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2020 (3) TMI 492 - AT - CustomsSmuggling - Diamond of mixed origin - Prohibited item or not - allegation that the diamonds were from Marange mines of Zimbabwe and were not permitted to be imported in India as the KP Certificates accompanying the consignments were not issued in accordance with the restrictions imposed by the KP Committee from time to time - Confiscation - quantum of redemption fine and penalties. HELD THAT - Though the revenue had disputed the various import documents and the KP Monitor Certificates, however the adjudicating authority upheld the validity of records and documents. He however held that since the diamonds has been procured by M/s C.D. Jewels from Zimbabwe after 17.11.2010, hence the goods are prohibited goods and thus liable for confiscation and not allowed as per the Office Memorandum dt. 19.08.2011 and subsequent OM issued by the Ministry of Commerce. We observe that none of the KPC Certification has been disputed by the adjudicating authority. From the records it is appearing that M/s C.D Jewels, UAE had placed orders on MBADA Mines, Zimbabwe for supply of rough diamonds prior to 17.11.2010 and in pursuance of same MBADA obtained KPC No. ZW 000114 dt. 12.11.2010. The KPC was duly issued by the Zimbabwean Authorities for diamond in question in support of C.D. Jewels. There is no reference of any date as to from which the diamonds from Marange area are to be allowed. It does not contain the date of excavation, sourcing or purchase date of diamonds by any intermediary or the first buyer from Marange. It simply states that if the goods are accompanied by KP Monitor certificate the goods of Marnage Origin are to be permitted for exports. The most important aspect to be observed that the intention of KPC Certification and the office memorandum issued by the Ministry of the commerce was to stop the trade of conflicting diamonds - Once the diamonds were KPC Certified and such certificates were not repudiated by the KPC organisation, in that case the goods cannot be prohibited for trade. Consequentially the impugned goods cannot be termed as prohibited goods and will not fall into the category of smuggled goods. The fact of KPC Certificates which holds that the goods were KPCC Compliant and the aforesaid documents unequivocally proves that the diamonds were procured by CD jewels before 17.11.2010. Unless and until such procurement was in process, there would not have been any KP certification and even the certificates show the buyer of goods as CD Jewels. Thus when the contracting parties and the authorities concerned with the certification process conclude that the procurement was prior to 17.11.2010, the same cannot be questioned as all these documents stands accepted by the adjudicating authority as far as their veracity is concerned. In such case only on the ground that the invoice was issued to M/s CD jewels after 17.11.2010, the same cannot be a ground to hold that the diamonds were banned from importation. In the present case though the KP certificates describes the diamonds as of mixed origin but since the diamonds are accompanied by required KP certificates, there is no reason to hold the diamonds as having been imported in contravention of import ban - As far as the authenticities of the documents are held to be undisputed by the adjudicating authority, the facts stated therein are also to be accepted. The Appellant in their appeal has also given detailed reply to the objections of the investigating authority regarding transport of goods and invoice and the same stands accepted by the adjudicating authority. In view of such facts, the impugned goods being held to be KPC Compliant and certified to be procured by M/S C.D. Jewels before 17.11.2010 cannot be confiscated - For the same reason the penalties imposed upon M/s SRDSIL and Shri Asit Mehta are also not sustainable - Since the confiscation of goods and penalties itself is held to be not sustainable, the appeal filed by the revenue for enhancement of redemption fine against release of impugned goods and penalties merits rejection. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Legitimacy of the Kimberley Process Certificates (KPC) for the imported diamonds. 2. Determination of the procurement date of diamonds. 3. Compliance with the Office Memorandum dated 19.08.2011 and 24.11.2011. 4. Confiscation of diamonds and imposition of penalties under the Customs Act, 1962. 5. Validity of the adjudicating authority's interpretation of "procure" and "sale." 6. Enhancement of redemption fine and penalties by the revenue. Issue-wise Detailed Analysis: 1. Legitimacy of the Kimberley Process Certificates (KPC) for the imported diamonds: The adjudicating authority upheld the validity of the KPCs issued by the Zimbabwean and UAE authorities. The KPCs identified the diamonds and the buyer (M/s CD Jewels) before 17.11.2010, confirming the legitimacy of the certificates. The certificates were not repudiated by the KPC organization, thus the diamonds were considered conflict-free and compliant with the KPCS. 2. Determination of the procurement date of diamonds: The adjudicating authority incorrectly equated the date of the sale invoice (20.01.2011) with the procurement date. The term "procure" was interpreted broadly to include any act towards obtaining the goods. Evidence showed that M/s CD Jewels had placed orders and obtained KPCs before 17.11.2010, indicating that the procurement process started before the critical date. The procurement was validated by various documents, including letters from MBADA Diamonds and KP Monitor, confirming the diamonds were acquired before 17.11.2010. 3. Compliance with the Office Memorandum dated 19.08.2011 and 24.11.2011: The OM dated 24.11.2011 allowed the import of rough diamonds from Marange region if accompanied by valid KPCs, without any date restrictions. Since the diamonds were supported by undisputed KPCs and the procurement process was initiated before 17.11.2010, the imports were compliant with the OMs. The interpretation by the adjudicating authority that the goods were prohibited based on the sale invoice date was incorrect. 4. Confiscation of diamonds and imposition of penalties under the Customs Act, 1962: The confiscation of 3,53,410 carats of diamonds under Section 111 (d), (m), and (o) of the Customs Act, 1962, and the imposition of penalties under Section 112 (a) and Section 114AA on M/s SRDSIL and its director were deemed unsustainable. The diamonds were not prohibited goods as they were KPC compliant and procured before the critical date. Consequently, the confiscation and penalties were set aside. 5. Validity of the adjudicating authority's interpretation of "procure" and "sale": The term "procure" was interpreted in its broad sense, meaning to obtain by any means, which includes placing an order. The adjudicating authority's narrow interpretation equating "procure" with the date of the sale invoice was flawed. The procurement process was initiated before 17.11.2010, as evidenced by the KPCs and supporting documents, thus the diamonds were not procured post-17.11.2010. 6. Enhancement of redemption fine and penalties by the revenue: The revenue's appeal for enhancement of redemption fine and penalties was dismissed. Since the confiscation of goods and penalties were found unsustainable, the request for enhancement did not survive. The appeal by the revenue was thus rejected. Conclusion: The appeals filed by M/s Surat Rough Diamond Sourcing (India) Ltd. and its director were allowed, setting aside the confiscation and penalties. The diamonds were deemed compliant with the KPCS and procured before 17.11.2010. The revenue's appeal for enhancement of fines and penalties was dismissed. The judgment emphasized the broad interpretation of "procure" and the legitimacy of the KPCs in determining the legality of the diamond imports.
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