2016 (8) TMI 924 - AT - Customs

Imposition of penalty - Section 112(b) of Customs Act, 1962 rough diamonds Kimberley Process Certificate seizure confiscation Held that - the appellants had brought the subject Rough Diamonds from Kenya illicitly and the same were recovered and seized from them - penalty imposable under section 112(b) of the customs act,1962. Quantum of penalty Held that - the subject Rough Diamonds should be valued by two experts, one chosen by the appellants and one by the Revenue from a panel of experts nominated by GJEPC and these experts should value the subject Rough Diamonds as per the value prevalent at the time of seizure of the subject rough diamonds. On the basis of the said value fixed by the experts, and the role of the appellants, the quantum of penalty should be re-quantified matter remanded to original authority for quantification of penalty application disposed off decided partly in favor of appellant.

Summary

Issues Involved:
1. Involvement in smuggling of Rough Diamonds.
2. Validity of the seizure Panchnama.
3. Retracted statements and their credibility.
4. Jurisdiction of DRI Ahmedabad and Commissioner of Customs, Ahmedabad.
5. Valuation of the seized Rough Diamonds.
6. Quantum of penalty imposed under Section 112(b) of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Involvement in Smuggling of Rough Diamonds:
The appellants, Shri Jorabhai and Shri Premabhai, were intercepted with 48637.525 carats of Rough Diamonds of Zimbabwe origin valued at ?10,16,68,077/-. The diamonds were not accompanied by the mandatory Kimberley Process Certificate, leading to their seizure. The appellants were alleged to have smuggled the Rough Diamonds through Mumbai International Airport and were intercepted in Surat while attempting to sell them. The appellants contended their innocence, arguing that the diamonds were not seized from them and that their statements were recorded under duress.

2. Validity of the Seizure Panchnama:
The seizure Panchnama dated 22.4.2011, written in Gujarati, documented that the appellants admitted to bringing the Rough Diamonds from Nairobi without declaring them at the airport. The Panchnama was signed by the appellants, Panchas, and DRI officers, and the appellants acknowledged receiving a copy. During cross-examination, the Panchas did not contradict the Panchnama, supporting its validity.

3. Retracted Statements and Their Credibility:
The appellants retracted their statements before the Chief Judicial Magistrate, Surat, claiming they were coerced. However, their bail applications were rejected due to false averments. Independent third-party statements under Section 108 of the Customs Act corroborated the appellants' involvement in the smuggling and sale attempts of Rough Diamonds, further undermining the credibility of their retraction.

4. Jurisdiction of DRI Ahmedabad and Commissioner of Customs, Ahmedabad:
The appellants questioned the jurisdiction of DRI Ahmedabad and Commissioner of Customs, Ahmedabad, as the goods were allegedly smuggled through Mumbai International Airport. However, this issue was not pressed further by the appellants during the proceedings.

5. Valuation of the Seized Rough Diamonds:
The appellants argued that the valuation of the Rough Diamonds was not conducted properly, leading to an inflated penalty. Initially, the diamonds were valued by a Customs Appraiser, but the expertise of the appraiser was questioned. A subsequent revaluation on 06.08.2015 by two experts nominated by GJEPC valued the diamonds at ?9,16,05,987.54. The Tribunal noted that the valuation should reflect the value at the time of seizure, considering the exchange rate then. It was directed that the Rough Diamonds be revalued by two experts, one chosen by the appellants and one by the Revenue, from a panel nominated by GJEPC.

6. Quantum of Penalty Imposed under Section 112(b) of the Customs Act, 1962:
The penalty of ?1 Crore each imposed on the appellants was questioned due to the improper valuation of the Rough Diamonds. The Tribunal acknowledged that while the penalty is not directly proportional to the value of the seized goods, the value does influence the quantum of the penalty. The matter was remanded to the original adjudicating authority to re-determine the value of the Rough Diamonds and, consequently, the quantum of penalty based on the revaluation by independent experts.

Conclusion:
The impugned order-in-original was upheld except for the quantum of penalty, which was to be re-determined by the original adjudicating authority following the revaluation of the Rough Diamonds as per the Tribunal's directions. The appeals were partly allowed to the extent of redetermination of value and quantum of penalty, and the miscellaneous applications were disposed of accordingly.