2018 (4) TMI 784 - AT - Customs

Smuggling - Gold - the jewellery made out of imported gold bars having not been exported out of country, the appellant as a nominated import agency, is held liable for such violation - Held that - the appellant imported duty free gold with a condition that same will be used in the manufacture of jewellery for export. The export of jewellery and foreign exchange realization on such export are crucial for fulfillment of obligation s of duty free import. The appellant in fact is the Bank who arranged the foreign exchange remittance - gold imported has been put to use for intended purpose i.e. manufacture of jewellery and thereafter duly disposed of with permission from competent Development Commissioner - The Development Commissioner apparently on consideration of condition and restriction imposed on appellant allowed such clearance to DTA. That being the case, there is no question of duty liability on the imported gold on the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Violation of import conditions regarding duty-free gold bars import and export of finished jewelry, liability for duty foregone, penalty under section 114A of the Customs Act, 1962, confiscation of imported gold bars, redemption fine imposition, contestation on limitation, differentiation in proceedings against EOU and appellant, obligation fulfillment under exemption notification, duty liability on imported gold, disposal of jewelry, fulfillment of duty-free import obligations, deemed export status, duty-free procurement eligibility for EOU.

Analysis:
The judgment by the Appellate Tribunal CESTAT New Delhi involved a case where the appellant, a government-owned bank, imported duty-free gold bars for supply to a jewelry manufacturer. The dispute arose as the jewelry made from the imported gold was not exported, leading to the appellant being held liable for violation. The original authority imposed a Customs duty demand, penalty under section 114A of the Customs Act, confiscation of gold bars, and a redemption fine. The appellant argued that the gold bars were accounted for and supplied to a 100% EOU jewelry maker, cleared to DTA on foreign exchange remittance, fulfilling the positive NFE requirement and deemed export status under the Foreign Trade Policy 2009-2014. The proceedings against the EOU were based on different grounds related to jewelry disposal. The appellant contended that they fulfilled the import conditions and should not be held liable for duty as the gold was used for its intended purpose and disposed of with approval.

The Tribunal noted that the duty-free gold was used for manufacturing jewelry, which was then cleared to DTA against foreign exchange remittance by the EOU, with the appellant facilitating the remittance. The Development Commissioner approved the clearance to DTA, considering it deemed export. As the gold was used for its intended purpose and disposed of with proper authorization, the Tribunal held that the duty liability could not be imposed on the appellant. The judgment emphasized that EOU was eligible for duty-free procurement, and in this case, the gold bars were supplied for the intended purpose and disposed of with competent authority approval, absolving the appellant of duty liability. Consequently, the impugned order was set aside, and the appeal was allowed.