2024 (7) TMI 936 - AT - Customs

Circular trading of Cut and Polished Diamonds (CPD) and Gold Jewellery - over invoicing of exports of studded Gold Jewellery - Mis-use of the Target Plus Scheme - allegation of entering into conspiracy with certain entities/persons and colluded with them to cause of dubious import of gold and exports of so called studded Jewellery, to take undue benefits of the Target Plus Scheme - Confiscation - penalty - HELD THAT - The identical allegations were raised by the department in Show Cause Notice F. No. DRI/AZU/INQ-15/2005 dated 30.3.2007 issued by Additional Director General, Directorate of Revenue Intelligence, Ahmedabad. However, the allegations were set aside and transactions were held to be genuine by the Hon ble Tribunal by its decision in CC (II) AIRPORT SPECIAL CARGO, MUMBAI AND OTHERS VERSUS SHRI SAMIR VORA AND OTHERS 2015 (9) TMI 1370 - CESTAT MUMBAI duly affirmed by Hon ble Supreme Court by dismissing the Revenue s Appeal as reported in COMMISSIONER VERSUS ADANI ENTERPRISE LTD. 2017 (1) TMI 474 - SC ORDER and further, review Petition filed by Revenue was also dismissed by Hon ble Supreme Court vide Order dated 30-3-2017. It is found that By way of the said order, it was held by the Tribunal to the effect that there was no inter relationship between the Respondents and Indian/overseas entities as well as no circular trading had taken place. The Order dtd. 27.12.2013 passed by the Joint Director General of Foreign Trade in the matter of M/s AEL is perused. It is found that in the said order he accepted the fact that there was no Circular trading, and that all the exports were to be accepted towards the discharge of the obligation under the Advance Licenses, and accordingly, redeemed all the Advance Licenses. The Order dated 27.12.2013 of the Joint DGFT covers the very same Advance Licenses, which are the subject matter of the present Show Cause Notices. Since the Licensing Authority, having accepted that the M/s AEL has discharged the export obligation under Advance Licenses, in accordance with law, there is and can be no breach of Condition (v) of Notification 93/2004-Cus dated 10.09.2004 and/or the bond issued in terms thereof. It is also noticed that the department s appeal does not allege that the licences had been cancelled by the Additional Director General of Foreign Trade in the instant case or Licencing authority take any legal action against the respondents. Clearly, the facts are on record that the DGFT has not taken any action against the respondent related to the disputed transactions and same were valid in the eyes of law. So it is clear that DGFT does not agree with the contention of the department. The allegation of the revenue that the exports/imports have been mis-declared and benefit of exports/imports have been obtained fraudulently cannot be agreed upon. There are no reason for demand of duty or confiscation of the goods, or imposition of penalties - no valid grounds have been brought out to interfere with findings of the Ld. Adjudicating authority - there is no infirmity in the impugned orders and they deserve to be upheld - appeal filed by Revenue dismissed.

Issues Involved:
1. Mis-declaration of FOB value and circular trading of Cut and Polished Diamonds (CPD) and Gold Jewellery.
2. Misuse of the Target Plus Scheme.
3. Confiscation of goods under various sections of the Customs Act.
4. Demand of customs duty and penalties.
5. Allegations of circular trading and financial manipulation.
6. Validity of evidence and statements provided by the parties.

Detailed Analysis:

Mis-declaration of FOB Value and Circular Trading:
The revenue alleged that the respondents indulged in mis-declaration of FOB value and circular trading of CPD and Gold Jewellery to artificially inflate their export turnover and fraudulently avail benefits under the Target Plus Scheme. The investigation revealed that the exported studded Jewellery was re-melted at a refinery in UAE and converted into Gold bars, which were then re-exported to Indian companies. The respondents argued that the goods exported were indeed gold studded jewellery, and the Commissioner examined the evidence and concluded that the goods exported were not merely gold but gold studded jewellery, thus rejecting the revenue's allegations.

Misuse of the Target Plus Scheme:
The investigation revealed that the respondents exported studded Jewellery to avail benefits under the Target Plus Scheme. The DGFT later excluded the export of studded Gold Jewellery and diamonds from the scheme. The respondents argued that the allegations were based on the same investigation as an earlier case where the Tribunal and the Supreme Court had ruled in their favor, confirming that there was no circular trading or mis-declaration.

Confiscation of Goods:
The revenue proposed the confiscation of Gold under Section 111(o) of the Customs Act and the confiscation of export goods under Section 113(i). The Commissioner, however, dropped the proceedings, concluding that the goods exported were indeed gold studded jewellery and not merely gold bars, thus rejecting the grounds for confiscation.

Demand of Customs Duty and Penalties:
The revenue demanded customs duty foregone on the import of goods not used for manufacturing as prescribed under the advance licenses, along with interest and penalties under various sections of the Customs Act. The Commissioner rejected these demands, stating that the exported goods were correctly declared and the value addition was genuine.

Allegations of Circular Trading and Financial Manipulation:
The revenue alleged that the respondents engaged in circular trading and financial manipulation to inflate export turnover. The Commissioner, after examining the evidence, including statements from job workers and supporting manufacturers, concluded that there was no circular trading. The Tribunal upheld this view, stating that the evidence did not support the revenue's allegations.

Validity of Evidence and Statements:
The revenue relied on various documents, statements, and emails to support their allegations. The respondents argued that these documents were unauthenticated and not reliable. The Commissioner and the Tribunal found that the evidence provided by the respondents, including notarized documents and certificates from recognized jewellers' associations, was more credible. The Tribunal also noted that the revenue failed to provide substantial evidence to support their claims.

Conclusion:
The Tribunal upheld the Commissioner's decision to drop the proceedings against the respondents, rejecting the revenue's allegations of mis-declaration, circular trading, and misuse of the Target Plus Scheme. The Tribunal found that the evidence provided by the respondents was credible and that the revenue failed to prove their case. The appeals filed by the revenue were dismissed, and the orders of the Commissioner were upheld.

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