2019 (5) TMI 984 - HC - Customs

Absolute Confiscation - illicit possession of the rough diamonds and that diamonds are not permitted to be imported without Kimberley Processing Certificate (KPC) - seizure of rough diamonds weighing 10,510.60 carats - whether the applicant has made out a case for staying the impugned order or whether the seized goods can be ordered to be released subject to certain terms and conditions? HELD THAT - If the order of absolute confiscation is upheld by the court, the goods would not be available for confiscation is concerned, in any case, even if there is absolute confiscation of goods, ultimately, the same would be auctioned by the authorities and, at best, the same would fetch the market price. In this case the value of the goods has already been determined as reflected in the orderinoriginal and hence, in case of absolute confiscation of goods, the applicant may be entitled to recover the entire value of the goods from the respondent. When the respondent has succeeded before the Tribunal and rough diamonds are otherwise freely importable and are duty free, the court is of the view that a case of absolute stay of the order of the Tribunal has not been made out. However, to protect the interest of the revenue, the goods may be permitted to be released subject to certain conditions. Application allowed in part.

Issues:
1. Stay of the order passed by the Customs, Excise and Service Tax Appellate Tribunal.
2. Confiscation of rough diamonds under the Customs Act, 1962.
3. Legitimate ownership of the seized rough diamonds.
4. Release of seized goods subject to conditions.
5. Comparison with previous court orders for similar cases.

Issue 1: Stay of the Tribunal's Order
The applicant sought a stay of the order passed by the Customs, Excise and Service Tax Appellate Tribunal, which allowed the appeal with consequential relief. The applicant argued that the rough diamonds were liable for absolute confiscation as they were imported without a Kimberley Processing Certificate (KPC). The applicant emphasized that no credibility should be attached to the respondent and releasing the goods would result in an irreversible situation. The applicant urged that the impugned order be stayed entirely.

Issue 2: Confiscation of Rough Diamonds
The adjudicating authority had ordered absolute confiscation of the rough diamonds and imposed a penalty under the Customs Act, 1962. The Tribunal, however, ruled in favor of the respondent, allowing the appeal against the orderinoriginal. The court admitted the appeal by framing substantial questions of law, indicating merit in the respondent's case.

Issue 3: Legitimate Ownership of Seized Diamonds
The applicant contended that the respondent failed to show legitimate ownership of the rough diamonds and that the claim of importation by Himani Gems in 2009-10 was false. The applicant argued that rough diamonds without a KPC are typically subject to absolute confiscation, citing previous orders and the discretion of the adjudicating authority under section 125 of the Customs Act.

Issue 4: Release of Seized Goods
The respondent argued that the rough diamonds were not harmful goods and should be released subject to conditions, citing previous court orders where goods were released upon payment of redemption fines and penalties. The court considered the value of the goods, the nature of rough diamonds, and the Tribunal's order in favor of the respondent before deciding to allow the release of the seized diamonds with specific conditions to protect the revenue's interest.

Issue 5: Comparison with Previous Court Orders
The court compared the current case with previous court orders involving the release of goods upon payment of redemption fines, penalties, and bank guarantees. The court noted the different scenarios where the revenue or the assessee was in appeal, leading to varying deposit requirements. Based on these comparisons, the court allowed the release of the seized diamonds upon payment of redemption fine, penalty, and furnishing a bank guarantee, in line with earlier orders.

In conclusion, the court partially allowed the application, ordering the release of the seized diamonds in favor of the respondent subject to specific conditions to safeguard the revenue's interest and ensure compliance with previous court precedents.

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