2025 (3) TMI 793 - AT - Customs

Seeking provisional release of 53 kgs of gold seized by the Directorate of Revenue Intelligence (DRI) - import of gold under Advance Authorization - diversion of duty free gold imported - HELD THAT - Under the Advance Authorization the export obligation was required to be fulfilled within 120 days from the date of clearance. The gold was detained by the authorities on 17.08.2020. It is for this reason that the appellant contended that the obligation could not be fulfilled and it had sought extension of the date for fulfillment of the export obligation. In regard to the prayer made by the appellant for extension of the Advance Authorization License the Delhi High Court observed that the appellant would be at liberty to apply for extension/re-validation after the adjudication of the show cause notice dated 11.08.2021. The appellant had filed a Writ Petition in the Delhi High Court not only for release of the seized gold but also for extension of the Advance Authorization and the Delhi High Court in its judgment 2024 (1) TMI 538 - DELHI HIGH COURT made it clear that the appellant would be at liberty to apply for extension/re-validation of the Advance Authorization License after the show cause notice dated 11.08.2021 was adjudicated. The Delhi High Court also made it clear that as and when such application is filed the Directorate General of Foreign Trade shall consider the same in accordance with law keeping in mind the peculiar facts of the case as the appellant was prevented from exporting the jewellery because the gold had been seized. The finding recorded by the Commissioner that the premises did not have a fully mechanized machine for manufacture of jewellery is not based on any evidence. The panchanama dated 13/14.08.2020 clearly mentions that two machines for manufacture of jewellery were available on the fifth floor. The Commissioner assumed that these two machines were not fully mechanized. It was imperative for the Commissioner to have obtained a report about the two machines found on the fifth floor before recording a finding whether they were mechanized or not. Conclusion - There are prima facie merit in the contention advanced on behalf of the appellant that 53kgs of gold bars at the time of detention were found in the declared premises and thus could not have been seized. The impugned order dated 01.05.2024 passed by the Commissioner cannot not be sustained and is set aside - Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the appellant's application for provisional release of 53kgs of gold seized by the Directorate of Revenue Intelligence (DRI) should be granted.

2. Whether the conditions of the Advance Authorization Scheme were violated by the appellant, justifying the seizure and non-release of the gold.

3. Whether the appellant's failure to have a fully mechanized facility for manufacturing gold jewelry impacts the provisional release of the seized gold.

4. The relevance of the Delhi High Court's observations and directions regarding the seized gold and the Advance Authorization License.

ISSUE-WISE DETAILED ANALYSIS

1. Provisional Release of Seized Gold

Relevant Legal Framework and Precedents: The application for provisional release of the gold was considered under Section 110(A) of the Customs Act, 1962, which allows for provisional release of goods pending adjudication.

Court's Interpretation and Reasoning: The Tribunal considered the appellant's explanation that the gold could not be brought to the declared premises on 13.08.2020 due to an ongoing search by DRI officers. The Tribunal noted that the Delhi High Court had found prima facie merit in the appellant's contention that the gold was found in the declared premises at the time of detention and could not have been seized.

Key Evidence and Findings: The Tribunal highlighted the absence of the gold in the premises during the search on 13.08.2020 and 14.08.2020, but noted that the gold was subsequently found on 17.08.2020. The Delhi High Court's observations that the gold was brought to the premises immediately after the search were also considered.

Application of Law to Facts: The Tribunal applied the principles of provisional release under the Customs Act, finding that the appellant's explanation for the absence of the gold during the initial search was reasonable.

Treatment of Competing Arguments: The department argued against provisional release due to ongoing adjudication and alleged violations of the Advance Authorization Scheme. The Tribunal, however, emphasized the Delhi High Court's directive allowing the appellant to apply for provisional release.

Conclusions: The Tribunal concluded that the order rejecting provisional release was unsustainable and set it aside, allowing the appellant's application for provisional release of the gold.

2. Alleged Violations of Advance Authorization Scheme

Relevant Legal Framework and Precedents: The Advance Authorization Scheme under the Foreign Trade Policy requires importers to fulfill export obligations using the imported goods.

Court's Interpretation and Reasoning: The Tribunal examined the Commissioner's findings regarding the alleged diversion of gold and the absence of a fully mechanized facility for manufacturing jewelry.

Key Evidence and Findings: The Commissioner had noted the absence of a fully mechanized facility and the issuance of vouchers to relatives and employees, suggesting diversion. The Tribunal, however, found that the presence of manufacturing machines was recorded in the panchanama.

Application of Law to Facts: The Tribunal found that the Commissioner's conclusions about the mechanization and alleged diversion were not supported by evidence.

Treatment of Competing Arguments: The appellant argued that the gold was seized before it could be used for manufacturing, while the department emphasized alleged misuse of the scheme. The Tribunal found merit in the appellant's explanation and the Delhi High Court's observations.

Conclusions: The Tribunal concluded that the evidence did not support the Commissioner's findings of scheme violations, impacting the decision on provisional release.

3. Mechanization Requirement for Manufacturing

Relevant Legal Framework and Precedents: The Advance Authorization Scheme mandates a fully mechanized process for manufacturing jewelry.

Court's Interpretation and Reasoning: The Tribunal noted that the Commissioner assumed the absence of mechanization without verifying the nature of the machines found during the search.

Key Evidence and Findings: The presence of two machines on the premises was recorded, but the Commissioner did not verify their mechanization status.

Application of Law to Facts: The Tribunal found that the Commissioner's assumption was unfounded without a proper report on the machines.

Treatment of Competing Arguments: The appellant contended that mechanization was present, while the department relied on the Commissioner's findings. The Tribunal found the appellant's position more credible.

Conclusions: The Tribunal determined that the mechanization requirement was not a valid ground for denying provisional release.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal emphasized the Delhi High Court's findings, stating, "The Delhi High Court found prima facie merit in the contention advanced on behalf of the appellant that 53kgs of gold bars at the time of detention were found in the declared premises and, thus, could not have been seized."

Core Principles Established: The Tribunal reinforced the principle that provisional release should be considered based on reasonable explanations and evidence, particularly when higher courts have made relevant observations.

Final Determinations on Each Issue: The Tribunal set aside the Commissioner's order rejecting provisional release and allowed the appellant's application for provisional release of the gold.