2020 (7) TMI 654 - AT - Customs

Clandestine Removal - Absolute Confiscation - Silver - Gold - shortage of goods - notification no.GO 2665 (E) in the Gazette - contravention of the provisions of SEZ Act, 2005 read with the provisions of Customs Act, 1962 - demand based on statement of various persons - corroboration of statements - HELD THAT - Prior to 9.8.2016 when vide notification no.GO 2665 (E) in the Gazette, the Government in exercise of the powers under sub-section (1) of Section 21 of the SEZ Act, notified the offences contained in Sections 111, 113 and 115 etc of the Customs Act, 1962, as offence under the SEZ Act. Thus, prior to 9.8.2016, Section 111 of the Customs Act is not attracted, when admittedly, the incidence of seizure and inspection was on 3/4th August, 2016. Further, a Coordinate Bench of the Tribunal in the case of M/S CHARISMA JEWELLERY PVT LTD., SHEELU MATHAI VERSUS COMMISSIONER OF CUSTOMS, AIRPORT, MUMBAI 2016 (8) TMI 178 - CESTAT MUMBAI under the fact held that one Shri Abhishekh Parikh, who was found carrying gold pieces without valid documents while exiting from SEEPZ - Sub-Economic Zone. The said person had a daily entry pass for M/s.Charishma Jewellery, a unit in SEZ and a permanent entry pass as employee of Diastar Jewellery Pvt. Ltd. The said Abhishekh Parikh had produced a sale invoice issued by a unit situated outside SEZ, which is a group company of Charisma Jewellery. The appellant had given a cogent explanation at the time of seizure and also the said explanation was supported by the statement of Proprietor of Tarkesh Art Jewellery. Further, the statement has been corroborated with cogent evidence of the statement of karigar as regards shortage of silver. Further, the shortage of gold has also been supported by the cogent explanation which has not been found to be untrue. The contention of the urgency to manufacture silver jewellery is also supported by proforma invoice for sale in favour of Sun Shine Ltd., Hong Kong. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Jurisdiction and applicability of Customs Act within SEZ.
2. Legality of confiscation and penalties imposed.
3. Validity of explanations provided by appellants regarding the shortage of silver and gold.
4. Violation of natural justice principles.

Issue-wise Detailed Analysis:

1. Jurisdiction and Applicability of Customs Act within SEZ:
The appellant argued that the impugned order was beyond jurisdiction and the statutory provisions of the Customs Act read with SEZ Act. The Tribunal noted that prior to the notification dated 9.8.2016, the offences under Sections 111, 113, and 115 of the Customs Act were not notified as offences under the SEZ Act. Thus, the seizure and inspection on 3/4th August 2016 could not attract Section 111 of the Customs Act. The Tribunal referenced the case of Charisma Jewellery Pvt. Ltd., which held that the SEZ Act has precedence over the Customs Act due to Sections 51(1) and 53(1) of the SEZ Act, which deem SEZs as territories outside the customs territory of India for authorized operations. Therefore, the Customs authorities did not have jurisdiction within the SEZ.

2. Legality of Confiscation and Penalties Imposed:
The Tribunal observed that the confiscation of 78.780 kgs of silver and the Santro car, along with penalties imposed under Sections 114A and 112(b) of the Customs Act, were not justified. The Tribunal relied on the ruling in Sangam International, which established that the Customs Department did not have jurisdiction within SEZ areas. It was also noted that the SEZ Act and Rules provide adequate safeguards and provisions for penal actions without invoking the Customs Act.

3. Validity of Explanations Provided by Appellants Regarding the Shortage of Silver and Gold:
The appellants provided explanations for the shortage of silver and gold, supported by statements and affidavits. The Tribunal found these explanations to be cogent and not disproven by the Department. The appellant explained that the silver was with a karigar for job work and the gold particles were in dust and slurry, periodically recovered from a water tank. The Tribunal accepted these explanations, supported by the proforma invoice for urgent manufacturing of silver jewellery for export.

4. Violation of Natural Justice Principles:
The appellants argued that their request for cross-examination of key witnesses was denied, violating natural justice principles. The Tribunal noted that this denial without cogent reasons prejudiced the appellants, further invalidating the impugned order.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order, and ruled that the appellants were entitled to consequential benefits in accordance with the law. The Tribunal emphasized that the SEZ Act takes precedence over the Customs Act within SEZs and that the appellants' explanations for the shortages were credible and supported by evidence.