1987 (5) TMI 145 - AT - Central Excise

Summary

Issues: Classification of imported diamonds as "worked" diamonds, mis-declaration of goods, confiscation of goods, imposition of penalty, reduction of redemption fine.

In the case before the Appellate Tribunal CEGAT, New Delhi, the appellants imported a parcel of diamonds declared as "rough diamonds" but found to contain drilled diamonds by the Customs authorities. The Customs alleged that the drilled diamonds required a specific import license and were mis-declared, as rough diamonds were duty-free while worked diamonds attracted duty. The Deputy Collector held the diamonds as "worked" under the Customs Tariff Act, leading to confiscation of goods and imposition of fines. The appellants sought to mutilate the goods under Customs supervision, which was rejected. The Collector (Appeals) upheld the Deputy Collector's decision, prompting the appeal.

The Tribunal analyzed the Customs Tariff Schedule to determine the correct classification of the diamonds, focusing on whether drilling constituted "working" of diamonds. While the statutory notes provided no clarity, reference to the Explanatory Notes of the Customs Cooperation Council Nomenclature indicated that drilling was considered a form of working. The Tribunal considered various sources, including books on diamonds, which suggested that drilling was indeed a working process. Therefore, the Customs authorities' classification of the diamonds as "worked" was deemed correct.

However, the Tribunal found the penalty imposed on the appellants unjustified due to the debatable classification issue. Consequently, the penalty was set aside, and the redemption fine was reduced to Rs. 10,000. The Tribunal upheld the confiscation of goods and the fine in lieu of confiscation. The appeal was dismissed with the modification of reducing the redemption fine.

In conclusion, the Tribunal affirmed the classification of the imported diamonds as "worked" based on the drilling process, upheld the confiscation of goods, and reduced the redemption fine while setting aside the penalty imposed on the appellants. The decision provided clarity on the classification issue and addressed the penalties imposed, ensuring a fair outcome for the appellants.