PER : M. M. PARTHIBAN

This appeal has been filed by M/s GTN Engineering (India) Limited, Hyderabad (herein after, referred to, as ‘the appellants’, for short), assailing the Order-in-Original No. 29/SJ(29)/PCC(ADJN.)/MUMBAI/2023-24 dated 20.12.2023 (herein after, referred to as ‘the impugned order’) passed by the Principal Commissioner of Customs (Adjudication), Mumbai, Maharashtra.

2.1 The brief facts of the case are that the appellants inter alia, are engaged in the manufacture of ‘industrial valves and its components’ for export to various counties such as Singapore, USA, Canada, Gulf countries etc., for which they import raw materials such as forged body, springs, bearing, pad stud and other components under ‘Advance Authorisation’ scheme of the Foreign Trade Policy (FTP) on the basis of Advance Authorisation Licenses/Scrips issued by the Directorate General of Foreign Trade (DGFT). For this purpose, the appellants are holding the Import Export Code (IEC) No. 0903003953. During the period 24.10.2017 to 24.09.2018, the appellants had imported the said raw materials in 175 Bills of Entries (B/Es) by availing the import duty/IGST exemption benefit vide Notification No.18/2015-Customs dated 01.04.2015 as amended. The imported goods were assessed at the port(s) of import and the proper officers of customs have allowed clearances of the imported goods by extending the duty exemption claimed by the appellants under the above notification dated 01.04.2015 on the strength of nineteen (19) Advance Authorisations submitted by the appellants.

2.2 DGFT vide Notification No.33/2015-2020 dated 13.10.2017 had amended the Policy provisions contained in paragraph 4.14 of the FTP 2015- 2020, wherein imports under Advance Authorization exempted from IGST were subjected to ‘pre-import condition’. Consequently, Central Board of Excise & Customs (CBIC) vide Notification No.79/2017-Customs dated 13.10.2017 amended the Notification No.18/2015-Customs dated 01.04.2015, whereby goods imported under Advance Authorisation are allowed duty exemption from IGST, on the condition that, if only the goods are first imported and the same are used as inputs in the manufacture of final products, which are later exported.

2.3 On the basis of intelligence developed by Directorate of Revenue Intelligence, Hyderabad Zonal Unit (DRI), import and export transactions undertaken by the appellants during the period 13.10.2017 to 09.01.2019 were obtained from them and detailed verification was conducted by DRI. The Department interpreted that the quantity of imported raw material physically incorporated in the manufactured product, which were later exported, can be verified only when the size of the exported product and the number of input components (size-wise) which went into the manufacture of such exported product are known. On the basis of verification conducted, DRI had noticed that the exports of industrial valves before the import of forged body under components in certain cases, and that there was difference between the number of components imported prior to export of similar industrial valves. Therefore, the Department had concluded that there is no one-to-one correlation of usage of imported items by the appellants as stipulated in the original condition attached to the advance licences. On the above basis, the Department issued Show Cause Notices (SCN) dated 24.10.2019 proposing for demand of differential duty of Rs.5,45,78,477/- under Section 28 (1) of the Customs Act, 1962 along with interest; confiscation of imported goods under Section 111 (o) ibid and for imposition of penalty on the appellants. The said SCN was adjudicated by the learned Principal Commissioner of Customs vide impugned order dated 20.12.2023, in confirmation of the adjudged duty demands for an amount of Rs. 5,44,52,019/- along with interest, by taking into account the amount of Rs.1,26,458/- already paid by the