Diversion allegations require substantive proof, while duplicate duty demands on inputs and finished goods need reconsideration.

Allegations of diversion of export-bound goods to the Domestic Tariff Area cannot be sustained on assumption alone when the record includes CT-3 forms, payment proof, and re-warehousing certificates that were not examined for falsity or manipulation. In such circumstances, substantive evidence of non-receipt and actual diversion is required before demand and confiscation can stand. The text also states that a separate duty demand on raw materials is not maintainable on the same footing where duty is also proposed on the finished goods manufactured from them. The matter was therefore required to be re-examined after proper verification and hearing.

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Issues: (i) Whether the duty demand and confiscation could be sustained on an allegation of diversion of goods to the Domestic Tariff Area without substantive evidence, despite production of CT-3 forms and re-warehousing certificates. (ii) Whether duty could be demanded again on raw materials when duty was also demanded on the finished goods manufactured from them.

Issue (i): Whether the duty demand and confiscation could be sustained on an allegation of diversion of goods to the Domestic Tariff Area without substantive evidence, despite production of CT-3 forms and re-warehousing certificates.

Analysis: The allegation was that goods cleared for an EOU were not re-warehoused and were instead diverted. The record showed that the appellant produced CT-3 documents, a contract showing ex-factory delivery, proof of payment, and re-warehousing certificates issued by the jurisdictional officer. The adjudicating authority did not examine whether those certificates were false or manipulated. In the absence of substantial evidence showing non-receipt at the consignee end and the actual place of diversion, the allegation could not be accepted on mere assumption.

Conclusion: The demand and confiscation based on alleged diversion and non-re-warehousing could not be sustained as they stood, and the matter required fresh examination.

Issue (ii): Whether duty could be demanded again on raw materials when duty was also demanded on the finished goods manufactured from them.

Analysis: The demand proceeded on both the finished goods and the raw materials used in their manufacture. Once duty is proposed on the finished product, a separate demand on the inputs consumed for manufacture is not maintainable on the same footing. This aspect was not properly considered in the adjudication.

Conclusion: The additional demand on raw materials was not sustainable in the manner framed and required reconsideration.

Final Conclusion: The impugned order was set aside and the dispute was remanded for fresh adjudication after granting personal hearing.

Ratio Decidendi: A demand alleging diversion of export-bound goods must be supported by substantive evidence, and where the record contains unexamined re-warehousing documents, the matter cannot be sustained without proper verification; a separate input-duty demand cannot be maintained in the same manner when duty is sought on the finished goods.

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