sent to units belonging to the assessee, and there was no transfer or sale to any third party. The notification permitted transfer of imported materials to a job worker for processing, and the Handbook of Procedures contemplated processing through job workers without insisting on endorsement of supporting manufacturers where central excise registration was not required, with the authorisation holder remaining responsible for the imported items and export obligation. The issuance of the export obligation discharge certificate also supported compliance with the authorisation conditions. In these circumstances, the allegation of diversion could not be sustained.

Conclusion: The alleged violation of the notification and advance authorisation conditions was not established, and the confiscation, duty demand, and penalty were set aside in favour of the assessee.

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