TaxTMI 
TaxTMI 
2018 (9) TMI 1290
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....red seven advance authorizations from DGFT for import of RCN without payment of customs duty under actual user condition with an obligation to export the processed cashew kernels as specified in the said advance authorizations (ii) Imported and cleared a quantity of 3073.331 MTs of RCN valued at Rs. 31,85,42,558/- without payment of customs duty, under the said seven advance authorizations vide 19 Bills of Entry through Tuticorin Port availing benefit of Notification No.18/2015-Cus. during the period April 2016 to July 2016. (iii) Received only 81.05 MTs of the imported RCN at their unit at Ochavilai, Puthukadai, Kunnathur Village, Kanyakumari District, which is the unit authorized under the seven advance authorizations to process the imported RCN. (iv) Used 190.48 MTs of RCN to process 47.62 MTs of cashew kernels for export as per the SION Norms. (v) Diverted / sold the remaining 2801.47 MTs of the imported RCN to various unit of another IEC holder viz M/s. Regin Agency (herein after referred to as RA) or to some firms at Kollan / Kanyakumari District, directly from the port of import without following the procedures prescribed under 4.35 of the....
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....ated in the Notification, for which appropriate action under Customs Act, 1962 is warranted. The adjudicating authority further held that the quantity of 2801.47 MTs out of 3073.331 MTs of RCN imported duty-free under Notification 18/2015-Cus. read with advance authorization has been diverted / sold to unauthorized units, which is totally against policy conditions contemplated under FTP 2015 - 2020 and Handbook of Procedures 2015- 2020 and thereby the benefit of exemption is not available ipso facto and duty involved on 2801.47 MTs of RCN is liable to be paid by the importer with appropriate interest. The adjudicating authority also held that the other noticees are liable for imposition of penalties under section 112(b) of the Act. Based on these and other findings, the adjudicating authority : (a) held that in respect of 2801.47 MTs of RCN, conditions prescribed under Notification 18/2015 are not met / fulfilled (b) 2732.263 MTs (i.e. total quantity diverted 2801.47 MTs less quantity provisionally released 429.207 MTs) of RCN valued at Rs. 25,29,617/- diverted to unauthorized units are liable for confiscation under section 111(d) / 111(o) of the Customs Act. ....
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....he premises mentioned therein. In the advance licenses, the head office located in Puluvilai and one owned processing unit located in Ochavilai are mentioned. 4.9 The practice followed by RE is to import RCN and directly send the containers to various branches / job workers premises, to get them processed, bring it back to the office mentioned in the licence, sort and grade, pack and store in hygienic conditions and ultimately export. 4.10 The only mistake committed by RE out of ignorance is that they did not mention the branches / job workers' premises at the time of obtaining Advance Authorizations. 4.11 Based on these procedural lapses, department has alleged that RE diverted 2801.47 MTs of RCN. However, this allegation has not been supported by any evidence. When officers searched the Puluvilai office, physical stock of cashew kernels in the finished goods in the godown and the packing was not recorded in the Mahazar. 4.12 The adjudicating authority failed to consider the appellant's request dated 11.7.2017, to consider the stock of 273.77 MTs of cashew kernel which is equivalent to 1095.08 MTs of imported RCN available from the stock register (Sl. No. 4 of Mahazar ....
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....red to in para 6, 7 and 8 of the impugned order to argue that they have correctly explained that the RCN after clearance was dispatched to the processing units belonging to RE accompanied by Bills of Entry and forms and other transport documents for movement of imported goods for processing. 4.21 The only condition that has been violated, if at all, is the procedure prescribed in para 4.35 of Handbook of Procedures which provides for endorsement of job workers / supporting manufacturers on the authorization. 4.22 The appellant has not imported anything contrary to what has been authorized by the DGFT either in terms of product or quantity or value. 4.23 They have not sold or diverted in the local market after importation and have only send the goods to their processors for processing RCN. 4.24 The appellants have also exported the finished goods within the time limit prescribed in FTP. 4.25 They have also received foreign currency for exports made and have submitted proof of exports and remittance to the DGFT. 4.26 In fact, they have applied for the EODCs for the exports made by them. However, the DGFT have informed them that since DRI are investigating the seven ....
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....rting manufacturers have been authorized to process. As per the conditions of the seven advance authorizations and as per the conditions laid down in the Notification, the imported RCNs should have been only sent to RE or the premises of the supporting manufacturers endorsed in the advance authorization. However, this has not been done and instead the imported the RCN have not been sent to authorized places to other persons. 5.2 Ld. AR took us to para 2 of the impugned order to point out that as on the date of search of the premises of RE on 22.7.2016, there was no stock of imported RCN. 5.3 When goods were not sent in the premises declared in the advance licences, then it is established that they have been diverted. It is not necessary for the department to prove that the goods have been sold other persons. It is enough for the department to prove that the goods have been diverted to premises or persons which are not authorized by the advance authorization licenses. Hence notification condition is violated and section 111(d) is attracted, the goods become liable for confiscation and penalty. 5.4 Hence it has been proved that 2801.47 MTS of RCN have been diverted. Therefor....
