Advance authorisation diversion and actual user breach justified customs demand, while broker penalty failed without proof of deliberate participation.

Goods imported under advance authorisation remained subject to the actual user condition, and the court treated unauthorised routing to other units, absence of proper accounts, and local market sales as diversion in breach of the exemption conditions and Foreign Trade Policy; confiscation and consequential duty liability were upheld against the importer side. Penalty on customs brokers was not sustained because the record did not establish deliberate participation in the diversion or the mens rea needed for penal action, as their role was confined to clearance and logistics; the broker penalties were therefore set aside.

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Issues: (i) Whether duty-free raw cashew nuts imported under advance authorisation were diverted in breach of the actual user condition, the customs notification, and the Foreign Trade Policy, so as to sustain confiscation and duty demand; (ii) Whether penalty on the customs brokers was sustainable for merely facilitating clearance and transport of the goods.

Issue (i): Whether duty-free raw cashew nuts imported under advance authorisation were diverted in breach of the actual user condition, the customs notification, and the Foreign Trade Policy, so as to sustain confiscation and duty demand.

Analysis: The imported goods were covered by advance authorisations and were subject to the actual user condition under the notification and the Foreign Trade Policy. The evidence showed that the goods were not processed in the authorised premises, were routed to other units without permission, no proper accounts were maintained, and substantial quantities were sold in the local market or otherwise diverted. The Court treated the transfer to other units and the subsequent sales as contrary to the conditions of the exemption and the policy governing advance authorisation.

Conclusion: The issue was answered in favour of Revenue. The confiscation and consequential duty liability were upheld against the importer and connected persons.

Issue (ii): Whether penalty on the customs brokers was sustainable for merely facilitating clearance and transport of the goods.

Analysis: The material showed that the customs brokers acted on the instructions received for clearance and dispatch, but there was no sufficient proof that they themselves participated in the diversion with an intention to evade revenue. Their role was confined to logistics and customs clearance, and the requisite mens rea for penalty was not established on the record as against them.

Conclusion: The issue was answered in favour of the brokers. The penalty imposed on them was not sustained.

Final Conclusion: The common judgment resulted in reversal of the Tribunal insofar as the importer-related appeals were concerned, while the appeals relating to the customs brokers failed, leaving the revenue's demand and confiscation intact against the importer side and the broker penalties set aside only where not justified.

Ratio Decidendi: Goods imported under advance authorisation must be used strictly in accordance with the actual user condition and the governing exemption conditions; unauthorised diversion, lack of accounting, and local sale justify denial of exemption and consequent customs action, while penalty on intermediaries requires proof of deliberate participation in the contravention.

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