2013 (8) TMI 433 - AT - Customs

Smuggling of goods - Cut & polished diamonds and Gold jewellery recovered from the baggage/person - Accounting procedures penalty u/s 112 r.w.117 - Held that - accounting procedure adopted by the assessee was proper and correct in the normal course of business and goods were not held liable for confiscation - no penalty was warranted under Section 112 r.w. Section 117 - The method of accounting had been explained by the employees of the said company in their various statements - It was stated that the system of accounting of stock by them was being followed by them since long and that even income tax authorities did not take any objection against this procedure - the allegation that they were having possession of unaccounted diamond was based on method of accounting adopted by them The system was recognised in Gem & Jewellery trade. The Income Tax authorities which were more acquainted about the accounting procedure had also stated that the accounts of assessee were found to be correct and complete considering the submissions of the assessee and also acceptance method of accounting of revenue in past assessment years and in original assessment years - in all the case diamonds polished ones were entered in the next year - Income Tax office had also given its finding that no material had been found by any authority indicating that the assessee had made any advance for illegally importing diamonds - the diamonds recovered by the customs authorities and paid the customs duty as per the order of Settlement Commission - Thereafter it was found that accounting procedure followed by the assessee were proper and legally correct and there is no discrepancy in the stock of diamonds. Smuggling of goods Held that - Proceedings of confiscation of diamonds were dropped - No evidence had been brought on record by the department which establish that the assessee was involved in the activity of illegal import or smuggling of diamonds no evidence on record to establish that any dutiable or prohibited goods were attempted to be illegally imported or were removed from the customs area to invoke Section 111(d) or 111(j) Decided in favor of assesse.

Summary

Issues Involved:
1. Confiscation of diamonds and gold jewelry recovered from a passenger.
2. Confiscation of diamonds seized from the office premises of M/s. I.P. Patel & Co.
3. Imposition of penalties on M/s. I.P. Patel & Co. and its partners.

Issue-wise Detailed Analysis:

1. Confiscation of Diamonds and Gold Jewelry Recovered from a Passenger:
A show-cause notice was issued to confiscate 5877 carats of cut and polished diamonds and 97 grams of gold jewelry recovered from a passenger arriving from Dubai. The Settlement Commission settled the case with customs duty paid, partial waiver of redemption fine and penalty, and granted full immunity from prosecution to the involved parties. This matter reached finality with the Settlement Commission's order.

2. Confiscation of Diamonds Seized from the Office Premises of M/s. I.P. Patel & Co.:
The Air Intelligence Unit seized 34147.66 carats of cut and polished diamonds from the office premises of M/s. I.P. Patel & Co. The department alleged these diamonds were smuggled into India and liable for confiscation under Section 111(d) & 111(j) of the Customs Act, 1962. The adjudicating authority dropped the proposal for confiscation, concluding that the evidence did not support the allegations of smuggling. The accounting practices of M/s. I.P. Patel & Co., which included the use of 'jangads' for brokers, were found to be in line with industry standards and previously accepted by the Income Tax department.

3. Imposition of Penalties on M/s. I.P. Patel & Co. and its Partners:
The adjudicating authority imposed penalties of Rs. 1,00,000 on M/s. I.P. Patel & Co. and Rs. 25,000 on Shri Mahesh Savani, partner of M/s. I.P. Patel & Co., under Section 112 read with Section 117 of the Customs Act, 1962. However, the Tribunal found that since the accounting procedures were proper and no illegal import or smuggling was established, the penalties were unwarranted. The Tribunal set aside the penalties imposed on M/s. I.P. Patel & Co. and Shri Mahesh Savani.

Conclusion:
The Tribunal concluded that the confiscation proposal for the 34147.66 carats of diamonds was to be dropped, and the penalties imposed on M/s. I.P. Patel & Co. and Shri Mahesh Savani were set aside. The appeal filed by the revenue was dismissed, and the appeals filed by the assessees were allowed.