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....5 20 and other provisions of relevant Customs Notification 18/2015 dated 01.04.2015. (viii) Hence, as per the conditions of Advance Authorizations, RE was required to process imported RCN only at their premises at Ochavilai or Pulluvilai unit and not at any other place. However, only 81.05 MTs of imported RCN was dispatched to the two units of RE which was authorized by DGFT. (ix) RE had exported 47.62 MTs of processed cashew kernels which works out to RCN quantity of 190.48 MTs. (x) Thus, it appears that out of 3073.331 MTs of imported RCN, only 81.05 of imported RCN in shell was dispatched to authorized units, 190.48 MTs was used for export and remaining quantity of 2801.47 MTs was diverted. (xi) RCN imported under Advance Authorization was subject to "actual user condition". The same shall not be transferable even after completion of export obligation. Only after export obligation is completed will authorization holder have option to dispose of product manufactured out of duty-free import. (xii) As per condition (x) of Notification 18/2015, materials imported under Advance Authorization shall not be transferred or sold. ....
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....ance and are contradicting one another. On the one hand, it is claimed in the Show Cause Notice that 190.48 MTs of RCN have been received in RE. At the same time, it is also alleged that only 81.05 MTs of imported RCN was dispatched to RE. 8.5 Another allegation in the Notice is that RE were directly sending imported RCN to various units of RA or to other firms at Kollam/KK district directly from the port of import in violation of the procedures prescribed in para 4.35 of HBP and condition (x) of Notification 18/2015-Cus. At the same time, the Show Cause Notice elsewhere alleges that RE had "sold" the imported RCN to commission agents/other buyers. There is also an allegation that in some cases such sales have been effected under sales invoice and even payment of sales tax. 8.6 Notwithstanding such allegations, although as many as 149 documents have been relied upon in the Show Cause Notice, there is not a single sales invoice or challan or document by any other name relied upon as evidence of such alleged sales. Nor have any of the alleged sales tax documents listed or enclosed. Interestingly, even in the body of the Show Cause Notice there is no reference to any Sl. No. ....
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....erefore evident that even the Show Cause Notice has not disputed that the quantity of RCN found at these 16 processing units was only the part of the RCN "imported" by RE. There is also substance in the appellant's contention that the DRI located this quantity in their investigations in respect of 16 processing units whereas stock lying at 21 other such units were not taken stock of or investigated by DRI. In any case, there is no dispute that these 37 units were in fact engaged by RE for processing the imported RCN in shell. 9.2 In the impugned Order, there is a finding that RCN processed by processing units were sold in the local market; that RA have sold cashew kernels processed out of imported cashew nuts to different firms, etc. However, as in the other allegations of sale of imported RCN directly from the port, no evidences to corroborate these allegations have been brought forth or adduced. 9.3 Per contra, we find that in the statement of Shri. V. Leon, Operations-in-charge of the CHA, it has been clarified that the imported material was sent to the various units under form KK, a transport document for movement of imported goods. On being asked as to why the Customs Au....
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....ce of sale - documents, invoices, payments effected and transfer of ownership, the allegation that the imported RCN has been sold can at the best be called an assumption. 9.7 We, however, find that even in the para 4.35 of the HBP, it is provided that "if applicant desires to have name of any manufacturer or job worker added to authorization, he may apply". Evidently, both the Customs Notification 18/2015-Cus. as well as para 4.35 of the HBP do provide for addition of supporting manufacturers/processors. Discernibly, the appellants have added the names of only two such processing units. However, they continued to send the imported RCN to all the 37 processing units, as they used to prior to 01.03.2016, when Customs Duty was imposed for the first time on the import of RCN. There is however no allegation that there has been any misuse or diversion of imported RCN on earlier occasions. 9.8 There is then no evidence that the imported RCN has been "sold". The only allegation that survives is that the imported RCN has been sent to processing units of RA/RE which have not been authorized as supporting manufacturer in the licences, but without transfer of ownership. 9.9 Credenc....
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....or that matter, that the exported cashew kernel were not processed out of the imported 3073.921 MTs of RCN in shell. From all accounts, therefore, the raison d'etre for allowing duty free import of RCN in shell by issue of Advance Authorizations has been fulfilled since the mandated quantity of cashew kernel has been exported as above. 9.12 Appellants have also submitted statements of bank realization in foreign exchange in USD for all these exports. There is no allegation made that RE have not exported 769.759 MTs as claimed by them or that the foreign exchange proceeds have not been realized . In fact, it is seen that they have sought for the EODC from DGFT, who, while acknowledging the receipt of the said applications, have informed the appellants that the request of EODC has been held up as per a DRI letter on alleged misuse of Advance Authorization. 9.13 It has to be kept in mind that this type of value addition exports in the area of food processing are highly labour intensive. As brought out by the appellant, the process of de-shelling imported RCN and its conversion to cashew kernel is done by hand, pre-dominantly by rural womenfolk who do the peeling of the ski....
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....ication; and (b) exempt materials are utilised in the factory of such supporting manufacturer in terms of condition (vii)". With reference to condition (vii), it has been held that the appellants violated this condition by transferring 68.972 MTs of imported raw material to nondeclared job workers i.e., jobbers whose names were not endorsed (as supporting manufacturers) on the licences. We find that this finding of the Commissioner is not sustainable inasmuch as the JDGFT has found (vide his order dated 4-2-2004) as follows :- "(a) A merchant-exporter can get a licence with AU condition and that the goods imported under the licence can be manufactured through a supporting manufacturer or through a jobber. (b) The merchant-exporter has got the option to get the name of the supporting manufacturer endorsed on their licence. (c) Such endorsement is only optional and not mandatory. (d) Prior endorsement and the approval of the Licensing Authority for the manufacture of the resultant product in the supporting manufacturer premises is required only for those item which contained prior import condition and not otherwise." As i....