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TMI Blog2018 (9) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... these two allegations are at variance and are contradicting one another. 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. 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. Credence is also found in the appellants’ submission that they regularly export pre-dominantly to the USA and the cashew kernels which are exported to that country have to meet the stringent USA Regulatory Approvals, apart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Handbook of Procedures and in violation of the condition at Sl. No. 14 of the condition sheet annexed to the advance authorizations and condition (x) of Notification No.18/2015-Cus. (vi) Neither obtained permission from jurisdictional Central Excise authority for transfer of inputs/RCN. (vii) Did not incorporate names of units to whom the RCN was diverted in contravention of provisions of condition contained in 4.10 of the Handbook of Procedures. A quantity of 429.2 MTs of imported RCN lying in stock in 16 premises under RA were seized. (viii) Did not maintain true and proper account of consumption and utilization of duty-free procured inputs under advance authorization in violation of cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 25,29,617/- diverted to unauthorized units are liable for confiscation under section 111(d) / 111(o) of the Customs Act. (c) confiscated 429.207 MTs of RCN diverted to unauthorized units under section 111(d) and 111(o) of the Act, however ordered release of the same on payment of redemption fine of ₹ 10 lakhs under section 125 of the Customs Act. (d) confirmed customs duty of ₹ 2,71,69,335/- with interest thereon (e) imposed equal penalty of ₹ 2,71,69,335/- under section 114A of the Act on RE (f) Imposed penalty of ₹ 25 lakhs on Shri P. Regin, Proprietor of RA; ₹ 5 lakhs each on Zion Logistics and Daniel and Samuel Logistics Pvt. Ltd. under Section 112(b) of the Customs Act. Hence the appellants have filed these appeals before this Tribunal. 4. When the matter came up for hearing, Shri D. Arvind, Ld. Consul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 at Sl. No. 123 in Annexure A to the Show Cause Notice). 4.13 429.267 MTs of RCN seized from 16 numbers of units during July 2016 were provisionally released to RE on 19.1.2017 and the same was processed and exported. 4.14 The adjudicating authority has however erroneously concluded that entire 2801.47 MTs of imported RCN was transferred / sold which includes 429.207 MTs of RCN provisionally released as above. 4.15 DRI officers were well aware of the 37 processing units were engaged by the appellant which was evident in the stock register maintained by them and also in the statement dated 25.7.2016 of Shri Regin P. 4.16 However, the DRI officers restricted themselves to 16 processing units and seized only RCN available in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 advance authorizations, the applications cannot be considered at present and that the request for EODC will be processed only after the decision is taken by DRI in the notice issued by them. 4.27 Ld. consultant drew our attention to para 5 of reply dated 16.5.2017 to the show cause notice filed in page 83 onwards of the appeal paper book, where it has been informed that the entire export obligations under the said seven advance licences have been fulfilled well before the stipulated period as per the details given in Annexure I to the reply. 4.28 Ld. Consultant drew our attention to the decision of the Tribunal in the case of Silverline Plastpack Pvt. Ltd. Vs. Commissioner of Customs, Bhavnagar 2016 (343) ELT 281 (Tri. Ahmd.) whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary 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. Therefore the conditions of the notification 18/2015-Cus. have been denied and the duty foregone on such quantity diverted is very much demandable. 5.5 RE was fully aware that the processing should be undertaken only in the authorized premises. In spite of this knowledge, they have diverted the subject goods to other unauthorized units. RE have thus misused the authorization scheme for their own benefits and deliberately suppressed the fact of diverting imported RCN with intent to evade appropriate customs duty payable on the 2801.47 MTS of RCN. For these reasons, the Ld. AR drew our attention to paras 74 to 79 of the impugned order to point out that the adjudicating authority has thoroughly analyzed the imposability of penalties on RE and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (xiii) Hence, RE have violated conditions prescribed under Notification 18/2015-Cus. in respect of 2801.47 MTs of RCN and hence, duty foregone of ₹ 2,71,69,335/- with interest is required to be recovered from them. Further, penalties under various provisions are also required to be imposed. 8.1 With regard to the allegation that no stock of imported RCN was found during search of premises of RE on 22.07.2016, appellants have contended that no stock taking was done during that search and that only documents were collected. In this regard, we find that as per the Mahazar dated 22.07.2016 drawn at the premises of RE, which is the relied upon document for the Show Cause Notice, there is no reference to any type of stock taking that has been done. The relevant portions of the Mahazar are reproduced as ready refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh 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. or Invoice No. or sales tax document no. to support an allegation that sales has been caused right at the port of import. 8.6 On the other hand, from the statements of Shri. Regin P., Shri. S. Mariappan, Proprietor of Zion Logistics and of the various other stakeholders and associates of both RE and RA, what actually comes to the fore is that the imported RCN was sent directly from the port of various processing units of RE as well as RA for processing the RCN into cashew kernel. 8.7 In fact, even as per para 7.1 (v) of the Show Cause Notice, it is indicated that a quantity of 429.2 MTs of imported RCN were lying found in stock in 16 premises under RA in the searches carried out by DRI. The appellants have flagged this very fact in support of their contention that the imported RCN was only sent to the said units for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idences 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 Authorities were not informed about the dispatch of RCN by RE to various units which were not authorized in their licences, Mr. Leon has replied that the destination of the imported goods was only RE with various addressed and that it was known that the processed goods would eventually be returned to the premises of RE mentioned in the Advance Licence. Hence, they did not feel anything strange warranting informing the Customs Authorities. Strangely enough, this assertion of the Customs House Agent (CHA) has not been contradicted or not been countered or demolished by the Department. 9.4 No proof or evidence has also been adduced by the Revenue to dispute the assertion of the appellants that they retained ownership and title of the imported RCN; that they only sent the imported RCN to 37 units for processing and that they r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 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 Credence is also found in the appellants submission that they regularly export pre-dominantly to the USA and the cashew kernels which are exported to that country have to meet the stringent USA Regulatory Approvals, apart from high quality specifications required by the customers. For this reason only the appellants are importing RCN in shell from abroad because the export orders require a better quality of cashew kernel which is not available in India. If this be the case, we wonder what the appellants would achieve by selling the imported RCN, since the cashew kernel of Indian origin would not be accepted by the buyers abroad. In any case, there is no allegation that any of the export consignments effected by the appellant have been rejected or sent back. On the other hand, appellants have adduced proof of export as well as receipt of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 skin of the kernel, grading and primary packing by hand. Surely, this is not a process involving highly mechanized or organized sector. In such spread out job working, therefore, there may be a few aberrations or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it was not mandatory to get supporting manufacturers (jobbers ) names endorsed on the advance licences, it was permissible for the appellants to get the imported raw material processed through jobbers other than M/s. Heena International. Hence, in respect of 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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