2018 (10) TMI 908 - AT - Customs

SEZ Unit - smuggling Gold - Confiscation - penalty - Held that - There is no dispute about illicit transaction of gold bars as well as gold jewellery between M/s D. Jewel and M/s Choksi Vachhraj Makanji that the gold bars imported by M/s D. Jewel in their SEZ Unit were removed without any documentation and without following the procedure. The SEZ is area which is considered as foreign territory for all the purpose of taxation, duties etc. therefore, the goods cannot remove into and out side SEZ freely. The goods imported by SEZ are meant for either export as such or for manufacture of export goods. The appellant knowingly removed the gold bars of SEZ without proper procedure. The excuse given by the appellant is that there is an urgency to execute the export order, however, the law does not provide any relaxation for any reason, therefore, appellants have admittedly violated the provision of SEZ Act and Rules as well as the provision of Customs Act. The appellant could not get any relief only by mentioning the commercial reason, if the excuses given by the appellant is accepted it would lead the situation whereby giving any excuse whole scheme of SEZ can be planted. Penalty on partners - Held that - High Court of Gujarat in the case of CCE, Vs. Jai Prakash Motwani (Supra) categorically held that when the penalty on partnership firm is imposed no separate penalty should be imposed on the partner as a partnership firm is consist of partners - separate penalty on the partner should not be imposed. Penalty on employees - Held that - They are mere employees working under the direction of their employer firm - penalty not justified. Appeal allowed in part.

Summary

Issues:
1. Smuggling of gold bars and jewellery from SEZ Unit
2. Violation of SEZ Act, Customs Act, and RBI guidelines
3. Confiscation and penalty imposition
4. Dispute over penalties on partners and employees
5. Appeal for absolute confiscation by Revenue

Issue 1: Smuggling of Gold Bars and Jewellery from SEZ Unit

The case involved M/s D Jewel, an SEZ Unit, engaging in the manufacture of various jewellery. The appellant procured duty-free gold bars and diamonds for production. However, an interception by DRI officers revealed an attempt to transfer gold bars and jewels to another entity, M/s Choksi Vachhraj Makanji, without following proper procedures. The Commissioner of Customs, Surat, issued a show-cause notice proposing confiscation of the goods under Customs Act sections 111 and 113(d). The appellant argued urgency in fulfilling export orders but admitted procedural lapses. The Tribunal found clear violations of SEZ Act, RBI guidelines, and Customs Act due to unauthorized removal of goods without documentation.

Issue 2: Violation of SEZ Act, Customs Act, and RBI Guidelines

The appellant contended that the goods' transfer was due to urgency and lacked malicious intent, with the jewellery brought to SEZ Unit balancing the gold removed. However, the Tribunal emphasized that SEZ regulations prohibit free movement of goods without proper procedures, regardless of commercial reasons. The violation of SEZ Act, RBI guidelines, and Customs Act was evident, leading to the dismissal of the appeals by M/s D Jewel and M/s Choksi Vachhraj Makanji & Company.

Issue 3: Confiscation and Penalty Imposition

The Commissioner ordered confiscation of gold bars and jewellery, with redemption fines imposed. Penalties were also levied on the appellants under the Customs Act. The Tribunal upheld the confiscations due to clear violations of laws but set aside penalties on partners and employees, citing a Gujarat High Court judgment that prohibits separate penalties on partners of a penalized partnership firm.

Issue 4: Dispute Over Penalties on Partners and Employees

The appellant argued against penalties on partners and employees, emphasizing their roles as employees without personal gain. The Tribunal, following legal precedents, concluded that separate penalties on partners of a penalized partnership firm were unwarranted. Penalties on employees were deemed unjustified and set aside based on their subordinate roles.

Issue 5: Appeal for Absolute Confiscation by Revenue

The Revenue sought absolute confiscation of the goods, citing smuggling and Customs Act violations. However, the Tribunal, referencing a previous decision, declined the appeal for absolute confiscation, stating that the adjudicating authority's discretion in not ordering absolute confiscation should not be interfered with.

In conclusion, the Tribunal dismissed the appeals by M/s D Jewel and M/s Choksi Vachhraj Makanji & Company, allowed the appeals by certain individuals, and dismissed the Revenue's appeal for absolute confiscation. The judgment highlighted the importance of adherence to SEZ regulations, Customs Act provisions, and RBI guidelines in cross-border transactions to prevent unauthorized movements of goods and ensure compliance with legal requirements.