Import policy waiver binds Customs, and confiscation cannot rest on a ground outside the show cause notice.

A waiver and clarification issued by the licensing authority under the import policy removed the return-stream condition for the naphtha imports, and that policy relaxation was binding on Customs, so the imports could not be treated as prohibited under Section 111(d) of the Customs Act, 1962. The adjudicating authority also could not sustain confiscation by relying on a new distinction between heptene, nonene and naphtha when the show cause notice proceeded on a different basis. An adjudication order that travels beyond the notice breaches natural justice and cannot stand.

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Issues: (i) Whether the waiver and clarification issued by the licensing authority under the Import and Export Policy removed the restriction on the imports and negatived confiscation under Section 111(d) of the Customs Act, 1962. (ii) Whether the adjudicating authority could sustain confiscation by distinguishing the goods in a manner not covered by the show cause notice.

Issue (i): Whether the waiver and clarification issued by the licensing authority under the Import and Export Policy removed the restriction on the imports and negatived confiscation under Section 111(d) of the Customs Act, 1962.

Analysis: The import policy permitted import of naphtha subject to a return-stream condition, but the licensing authority exercised the relaxation power under the relevant policy provisions and expressly waived that condition for the imports in question. The assessments were provisional and the importers had executed bonds, so the later clarification operated on open assessments. The clarification issued by the licensing authority was binding on Customs for purposes of policy interpretation and the import restriction could not be enforced contrary to that waiver.

Conclusion: The imports were covered by the waiver and could not be treated as offending Section 111(d) of the Customs Act, 1962.

Issue (ii): Whether the adjudicating authority could sustain confiscation by distinguishing the goods in a manner not covered by the show cause notice.

Analysis: The show cause notice proceeded on the basis that the goods were naphtha for classification and licensing purposes. The adjudicating authority, however, rejected the goods on a different footing by drawing a distinction between heptene, nonene and naphtha, which was not the basis of the notice. An order cannot travel beyond the allegations in the show cause notice, and findings founded on a new case not put to notice offend natural justice.

Conclusion: The confiscation order could not be sustained because it travelled beyond the scope of the show cause notice.

Final Conclusion: The appeal succeeded, and the importers were entitled to relief as the policy waiver bound Customs and the impugned order was vitiated by deviation from the show cause notice.

Ratio Decidendi: A clarification or waiver issued by the competent licensing authority under the import policy is binding on Customs, and an adjudication order cannot be sustained if it rests on a ground not alleged in the show cause notice.

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