2024 (3) TMI 1295 - AT - Customs

Value addition - Duty-free import of gold - Replenishment of gold under the replenishment scheme from DIL against export of gold jewellery - Not fulfilled the mandatory requirements - balance quantity of gold supplied - duty demand - confiscation - Penalty u/s 114A - limitation for adjudication - Violation of the conditions of Notification No. 57/2000-Cus. i) Whether or not the subject kadas were manufactured by a fully mechanized process as declared by BL/JR in the shipping bills. ii) Whether or not the claim made by BL/JR that the value addition was 2.05% of the export FOB value, is correct? HELD THAT - Gold has been supplied by DIL by way of replenishment and there is no allegation that matching quantum of gold has not been exported as required under Notification No. 57/2000-Cus. In the said Notification, in the second proviso, it clearly provides that Nominated Agency supplying gold to the exporter is liable only for difference (shortage) between the quantity issued and that contained in the exported jewellery or articles. We further find that the value addition norm was required to be checked by the proper officer of customs on presentation of goods with the export documents. Admittedly, all the shipping bills along with the export invoices were approved by the proper officer of customs on being satisfied as to the declarations and requirements. Thus, we find that no case of violation of the conditions of Notification No. 57/2000-Cus is made out in the facts and circumstances. Thus, we hold that the Appellant DIL has not violated the provisions of Customs Act read with Notification No. 57/2000-Cus. From the facts on record and the evidence recorded, it is evident that the jewellery in question which have been exported, was manufactured by the said job worker by fully mechanised process. The Govt. approved jewellery valuers, who are experts, have also certified so. Further, the said valuers have not stood by their statements recorded during investigation. The Chartered Engineer has also certified the process as fully mechanized. Therefore, the value addition here would be 2% and not 3.5% as held in OIO. Value addition - I t is obvious that the interpretation of DGFT Authority would prevail over Customs Authority, which has also been admitted by DGEP in their circular (quoted supra). Therefore, if that norm is followed instead of the calculation method adopted by the Revenue, the requirement of Notification No. 57/2000 is met, in as much as, the conditions for duty-free imports stand fulfilled and therefore, there is no short levy. Evidential value of email clarification - It is also noticed that this mail has come in response to DIL s letter dt.09.10.2020. Since it is an official mail, it cannot be held as having no authority to clarify as indicated in the said mail. If Revenue had any doubt about genuineness of this mail, they could have cross-checked from the DGFT as regard bonafide of this mail. It is obvious that the original Circular dt.27.09.2019 also, in Para 3, has clarified that for the purpose of value addition, inputs in B in Para 4.38 means the duty-free (either on advance or replenishment basis). Therefore, it would be obvious that the term dutyfree used here in conjunction with either on advance or replenishment basis, would obviously mean imported inputs or in other words, what has been clarified in email is inputs imported duty free. Therefore, the objection taken by the Revenue on this ground does not hold any substance. Further, we have held that the process of manufacture is fully mechanised, we find that the wastage allowable was 0.9%. Further, the required value addition is 2% as per the table in Para 4.61 4.62 in the Handbook of procedures. Thus, we find that the whole allegation by revenue of not achieving minimum value addition is misconceived and bad. There is no allegation in the SCN that the customs authorities proper officer did not perform their duty diligently or have abetted with the exporter. Further, all duly endorsed documents were submitted by DIL to jurisdictional Customs officer for final assessment and closure of the bond and the said bonds were closed without raising any doubt or query based on endorsement of proper officer of customs, at the time of export of gold jewellery. Thus, the whole allegation is not substantiated and has got no legs to stand. We further find that there is also no allegation that the Appellant have exported gold jewellery using less quantum of gold, than declared or made by some other metal other than gold. Also, there is no allegation regarding purity of gold as declared. Thus, we hold that the provisions of section 113(i) for confiscation are not attracted, there being no case of any misdeclaration. DIL as the Nominated agency - We hold that there is no case of any violation against DIL under the Customs act, read with the notification. We further take notice of the fact that the bonds given by the Nominated agency DIL to the customs, have been duly discharged or closed by the proper officer after due verification of relevant documents under the scheme. Jewellery valuer - We find that, the allegation against him would also not stand. It is evident that this Appellant has valued the gold jewellery under export, in the export shed in presence of the Customs officials. He has certified certain other parameters including weight and purity but that does not make him accomplice. No case of any suppression or collusion in the valuation report is made out. In this view of the matter, we allow the appeals of the jewellery valuer and set aside the penalties imposed on him. Consequently, we hold that no penalties are imposable on any of the parties/Appellants. Accordingly, all the penalties imposed on all the Appellants are set aside. Limitation for adjudication - The Revenue has however put on record an Order dt.21.08.2019, whereby, in the case of SCN dt.31.08.2018, the approval for extension of one year as per first proviso to Sec 28(9) of Customs Act was recorded by the competent authority. Further produced a notification viz., 06/2019-CUS dt.27.02.2019, under sub-sec (8) of Sec 28 of Customs Act, whereby in respect of SCN dt.26.09.2018 of DIL was extended by further period of one year. The Appellants have relied on the judgment of Gautam Spinners vs CC (Import) 2023 (386) ELT 62 (Del) to substantiate their claim that regardless of causative factors, the notice needs to be adjudicated within the statutory period. Be the case as may be, since the entire issue has been decided on merit itself, we keep the issue of limitation open without expressing any view on this aspect. Further, as we have allowed the appeals on merits, we also leave the question of limitation open. All appeals are allowed with consequential benefits, including entitlement to receive the balance quantity of gold, which has not been released by the Nominated agency DIL to the Appellant/exporter M/s BL/JR under the replenishment scheme.

Summary

Issues Involved:
(a) Demand of customs duty from DIL.
(b) Confiscation of exported goods under Section 113(i) of the Customs Act, 1962.
(c) Interpretation of FTP by DGFT.
(d) Time-barred adjudication under Section 28(9) of Customs Act.
(e) Imposition of penalties on various parties.

Summary:

Demand of Customs Duty from DIL:
The Adjudicating Authority demanded customs duty from DIL for the gold supplied to BL and JR under the replenishment scheme, alleging non-compliance with FTP provisions. The Tribunal found that DIL accounted for the quantity of gold imported and exported as required under Notification No. 57/2000-Cus, and no violation of the Customs Act or FTP provisions was established.

Confiscation of Exported Goods:
The Tribunal concluded that the exported goods were not liable for confiscation under Section 113(i) of the Customs Act, as there was no misdeclaration regarding the manufacturing process. The process was deemed fully mechanized, and the required value addition was achieved.

Interpretation of FTP by DGFT:
The Tribunal held that the DGFT's interpretation of the FTP, including clarifications on value addition, should prevail over the Customs Authority's interpretation. The value of inputs should be considered as the duty-free price of gold plus service charges, as clarified by DGFT.

Time-Barred Adjudication:
The Tribunal acknowledged the Appellants' contention that the adjudication was time-barred under Section 28(9) of the Customs Act but decided the case on merits, leaving the question of limitation open.

Imposition of Penalties:
The Tribunal set aside all penalties imposed on the Appellants, including BL, JR, DIL, and the government-approved jewellery valuers. It found no evidence of misdeclaration or suppression of facts and concluded that the proper officer of customs had verified and approved the export documents.

Conclusion:
The Tribunal allowed the appeals, set aside the demands and penalties, and directed the release of the balance quantity of gold under the replenishment scheme.