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TMI Blog2013 (8) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and also acceptance method of accounting of revenue in past assessment years and in original assessment years - in all the case diamonds polished ones were entered in the next year - Income Tax office had also given its finding that no material had been found by any authority indicating that the assessee had made any advance for illegally importing diamonds - the diamonds recovered by the customs authorities and paid the customs duty as per the order of Settlement Commission - Thereafter it was found that accounting procedure followed by the assessee were proper and legally correct and there is no discrepancy in the stock of diamonds. Smuggling of goods – Held that:- Proceedings of confiscation of diamonds were dropped - No evidence had been brought on record by the department which establish that the assessee was involved in the activity of illegal import or smuggling of diamonds – no evidence on record to establish that any dutiable or prohibited goods were attempted to be illegally imported or were removed from the customs area to invoke Section 111(d) or 111(j) – Decided in favor of assesse. - 327, 328 and 744/2012 - A/679-681/2012-WZB/C-I(CSTB) - Dated:- 9-10-2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic information searched the baggage of passenger Shri Manish Kalvadiya on his arrival from Dubai on 22-4-2003 at Chatrapati Shivaji Airport, Mumbai. On examination 5877 carats of Cut polished diamonds valued at ₹ 2,79,61,710.00 were recovered from his baggage which were seized under provisions of Customs Act, 1962. Shri Manish Kalvadiya gave the name of Bharat Bodra, who was waiting outside the airport to receive the said diamonds. Shri Bharat K. Bodra was identified who was waiting outside and statements of these two persons were recorded. Shri Manish Kalvadiya stated that these diamonds were given to him by Shri Girish Bodra. It was found that Shri Bharat K. Bodra was acting on behalf of his brother Shri Girish Bodra and he stated in his statement that he was to hand over the diamonds to Shri Mahesh Savani of M/s. I.P. Patel Co. It was suspected that Shri Mahesh Savani was the ultimate beneficiary of diamonds seized from Shri Manish Kalvadiya. In the follow up action, the officers of Air Intelligence Unit searched the office premises of M/s. I.P. Patel Co. at Pancharatna Bldg., Mumbai on 22-4-2003 as Shri Mahesh Savani was partner in M/s. I.P. Patel Co. In search a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the Cut polished diamonds received from their Surat head office is not properly accounted; that Cut polished diamonds issued to the brokers under cover of jangads issued by their Surat office, were not accounted in the books of account maintained on computer system at the Mumbai office; an extra stock of 271.49 carats vis- -vis the stock as per the computer records was found in premises; representative of M/s. I.P. Patel Co. informed them on 22-4-2003 itself that 5848.98 carts were with brokers on the basis of jangads. Treating the said quantity of Cut polished diamonds with the brokers covered under jangads and excess stock physically found on the premises as unaccounted, its alleged that there was totally a surplus of 6120.47 carats of Cut polished diamonds. The show-cause notice alleged that the accounting practice followed by M/s. I.P. Patel Co. is not proper and is legally not correct. The Surat office of M/s. I.P. Patel Co. was searched on 24-4-2003 but no incriminating evidences were recovered. The two CPUs under detention in the office of M/s. I.P. Patel Co. at Mumbai were verified by the officers, but no incriminating evidences were found. 8. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, revenue is in appeal for dropping the proposal to confiscate the diamonds as per show-cause notice and the assessees are in appeal against the imposition of penalties on both M/s. I.P. Patel Co. and Shri Mahesh Savani. 12. As all the appeals are against the common order therefore all are disposed of by a common order. 13. Shri Prakash Shah, ld. advocate for the assessee appeared and submitted that as per the show-cause notice the allegation mainly against the assessee is that they have smuggled the diamonds in India. Hence they are liable for confiscation under Section 111(d) and 111(j) of the Customs Act that too based on the search made in their premises and found discrepancy in the books of accounts. In support of this he submitted that the assessee has given explanation regarding the difference in physical stock available in their office on 22-4-2003 and the stock as per the stock register as follows : (a) that the diamonds which are lying with brokers are not entered in the books of accounts, because of the high numbers of such jangads about (125-150) per day; (b) that the physical balance at the end of the month is taken after calling back all the diamonds fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso informed and they have examined their books of accounts and found that they are maintaining books of accounts in proper order and accounting system is correct. No other evidence is available on record to establish that the assessee had tried to smuggle the goods and violated the provisions of Section 111(d) and (j) of the Customs Act. Therefore, the impugned order quo dropping the proceedings of confiscation is correct but he submitted that as it has been held that goods are not liable for confiscation, penalties on the assessees are not warranted. Therefore, penalty imposed on M/s. I.P. Patel Co. of ₹ 1 lakh and penalty of ₹ 25,000/- on Shri Mahesh Savani be set aside. 16. On the other hand, Shri K.L. Goyal, Commissioner (AR) appeared before us and submitted that the adjudicating authority has relied on the decision of the Income Tax department in the instant case wherein it was held that accounting system was proper and dropped the proceedings against the assessee. No independent investigation was done by the adjudicating authority. Therefore, impugned order quo dropping the proceedings of confiscation be set aside and adjudicating authority be directed for fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and also acceptance method of accounting of revenue in past assessment years and in original assessment years. It was found that it is clear that in all the case diamonds polished ones are entered in the next year. The entries maintained in Surat and maintained at Mumbai are supported by the documentary evidence and no evidence was found in the course of search by customs authorities that assessee has suppressed productive of polished diamond or made payment in respect of 52,284.34 carat which was in fact yielded from the conversion of imported rough diamond supported by proper documents. The matter was also examined by the Income Tax office and which has also given its finding that no material has been found by any authority indicating that the assessee has made any advance for illegally importing diamonds through Shri Manish H. Kalvadiya. Moreover Shri Manish H. Kalvadiya owned the diamonds recovered from his possession by the customs authorities and paid the customs duty as per the order of Settlement Commission. Thereafter it was found that accounting procedure followed by the assessee were proper and legally correct and there is no discrepancy in the stock of diamonds. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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