2009 (8) TMI 496 - AT - Customs

Confiscation and penalty- Import of rough diamonds- without, assigning any reason, department rejected first report given by expert penal and decided to go for second report constituted by expert penal in field and it seems impossible for them to give an unacceptable report whereas the member of second and third penal were not experts and picked up from trade. No uniformity in versions of various members and facts narrated in notice making the second and, third report also doubtful. Held that- moreover there was no allegation of any relationship between appellant and foreign supplier of goods casting any doubt on value declared by appellant. since over valuation of goods not proved, confiscation and penalty not warranted. Kimberly process certificate produced by importer allegedly not covering goods in question. CBEC Circular No. 53/2003-cus, dated 23.6.2003 para 7 of the circular relied upon by the department for absolute confiscation not relates to non-production of K.P.Certificate, but is in respect of other contravention. Moreover board itself prescribe re export of goods in absence of any K.P. Certificate, hence absolute confiscation of rough diamond not warranted in light of fact that K.P. Certificate is valid and corresponds to value of rough diamonds declared by appellant. goods allowed to be re-exported without any redemption fine in the fact of case.

Summary

Issues Involved:
1. Over-valuation of imported rough diamonds.
2. Validity and acceptance of valuation reports.
3. Absolute confiscation of goods.
4. Imposition of penalties.

Issue-Wise Detailed Analysis:

1. Over-valuation of Imported Rough Diamonds:
The primary issue revolves around the alleged over-valuation of rough diamonds imported by the appellants. The Directorate of Revenue Intelligence (DRI) received intelligence suggesting large-scale over-valuation, leading to the detention of the consignments for further investigation. The initial valuation by an expert panel constituted by the DRI matched the declared value. However, subsequent panels provided lower valuations, which were ultimately accepted by the Commissioner.

2. Validity and Acceptance of Valuation Reports:
The appellants argued that the initial expert panel, which included qualified and experienced members, provided a valuation report supporting the declared value. This report was discarded without any justifiable reason, and subsequent panels, lacking similar expertise, were constituted. The court found that the first report should not have been rejected without valid reasons. The subsequent panels' reports were inconsistent and lacked credibility, as revealed during cross-examinations. The court emphasized that the initial report, being from a panel of experts, should be accepted.

3. Absolute Confiscation of Goods:
The Commissioner ordered the absolute confiscation of the rough diamonds under Sections 111(m) and 111(d) of the Customs Act, citing non-compliance with the Kimberly Process (KP) certificate requirements. However, the court noted that the KP certificates were produced, and the declared value was correct. The court referred to a CBEC circular which prescribed re-export of goods in the absence of a KP certificate rather than absolute confiscation. Consequently, the court held that absolute confiscation was not warranted and allowed the re-export of the goods.

4. Imposition of Penalties:
The court referred to previous decisions, including the Tribunal's decision in the case of Suraj Diamonds (India) Ltd., which held that no penalty could be imposed when the goods were exempt from duty. Since the rough diamonds did not attract any duty and the declared value was correct, the court found that the imposition of penalties was unjustified and set them aside.

Conclusion:
The court allowed the re-export of the diamonds and set aside the penalties imposed on the appellants. The initial valuation report was accepted, and the absolute confiscation of goods was deemed unwarranted. The appeals were allowed in favor of the importers.