2019 (11) TMI 687 - AT - Customs

Provisional release of gold stock in trade - Advance Authorisation Scheme - Exhibition Export Scheme - no reason given for refusal to release the goods provisionally - principles of natural justice - HELD THAT - No cogent reason given for refusal to release the goods provisionally. Rather the impugned order is non-speaking and cryptic. This is clearly a case of non exercise of discretion vested in him fairly, by the Revenue Authority, rendering the provision of Sec.110A of the Act, practically otiose. The Department has not adduced any evidence to contradict the fact that the same jewellery has been imported by the appellant which had been exported for exhibition purpose - At this juncture, we are only examining whether the import of the subject seized gold jewellery was in violation of any of the provision of Customs Act, 1962 and Import-Export Policy of 2015-2020 or whether it was a legitimate re-import of exported goods? It is found that the Assessing Officer after scrutiny of all the relevant documents and on satisfaction has allowed the clearance of re-imported gold jewellery and had endorsed that the imported gold jewellery was same which had been exported under the two shipping bills - the Department has not adduced any evidence to establish that the re-imported gold jewellery is not which have been exported by the appellant for exhibition purpose - also there might have been certain violations in following the procedure for proper importation of these goods, however, same will also not make the Indian made gold jewellery as prohibited goods as per the provision of Customs Act, 1962 read with the provisions of the Import-Export Policy 2015-2020. It is also matter of record that documents as required for re-import of the exported goods as provided under Notification No. 45/2017 dated 30 June 2017, read with the clarification No. 21/2019 dated 24 April 2019 is that the goods should be same as has been exported for the exhibition purpose and in the present case it is not mentioned by the Department that re-imported goods are not the same which have been exported vide above-mentioned two shipping bills for the exhibition purpose - the appellant has a strong case for provisional release of re-imported jewellery as per the provisions of Section 110A of Customs Act, 1962. It is also a matter of record that the main Karigar of the appellant who was supervising manufacturing of gold jewellery has categorically mentioned that from the imported gold bars he has made jewellery of 7 kg. and certain other jewellery and certain quantities were work-under progress in the form of gold, dust and other pieces of jewellery at different stages of manufacturing - also the appellant have also made certain purchases of the gold from the local market and for which he has necessary purchase invoices and this gold has also been used for manufacture of gold jewellery. Under the facts and circumstances, the appellant is an established business concern registered with the Customs dept, DGFT, Income Tax, GST, etc. Due to seizure of almost the whole working capital (Goods, raw material, W.I.P.), for over 6 months, the appellant is facing difficulty of livelihood, it s workmen, and others too. The appellant is also incurring regular fixed cost or establishment cost, unable to fulfill its time-bound export obligation, resulting in irreparable loss and civil consequences. The balance of convenience lies in allowing provisional release in favour of the appellant. The provisional release of goods allowed on certain terms - appeal allowed.

Issues Involved:
1. Provisional release of seized goods.
2. Compliance with Advance Authorisation Scheme.
3. Compliance with Exhibition Export Scheme.
4. Legality of the seizure by DRI.
5. Procedural lapses and their impact on the legality of the goods.
6. Applicability of legal precedents.
7. Balance of convenience and irreparable loss to the appellant.

Detailed Analysis:

1. Provisional Release of Seized Goods:
The appeal challenges the order dated 04.10.2019, which rejected the appellant's request for provisional release of seized goods. The appellant argued that the refusal violated Section 110A of the Customs Act, which allows for the release of goods pending adjudication upon taking a bond with security and conditions. The tribunal found the impugned order to be non-speaking and cryptic, indicating a failure to exercise discretion fairly.

2. Compliance with Advance Authorisation Scheme:
The appellant, a manufacturer and exporter, operates under the Advance Authorisation Scheme, allowing the import of up to 1,000 kg of gold. The appellant maintains proper records audited under various tax laws. Out of the last import of 50 kg of gold, 31.1 kg was detained by DRI. The tribunal noted that 22 kg of the seized gold bars matched the import documents, and the appellant had proper documentation for the remaining gold, purchased domestically.

3. Compliance with Exhibition Export Scheme:
The appellant also operates under the Exhibition Export Scheme, which mandates prior approval from the Gems & Jewellery Export Promotion Council for participation in exhibitions abroad. The appellant had exported jewellery for exhibitions and re-imported unsold items, which were seized by DRI. The tribunal found that the appellant had complied with the necessary procedures for re-import, and the seized jewellery was the same as that exported.

4. Legality of the Seizure by DRI:
The DRI seized the goods on allegations of procedural lapses. However, the tribunal found no evidence to contradict the appellant's claim that the re-imported jewellery was the same as exported. The tribunal noted that the seizure at the factory premises was not justified, as the appellant had all the legal documents for the possession of the goods.

5. Procedural Lapses and Their Impact on the Legality of the Goods:
The tribunal acknowledged minor procedural lapses but stated that these did not render the goods prohibited. The appellant had followed the laid-down procedures and standard operating procedures for re-import, barring a few minor lapses. Therefore, the consignment could not be equated with prohibited goods.

6. Applicability of Legal Precedents:
The tribunal distinguished the present case from the rulings cited by the revenue, such as Malabar Diamond Gallery (P) Ltd. vs. Addl. Dir. Gen., DRI, and Jagdev Damodaran vs. D. C. Customs, noting that the facts were entirely different. The tribunal relied on rulings such as M. D. Overseas Ltd. vs. Union of India and Mink Tradecom Pvt. Ltd. vs. Union of India, which supported the appellant's case for provisional release.

7. Balance of Convenience and Irreparable Loss to the Appellant:
The tribunal noted that the appellant is an established business concern facing significant hardship due to the seizure of its working capital. The balance of convenience lay in favor of allowing provisional release to prevent irreparable loss and civil consequences. The tribunal allowed provisional release on the condition of a bond for the full value of the seized goods and a bank guarantee of ?1.25 crores.

Conclusion:
The appeal was allowed, and the impugned order rejecting provisional release was set aside. The revenue authority was directed to release the detained/seized goods upon the appellant fulfilling the stipulated conditions. The tribunal emphasized that the appellant had a strong case for provisional release under Section 110A of the Customs Act, 1962.

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