Import of raw cashew nuts under Advance Authorisation: diversion and record failures attract duty and penalties; mere broker carriage without connivance does not.

Import of raw cashew nuts under Advance Authorisation must comply with the actual user condition and prescribed accounting requirements; diversion of duty free imports to unauthorised units without permission and failure to maintain true records renders the importer liable to assessment of duty, interest and penalties, and supports confiscation. By contrast, customs brokers who merely executed clearance and transport on instructions, without material showing connivance to evade revenue or actions beyond their licensed functions, are not liable to the same penalties; the penalty against brokers is therefore unsustainable while the adjudicating authority's measures against the importer stand confirmed.

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Issues: (i) Whether the importer who imported raw cashew nuts (RCN) under Advance Authorisation and diverted the imported goods to unauthorised units/agents without requisite permission and without maintaining mandated accounts violated the conditions of Notification No.18/2015-CUS and relevant provisions of the Foreign Trade Policy/Handbook of Procedures, thereby attracting duty, confiscation and penalties; (ii) Whether customs brokers who cleared and transported the consignments on instructions of the importer/agent can be held liable for the penalty imposed by the Commissioner.

Issue (i): Whether diversion of duty-free imported RCN to unauthorised units and failure to maintain prescribed records breached the conditions of the Advance Authorisation and Notification No.18/2015-CUS, attracting duty, interest and penalties.

Analysis: The decision analyses the terms of the Advance Authorisation and condition sheet (including para 4.16 of the Foreign Trade Policy 2015-2020 and condition (x) of Notification No.18/2015-CUS) which impose the actual user condition, prohibit transfer or sale of imported materials except as permitted, and require maintenance of true and proper accounts under para 4.21 and related HBP provisions. The factual findings relied on admissions in recorded statements, seizure of imported RCN from multiple units, sales invoices, banking records, transport and import documents showing direct dispatch from port to various processing units, and the absence of registers reconciling imported quantities with stocks. The materials show that only a small portion of imported RCN reached the authorised processing addresses, a large quantity was dispatched to other units under control of the agency, processed product was sold in local market or through the agency, and no permission/endorsement was obtained from Customs or Regional Authority for transfers/job work as required. Those facts were held to demonstrate diversion and failure to comply with the actual user and accounting conditions, rendering the importer liable to confirm duty, interest and penalties imposed by the adjudicating authority.

Conclusion: In favour of Revenue. The diversion and non-maintenance of requisite accounts constituted breach of Advance Authorisation/Notification conditions and justified confirmation of duty, interest and penalty as imposed by the Commissioner.

Issue (ii): Whether customs brokers who executed clearance and transport of consignments on instructions of the importer/agent were liable to the penalties imposed by the Commissioner.

Analysis: The decision examines the role of the customs brokers, the documentary and testimonial record as to instruction and conduct, and the scope of obligations on brokers under the Customs Brokers Licensing Regulations, 2013. It notes that the brokers performed customs clearance and transportation as per instructions from the importer/agent, and there is no material proving that the brokers acted in connivance with the importer to evade revenue or that they exceeded the scope of their clearance/transport functions.

Conclusion: In favour of Respondents (customs brokers). The penalty imposed on the customs brokers was not justified and the Tribunal's order confirming dismissal of penalty against them is to be upheld.

Final Conclusion: The appeals are partly allowed: the order of the Tribunal is set aside and the adjudicating authority's duty, interest and penalty measures against the importer are confirmed; however, the penalties against the customs brokers are not sustained and the Tribunal's order in their favour is affirmed.

Ratio Decidendi: Where goods imported under an Advance Authorisation are transferred or diverted to unauthorised units without the statutory/authorisation-required permission and required accounting evidences are not maintained, such diversion breaches the actual user condition of the Advance Authorisation and Notification No.18/2015-CUS, attracting duty, interest and penal consequences; by contrast, mere performance by customs brokers of clearance and transport on instructions, without proven connivance to evade revenue, does not justify imposition of like penalties on the brokers.

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