Legal principle

An advance authorisation holder who diverts duty-free imports to unauthorised units and cannot produce true and proper accounts cannot claim compliance with the exemption notification, while a customs broker who merely transported goods on the client's directions cannot be penalised unless connivance and an intention to evade Government revenue are proved.

Court decision

Partly in favour of the Department: C.M.A.(MD)Nos.571 and 572 of 2020 (against Shri Regin.P and M/s.Regin Exports) were allowed — the CESTAT order dated 17.09.2018 was set aside and the Commissioner's order dated 05.12.2017 (referred to as imposing fine, with duty and interest) was confirmed, recoverable with interest, to be paid within six weeks. However, C.M.A.(MD)Nos.573 and 574 of 2020 against the customs brokers were dismissed — the CESTAT order was confirmed, the Court holding the penalty on M/s.Daniel and Samuel Logistics and M/s.Zion Logistics not justifiable.

Facts

M/s.Regin Exports, a Kanyakumari proprietorship processing raw cashew nuts, held seven Advance Authorisations (March–May 2016) to import raw cashew nuts (RCN) duty-free under Notification No.18/2015-CUS dated 01.04.2015, with an obligation to export the processed kernels. It imported 3073.331 Mts of RCN valued at Rs.31,85,42,558/- through 19 bills of entry without payment of duty between 01.04.2016 and 26.07.2016. Acting on secret information of diversion, DRI searched the premises on 22.7.2016 and later dates, found no imported stock at the authorised units, and seized only 429.2 Mts valued at Rs.3,74,27,160/-; investigation showed 2801.47 Mts diverted to 16 unauthorised units/commission agents of M/s.Regin Agency and 225 Mts sold in the local market. The Commissioner of Customs by order dated 05.12.2017 ordered confiscation of 429.207 Mts, confirmed customs duty of Rs.2,71,69,335/- with interest, imposed Rs.25 lakhs penalty on Mr.Regin and Rs.5 lakhs each on customs brokers M/s.Zion Logistics and M/s.Daniel and Samuel Logistics. CESTAT, Chennai allowed the respondents' appeals by common final order dated 17.09.2018, and the Department appealed to the High Court under Section 130 of the Customs Act, 1962.

Key provisions

• Section 130, Customs Act, 1962 —  Appeal to High Court
• Regulation 11, Customs Brokers Licensing Regulations, 2018 — Change in constitution of any firm or a company
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty