2024 (3) TMI 875 - AT - Customs

Customs authorities deny benefits under Notification 99/2009 for misused advance authorization in garment exports

CESTAT New Delhi upheld customs authorities' decision to deny benefits under Notification No. 99/2009 to an appellant who misused advance authorization ... Diversion of imported goods to the open market - misuse of Advance Authorisation / violation of condition of Advance Authorisation - principles of natural justice and denial of cross-examination - admissibility and evidentiary value of statements recorded under Section 108 of the Customs Act - undervaluation and enhancement of transaction value - disallowance of benefit under Customs Notification due to mens rea and diversion - imposition of penalty under the Customs law for misuse of duty-free import facilityDiversion of imported goods to the open market - misuse of Advance Authorisation / violation of condition of Advance Authorisation - Findings that imported raw material cleared duty free under Advance Authorisation were diverted to the open market and not delivered to the declared actual user premises were upheld. - HELD THAT: - The Tribunal accepted the adjudicating authority's conclusion that multiple consignments were not delivered at the factory premises specified in the Advance Authorisation. The conclusion was supported by corroborative material including statements of transporters and buyers, an inter departmental letter from Himachal Pradesh authorities, panchnama findings, and investigative tracing of consignments and deliveries. The Tribunal found that the Revenue had investigated each consignment and demonstrated how and where the consignments were disposed, and that the Advance Authorisation facility was misused to clear goods duty free which were subsequently diverted to the open market. [Paras 6]Upheld the adjudicating authority's finding of diversion and misuse of the Advance Authorisation.Principles of natural justice and denial of cross-examination - The challenge that denial of cross examination of certain witnesses violated principles of natural justice was rejected. - HELD THAT: - The Tribunal noted that the Department had permitted cross examination of some witnesses but not of others, and that the appellants and director had not cooperated with investigations or produced evidence to counter the material relied upon. The adjudicating authority's reasons for not permitting broader cross examination were held to be cogent, and the Tribunal applied established precedents that formal cross examination is not an absolute requirement where the show cause notice sets out the material relied upon and the party has an opportunity to meet it. The Tribunal also observed that requests for extensive cross examination could be used as dilatory tactics. [Paras 6]Held that there was no violation of principles of natural justice in the limited grant of cross examination; the contention was without merit.Undervaluation and enhancement of transaction value - admissibility and evidentiary value of statements recorded under Section 108 of the Customs Act - The adjudicating authority's enhancement of declared values (undervaluation) was sustained. - HELD THAT: - The Tribunal accepted the Revenue's reliance on supplier declarations from Hong Kong and other materials showing higher actual values than those declared before Indian Customs. The Tribunal also confirmed that confessional or explanatory statements recorded under Section 108 are admissible and can be relied upon to determine transaction value where supported by retrieved documents and admissions. Applying these principles, the Tribunal upheld the enhanced values adopted in the impugned order for the specified bills of entry. [Paras 6, 7]Upheld the enhancement of declared values and the use of statements/evidence relied upon for valuation.Disallowance of benefit under Customs Notification due to mens rea and diversion - imposition of penalty under the Customs law for misuse of duty-free import facility - Benefit of Customs Notification No. 99/2009-Cus was denied and penalties/penal consequences were sustained on the finding of mens rea and diversion. - HELD THAT: - Given the established diversion of duty free imports and the corroborative evidence of connivance, the Tribunal agreed that the statutory concession could not be extended. The Tribunal found mens rea established as raw material imported duty free was diverted instead of being used in manufacture for export. The DGFT correspondence showing issuance of show cause/demand notices was noted to negate the appellant's claim of discharged export obligation. Consequent penalties and demands imposed in the adjudicating order were not interfered with. [Paras 6, 7]Denied the Notification benefit and upheld penalties and demands on account of misuse and mens rea.Admissibility and evidentiary value of statements recorded under Section 108 of the Customs Act - Statements recorded under Section 108 admitting custody, sale or purchase of imported goods were held to have evidentiary value and were relied upon. - HELD THAT: - The Tribunal reiterated that confessional or admissionary statements recorded under Section 108 form valid evidence under the Evidence Act and may be the basis for demand or penalty where voluntary and corroborated. The Tribunal observed that co noticees' statements admitting custody and sale of goods were not retracted and therefore could be adopted to establish disposition of goods and transaction values. Reliance was placed on settled authorities that admissions need not be further proved. [Paras 7]Accepted the evidentiary value of the Section 108 statements and relied on them to uphold findings and demands.Final Conclusion: The Tribunal dismissed all four appeals, upholding the adjudicating authority's findings of diversion and misuse of Advance Authorisation, the enhanced valuation, denial of Notification benefit, the reliance on admissible Section 108 statements, and the penalties and demands imposed; the appellants' challenge on denial of cross examination and natural justice failed. Issues Involved:1. Denial of benefit of Customs Notification No. 99/2009.2. Confiscation of imported fabrics and imposition of penalties.3. Violation of principles of natural justice.4. Diversion of imported goods into the open market.5. Undervaluation of imports.6. Role of co-noticees in the diversion of goods.Summary:1. Denial of Benefit of Customs Notification No. 99/2009:The appellant, M/s Himachal Fashion Pvt Ltd., was denied the benefit of Customs Notification No. 99/2009 dated 11.09.2009, as the imported raw material was found to be diverted to the open market instead of being used in the manufacture of export products as required under the Advance Authorisation.2. Confiscation of Imported Fabrics and Imposition of Penalties:The imported goods were seized based on the reasonable belief of violation of condition no. 14 of the Advance Authorisation. The adjudicating authority imposed penalties and ordered the confiscation of the fabrics imported by the appellant.3. Violation of Principles of Natural Justice:The appellant contended that the adjudicating authority did not consider their defense and denied them the opportunity to cross-examine the witnesses, which violated the principles of natural justice. However, the Tribunal noted that the Department had allowed cross-examination of four witnesses and found the appellant's request for further cross-examination unjustified, considering it a tactic to delay the proceedings.4. Diversion of Imported Goods into the Open Market:The Tribunal upheld the findings of the adjudicating authority that the imported goods were diverted to the open market. The evidence included statements from various individuals and corroborative documents, indicating that the goods were not delivered to the factory premises as required by the Advance Authorization.5. Undervaluation of Imports:The Tribunal upheld the enhanced values of the imported goods, as the declarations filed by the supplier in Hong Kong indicated higher values than those declared by the appellant before Indian Customs. The Tribunal found no hesitation in upholding the enhanced values.6. Role of Co-noticees in the Diversion of Goods:The Tribunal considered the roles of co-noticees, including Shri Ajay Kumar Goyal and Shri Pawan Kumar Seth, in the diversion of goods. The evidence, including statements recorded under \u/s 108 of the Customs Act, 1962, indicated their involvement in the sale of imported goods in the open market. The Tribunal found no reason to interfere with the imposition of penalties on the co-noticees.Conclusion:The Tribunal dismissed all four appeals filed by the appellant, upholding the findings of the adjudicating authority regarding the diversion of imported goods, denial of benefit under Customs Notification No. 99/2009, and the imposition of penalties. The judgment emphasized the overwhelming evidence against the appellant and the co-noticees, supporting the conclusions reached in the impugned order.