2016 (8) TMI 178 - AT - Customs

Seizure of gold jewellery - allegation smuggling from from SEEPZ SEZ area to Domestic tariff area (DTA) - proceedings were commenced and concluded without issue of a show-cause notice as prescribed in section 124 of Customs Act, 1962 - Held that - Even if the goods are subject to duty, section 12 of Customs Act, 1962 is not applicable owing to the definition of import ; the charging section is section 26 of Special Economic Zones Act, 2005 which is outside the scope of invoking by the original authority. Colloquial comprehension or usage of export or import in relation to movement of goods to and from zones cannot substitute for the statutory definitions. Recourse to penal provisions without clear understanding of legalities is the surest mode of reverting to arbitrariness and lawlessness that preceded the dawn of civilization. The activities of the units in the zones are also subject to review of annual performance by the legally constituted Approval Committee. It would be well-nigh impossible for the units to remove finished products or inputs without detection at the time of such annual review. And shortage or failure to account for inputs is visited by recovery of duty and other penal action in accordance with the Special Economic Zones Act, 2005. There are adequate safeguards in that Act without the need to indulge in misadventure under the Customs Act, 1962 that does not extend to special economic zones. There are also provisions for action in the event of illicit removal by units. The notice issued by the Development Commissioner of SEEPZ Special Economic Zone is testimony to it; proceedings thereon will suffice to safeguard the economic integrity of the nation. The proceedings against the appellants are without jurisdiction. Consequently, the confiscation and penalties are set aside. Appeal is allowed. - Decided in favor of appellant.

Summary

Issues:
1. Confiscation of diamond studded gold jewellery under Customs Act, 1962.
2. Allegations of attempted smuggling and evasion of duty.
3. Jurisdictional conflict between Customs Act, 1962 and Special Economic Zones Act, 2005.

Detailed Analysis:
1. The judgment involves appeals against Orders-in-Appeal upholding the confiscation of diamond studded gold jewellery valued at Rs. 4,99,257 under Sections 111(j) and (o) of the Customs Act, 1962. The proceedings were initiated due to the recovery of the gold pieces from an individual without valid documents while exiting a Special Economic Zone. The original authority found grounds to believe that the goods were being removed with intent to evade duty, leading to confiscation and penalties under the Customs Act, 1962.

2. The appellants argued that the jewellery belonged to a Domestic Tariff Area unit and presented evidence of ownership by another company, claiming the goods had no connection to the SEZ unit. The lower authorities failed to consider these submissions, leading to a presumption that the goods were removed from the SEZ unit. The failure to verify these claims vitiates the proceedings, as the seized goods could be a manufactured product beyond the scope of customs laws.

3. The judgment delves into the jurisdictional conflict between the Customs Act, 1962, and the Special Economic Zones Act, 2005. The Special Economic Zones Act, 2005, established a comprehensive framework for SEZ operations, superseding previous customs laws. The Tribunal emphasized that proceedings under the Customs Act, 1962 in relation to a unit in an SEZ lack jurisdiction due to the SEZ Act's overriding status. The provisions of the SEZ Act exclude the application of customs laws, and the activities in SEZs are subject to specific regulations and oversight by designated committees.

4. The judgment highlights that invoking sections 111 and 112 of the Customs Act, 1962 in this case is not appropriate, as the definition of import under the Customs Act does not encompass movements within SEZs. The SEZ Act provides for duty-free consumption subject to conditions, with mechanisms for review and penalties for violations. The Tribunal concluded that the proceedings against the appellants lacked jurisdiction, setting aside the confiscation and penalties imposed under the Customs Act, 1962.

5. In conclusion, the Tribunal allowed the appeal, emphasizing the need to adhere to the legal frameworks established by the Special Economic Zones Act, 2005, and highlighting the importance of jurisdictional clarity in customs enforcement actions within SEZs.