Diversion allegations require substantive evidence, and re-warehousing certificates must be examined before confirming duty demand.

Allegations that goods cleared to an export-oriented unit were diverted to the Domestic Tariff Area without re-warehousing must be supported by substantive evidence, and re-warehousing certificates endorsed by the jurisdictional officer must be properly examined before confirming duty demand or confiscation. A demand on raw materials is not independently sustainable where the principal demand concerns finished goods and consumption for manufacture has not been adequately addressed. The impugned order was set aside and the matter remanded for de novo adjudication after hearing the appellant.

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Issues: Whether the demand of duty and confiscation could be sustained on the allegation that goods cleared to an export-oriented unit were diverted to the Domestic Tariff Area without re-warehousing, and whether duty could also be demanded on raw materials used in the finished goods.

Analysis: The allegations of non-receipt and diversion required proof by substantive evidence. The record showed reliance on the re-warehousing certificates endorsed by the jurisdictional officer of the consignee unit, along with the contractual delivery terms and payment evidence, but these were not properly examined. The finding of diversion could not rest on assumption, and the lower authority did not record any clear finding that the certificates were false or manipulated. The demand on raw materials was also not independently sustainable when the principal demand itself related to the finished goods and the issue of consumption for manufacture had not been properly addressed.

Conclusion: The matter was not fit for final confirmation on the existing record and required fresh consideration by the adjudicating authority.

Final Conclusion: The impugned order was set aside and the matter was remanded for de novo adjudication after giving an opportunity of hearing to the appellant.

Ratio Decidendi: Allegations of diversion and non-re-warehousing must be supported by substantive evidence, and material defence documents such as re-warehousing certificates must be examined before confirming duty demand.

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