2012 (6) TMI 776 - CGOVT - Customs

Denial of the benefit of concessional rate of duty - Notification No. 31/03-Cus. (N.T.), dated 1-3-2003 - Declaration of Gold Jewellery weighing to 8.3 kg - Denial of concessional rate of duty since jewellery studded with stones - Held that - Passenger is an eligible passenger in terms of said notification who has fulfilled all the conditions of notification. There is no dispute on this aspect. The gold jewellery imported by applicant is claimed to be covered under Sr. No. 2 of table of notification on the grounds that the ornaments i.e. gold bangles are not studded by precious stones, diamonds or pearls but studded with Cubic Zirconia which is a synthetic stone. There is no definition of term ornaments studded with stones or pearls in the said notification. So, the definition as given in the exemption notification relating to manufacturing of jewellery by the units of free trade zone, namely Notification No. 3/88-Cus., dated 14-1-1988 Para (xiii)(d), and Notification No. 52/03-Cus., dated 31-3-2003 Para (XV)(c) became quite relevant. Commissioner (Appeals) has not given any reasoning to counter the various grounds given by adjudicating authority for allowing benefit of Notification No. 31/03-Cus. The definition given in the other notification clearly indicates that the such jewellery studded with Cubic Zirconia (Synthetic Stone) having negligible value is to be treated as plain jewellery. Moreover this eligible passenger has made the declaration of the goods before the Customs Officers and paid duty on the Cubic Zirconia studded in gold bangles on weight basis as gold jewellery whereas its value in very negligible as compared to gold value. The reasoning given by adjudicating authority is logical and merits acceptance. - original adjudicating authority has rightly extended the benefit of concessional rate of duty in this case in terms of Notification No. 31/03-Cus., dated 1-3-2003. Accordingly, the other charges w.r.t. confiscation of goods and imposition of penalty do not sustain - Decided in favour of assessee.

Summary

Issues Involved:
1. Denial of concessional rate of duty under Notification No. 31/2003-Cus.
2. Imposition of redemption fine and personal penalty without issuing a Show Cause Notice.
3. Classification of gold jewellery studded with Cubic Zirconia as plain jewellery.
4. Applicability of exemption notifications and their interpretation.

Detailed Analysis:

1. Denial of Concessional Rate of Duty under Notification No. 31/2003-Cus.:
The applicant declared gold jewellery weighing 8.3 kg at the Customs Counter. The jewellery was found to be radium plated and studded with Cubic Zirconia, valued at Rs. 1,28,22,500/-. The adjudicating authority allowed the clearance of the jewellery at a concessional rate of duty under Notification No. 31/2003-Cus. However, the Commissioner (Appeals) denied this benefit, asserting that the notification did not cover jewellery studded with stones. The applicant contested this, arguing that Cubic Zirconia is a synthetic stone with negligible value, and thus, the jewellery should be considered plain and eligible for the concessional rate.

2. Imposition of Redemption Fine and Personal Penalty without Issuing a Show Cause Notice:
The Commissioner (Appeals) imposed a fine of Rs. 10,00,000/- and a penalty of Rs. 1,00,000/- without issuing a Show Cause Notice, which is against Section 128A(3) of the Customs Act. The applicant argued that this action violated statutory provisions, as no reasonable opportunity was given to show cause against the proposed order. The government noted this procedural lapse and emphasized the necessity of issuing a Show Cause Notice within the stipulated time.

3. Classification of Gold Jewellery Studded with Cubic Zirconia as Plain Jewellery:
The applicant argued that the jewellery should be classified as plain jewellery because Cubic Zirconia is a low-value synthetic stone. The adjudicating authority supported this view, citing that the jewellery was described as "plain studded jewellery" in the market and by experts. The Commissioner (Appeals) did not counter this reasoning effectively, leading the government to uphold the classification of the jewellery as plain.

4. Applicability of Exemption Notifications and Their Interpretation:
The adjudicating authority extended the benefit of Notification No. 31/2003-Cus., relying on definitions from other notifications (Nos. 3/88 and 52/2003-Cus.) that consider jewellery studded with Cubic Zirconia as plain jewellery. The Commissioner (Appeals) cited various Supreme Court judgments to argue for a strict interpretation of exemption notifications. However, the government noted that the purpose and object of the exemption must be considered, as held in the case of CC (Prev.) Gujarat v. Reliance Petroleum Ltd. and CC (Prev.), Amritsar v. Malwa Industries. The government concluded that the original adjudicating authority rightly extended the benefit of the concessional rate of duty.

Conclusion:
The government set aside the Order-in-Appeal and restored the Order-in-Original, allowing the benefit of the concessional rate of duty under Notification No. 31/2003-Cus. The imposition of redemption fine and personal penalty was also nullified due to procedural lapses and the classification of the jewellery as plain was upheld. The revision application succeeded, and the original order was reinstated.