2013 (9) TMI 424 - AT - Customs

SEZ units - Procurement (import) of goods - authorized operation - import of old and used clothing for mutilation and for reconditioning. - Mis-declaration and Under-Valuation of Goods - Whether the goods were covered by the Letter of Approval and required for the authorized operations and can be admitted in the SEZ - Held that - The confiscation ordered by the adjudicating authority of the goods which are as per Letter of Approval was incorrect and beyond his powers to do so following the decision of SHILPA CREATION PVT. LTD. Versus COMMR. OF CUSTOMS (AIRPORT), KOLKATA 2007 (5) TMI 520 - CESTAT, KOLKATA - goods which were found as per Letter of Approval in both the containers, could not be confiscated, nor their value could be determined by the CC as the said goods were going to SEZ and proper Bill of Entry was filed with the authorities. Assessment of Value - Whether the assessment of the value, the SEZ Rules, 2006 specifically vest the jurisdiction in the Development Commissioner and the Authorized officer under Rules 27(2) and 29 respectively Held that - Commissioner of Customs has assessed the Bill of Entry filed by the appellant-assessee before KASEZ authorities which he is not empowered to do so as per the provisions of Rule 29 of SEZ Rules, 2006 - when the goods are meant for SEZ and on going to SEZ, they are not liable for Customs duty and hence any question of valuation being determined under the provisions of Section 14 of the Customs Act, 1962 does not arise. Confiscation of Goods u/s 111(m) and 111(d) Held that - the confiscation ordered by the adjudicating authority of the goods which are as per LOA is incorrect and beyond his powers to do so. Accordingly, the impugned order to that extent is set aside. Regarding goods not allowed or entitled to be imported into SEZ - Held that - the Customs authorities, on suspicion, could inspect the consignment and on the inspection, if they find any items which are not allowed or entitled to be imported into SEZ, they are within their powers to seize the goods and act in accordance with the law. In this case, since the items like leather bags, purses, jackets, and carpets, are not included in LOA granted to the appellant for import into the SEZ for authorized operations, are liable to be confiscated and we hold it so. The value of the said goods should be determined in accordance with the law and the redemption fine be imposed in proportion to the value of such goods and imposition of proportionate penalties also needs to be imposed. - Decided partly in favor of assessee.

Summary

Issues Involved:
1. Jurisdiction of Commissioner of Customs, Kandla.
2. Whether the goods are covered by the Letter of Approval (LOA) and required for authorized operations in SEZ.
3. Assessment and re-determination of the value of the imported goods.
4. Confiscation of goods and imposition of penalties.

Issue-wise Detailed Analysis:

1. Jurisdiction of Commissioner of Customs, Kandla:
The appellants argued that the Commissioner of Customs, Kandla, lacked jurisdiction over the issues raised in the Show Cause Notice, namely, whether the goods are covered by the LOA and required for authorized operations, and the assessment of the value. They contended that under the SEZ Rules, 2006, the jurisdiction for these issues lies with the Development Commissioner and the Authorized Officer. The SEZ Act and Rules have an overriding effect over other enactments, as provided in Sections 51 and 52 of the SEZ Act. Rule 27(2) specifies that any doubt regarding whether goods are required for authorized operations should be decided by the Development Commissioner. Rule 29 mandates that the Bill of Entry is filed with the Authorized Officer of SEZ, not with the customs authority under Section 46 of the Customs Act, 1962. Therefore, the Customs Commissioner had no jurisdiction to confiscate the goods or re-determine their value.

2. Whether the Goods are Covered by the LOA and Required for Authorized Operations in SEZ:
The appellants argued that the imported goods were covered by the LOA and required for authorized operations. The LOA allowed the import of used worn clothing for mutilation and reconditioning. The Show Cause Notice incorrectly assumed that the goods, being already sorted, did not require further processing. The Commissioner admitted that it was difficult to prove legally that the importer would not further segregate the goods, indicating that the goods were as per the LOA and required for authorized operations. The confiscation of goods under Section 111(d) of the Customs Act, 1962, was thus erroneous.

3. Assessment and Re-determination of the Value of the Imported Goods:
The appellants contended that the Commissioner had no jurisdiction to assess or re-determine the value of the goods. Even on merits, the re-determination was untenable. The Commissioner ignored data of contemporary imports and relied on a valuation report without allowing cross-examination. The SEZ Rules mandate that the assessment of the Bill of Entry is the function of the Authorized Officer of SEZ, not the Customs Officer. Goods meant for SEZ are not liable to customs duty, making the valuation under Section 14 of the Customs Act, 1962, irrelevant. The Tribunal's decision in Shilpa Creation Pvt. Ltd. supported this view.

4. Confiscation of Goods and Imposition of Penalties:
The lower authorities confiscated goods and imposed penalties based on the finding of undeclared items like leather bags, purses, jackets, and carpets in the containers. The appellants argued that the goods declared as per the LOA could not be confiscated. The Tribunal agreed, setting aside the confiscation of goods covered by the LOA. However, it upheld the confiscation of undeclared items not covered by the LOA, allowing the Customs authorities to inspect and seize such goods. The value of these goods should be determined, and proportionate penalties imposed.

Conclusion:
The Tribunal concluded that the Commissioner of Customs, Kandla, exceeded his jurisdiction by adjudicating issues meant for the Development Commissioner under the SEZ Rules. The confiscation of goods covered by the LOA was set aside, while the confiscation of undeclared items was upheld. The lower authorities were directed to release containers with goods declared as per the LOA and to seize only those goods not allowed for import into the SEZ. The appeals were disposed of accordingly.