2024 (10) TMI 335 - AT - Customs

Diversion of raw sesame seeds imported duty free - Import of duty-free Sesame seeds under Advance Authorization Scheme (A.A.S) under Notification No. 96/2009-Cus dated 11.09.2009 and subsequent export of processed Sesame seeds against Advance Authorization - whether allegation that goods imported under various advance authorization were not used for the specified purpose but have been sold in local market (diversion of imported raw sesame seeds and claim of process loss) or otherwise? HELD THAT - The party claims to have made up exports by procuring indigenous duty paid goods and by claiming only 1% SION stipulated norm. Customs has also discharged the bond furnished in this regard after due consideration of all facts. For alleged diversion of raw (natural, seasame seeds against 4 contract notes, as was pleaded before Original authority also, 3 notes were cancelled and against 4th contract notes, hulled seasame seeds were supplied, therefore diversion is not proved beyond allegation. The documents relied upon by the department fall flat on their face in attempting to evidence alleged diversion. Even, broker in his statement mentions that seeds were not imported but were of Somalia quality and not Somalian origin as also pointed out by the adjudicating authority. It is also found that clarification about indigenous raw material used for short fall as well as revision of norms was on specific reference by the appellants as well as the relevant export promotion council, same was therefore rather required to be given due weightage. It rather fortifies their claim that even under old dispensation of 1% wastage SION norm, there was need to use indigenous material to meet export obligation. Same was apparently done by them. In fact, instead of diversion, the evidence on record points to rather procurement of indigenous material and this appears to have been appreciated by DGFT, as how else an industry with low 1% norm as against actual 13% (revised 33%) could have practically operated, without indigenous procurement. Later stance of DGFT therefore was most practical and pragmatic and was indeed a corrective measure to rectify the lower rate norm of 1%. The discussion of Policy Interpretation Committee of DGFT as brought out in para 20 of the order of the Adjudicating authority, clearly indicates that sourcing material from domestic market is very much permissible to make up for deficiency. It is also noted that DGFT has issued EODC in all cases to the appellant. On the basis of such certificates, the Assistant Commissioner of Customs at Mundra port has also discharged the bond taken by it. We find that the adjudicating authority has correctly taken into account various arguments and has properly given relief which was due to the respondent. The respondent has also explained its position in the light of developments as happened. In case, the Revenue Department does not accept its proposition of higher wastage than SION norms, it was for it to prove with evidence the removal and convince DGFT for no need of revision of input output norms or of issuance of EODC. The learned Commissioner of Customs has correctly appreciated the position and passed his order which, therefore, deserves to be upheld. Accordingly appeals by the department are dismissed as devoid of merits and the appeals by the respondent seeking approval to adjust drawback against Advance Authorization Scheme becomes infructuous and therefore deserves to be dismissed. Respondent s appeal is dismissed as infructuous.

Issues Involved:
1. Alleged diversion of duty-free imported sesame seeds into the local market.
2. Violation of the actual user condition under Notification No. 96/2009-Cus and FTP 2009-14.
3. Legitimacy of process loss claims and applicability of revised SION norms.
4. Validity of export under the drawback scheme instead of Advance Authorization.
5. Consideration of DGFT rulings and issuance of EODC.
6. Maintenance of records and evidence of alleged diversion.

Issue-wise Detailed Analysis:

1. Alleged Diversion of Duty-Free Imported Sesame Seeds:
The department alleged that M/s. Dhaval Agri Exports (DAE) diverted 9527.592 MT of duty-free imported sesame seeds into the local market, violating the conditions of the Advance Authorization Scheme. The investigation revealed a shortage of this quantity during a search, and statements from brokers suggested local sales. However, the adjudicating authority found no conclusive evidence of diversion, noting that the contract notes referenced quality rather than origin, and the alleged shortage could be attributed to process loss.

2. Violation of Actual User Condition:
The department argued that DAE violated the actual user condition by selling imported goods locally, contrary to Notification No. 96/2009-Cus and Para 4.1.5 of the FTP 2009-14. The adjudicating authority, however, found no documentary evidence supporting this claim, and noted that the goods were processed and exported, albeit under the drawback scheme, which does not constitute a violation of the actual user condition.

3. Legitimacy of Process Loss Claims and Revised SION Norms:
DAE claimed a process loss of 13%, which exceeded the 1% allowed under the original SION norms. The adjudicating authority accepted this claim, considering the revised SION norms allowing up to 33% loss, effective from 2018. The department's appeal contested this acceptance, arguing that the revised norms should not apply retrospectively. The tribunal upheld the adjudicating authority's decision, recognizing the revised norms as a corrective measure reflecting industry realities.

4. Validity of Export Under Drawback Scheme:
DAE exported 8140.649 MT of hulled sesame seeds under the drawback scheme, claiming it was a mistake and sought conversion to Advance Authorization. The department rejected these applications, but the adjudicating authority noted that DAE had fulfilled its export obligations using domestic inputs, as permitted by DGFT rulings. The tribunal found no evidence of intentional misuse or diversion, supporting the adjudicating authority's findings.

5. Consideration of DGFT Rulings and Issuance of EODC:
The DGFT issued Export Obligation Discharge Certificates (EODC) for the disputed Advance Authorizations, which the adjudicating authority considered binding. The tribunal emphasized the finality of DGFT interpretations in such matters, citing case law that supports the binding nature of DGFT decisions on customs authorities. The issuance of EODC and bond release by customs further validated DAE's compliance with export obligations.

6. Maintenance of Records and Evidence of Alleged Diversion:
The department criticized DAE for inadequate record-keeping, suggesting potential for mixing imported and domestic seeds. However, the adjudicating authority found no substantive evidence of diversion, and the tribunal noted the absence of clear proof of clandestine removal or local sales. The statements from brokers were deemed insufficient to substantiate the department's allegations.

Conclusion:
The tribunal upheld the adjudicating authority's decision to drop proceedings against DAE, dismissing the department's appeals. It recognized the revised SION norms and DGFT rulings as authoritative and binding, affirming that DAE complied with the conditions of the Advance Authorization Scheme. The respondent's appeal for conversion of drawback shipping bills was deemed infructuous given the dismissal of the department's appeals.

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