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TMI Blog2017 (3) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... of jewellery that hangs from a necklace chain, medallion is also termed as a piece of jewellery in the shape of a medal worn as pendant. Therefore, it is clear that there is no distinction or difference between the meaning given to the commodities 'pendant' and 'medallion'. The handbook of procedure only prescribes norms for value addition. As per clause 4A 2 and 2.1 of the Handbook of Procedure relied on by the respondent, the wastage norms and value addition norms relates to plain jewellery to have a maximum wastage of 3.5% while in the case of medallions it is permitted upto 0.25%. When the petitioner has admittedly achieved 7% of value addition, even the invocation of the guidelines contained in the handbook of procedure will not confer any jurisdiction to the respondent to impose the penalty on the petitioner. These aspects have not been taken note of by the respondent while passing the impugned order imposing penalty on the petitioner and therefore the impugned order cannot be sustained. Alternative remedy - Held that: - there was an appellate remedy but without availing it, the petitioner has approached this Court. Merely because the petitioner failed to avail the alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pendants are not medallions but all medallions are pendants. Further, before export of the goods, they were physically examined by the customs authorities with respect to description, quantity, weight etc., and they have not raised any objection. In fact, the petitioner firm had successfully exported the gold jewel during the financial year 2008-2009, 2009-2010, 2010-2011 and 2011-2012 and during this period, there was no complaint or objection raised by the respondent with respect to violation of the conditions of LoA. However, on and from 31.03.2012, since the Government withdraw certain tax benefits to SEZ, the petitioner did not continue the business and the petitioner unit was lying idle. Subsequently, on 24.04.2013, the petitioner unit was closed and a letter to that effect was also submitted to the appropriate authority. The appropriate authority also granted permission on 28.06.2013 for closure of the unit and to exit the SEZ after paying all customs duty/VAT for durable and taxable items such as machineries and raw materials. The petitioner firm also, before exit, paid ₹ 1,38,170/- towards payment of VAT for capital goods and raw materials. According to the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given to those articles in the common parlance. Further, on that date, the petitioner also submitted affidavits obtained from goldsmith, jewellery dealer and Madras Jewellers Diamond Merchants Association submitted on 26.03.2015 to prove that both pendant and medallion are one and the same. Notwithstanding such submissions, the respondent has passed the order dated 20.04.2015 imposing penalty on the petitioner firm, which is impugned in this writ petition. 4. The learned counsel for the petitioner would vehemently contend that as per Rule 54 (2) of the Special Economic Zone Rules, 2000, the respondent is bound to render a specific finding that there had been a violation of the conditions of LoA by the petitioner company. According to the learned counsel for the petitioner, in the present case, no such finding or conclusion has been arrived at by the respondent and it vitiates the impugned order imposing penalty. Such a conclusion has to be arrived after affording an opportunity of hearing and thereafter, appropriate action has to be initiated. Even otherwise, penalty cannot be imposed directly unless it is specifically pointed that there is any violation of LoA or any other Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antiate the above, the petitioner also produced the affidavits obtained from the goldsmith, jewellery dealer and the Jewellers and Diamond Merchants Association which were submitted before the respondent during the course of personal hearing. By placing reliance on the above, it was contended that both 'medallion' and 'pendant' are one and the same. Further, it is contended that at the time of submitting the application for setting up the unit in SEZ, it was clearly stated that the product to be manufactured is 'gold jewellery and article' and description of the term was indicated as 'Pendant and Bangles'. Therefore, according to the learned counsel for the petitioner, even if pendant and medallion will fall under different criteria, as assumed by the respondent, they will be classified within the scope of 'jewellery and article'. the purpose for which manufacturing, the petitioner's unit was established. 6. The learned counsel for the petitioner relied on the order dated 19.02.2016 passed in Income Tax Appeal Nos. 2311 and 2312 (MDS) of 2015 by the Income Tax Appellate Tribunal, Chennai Bench C in the appeal filed by the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the manufacturing unit of the petitioner, it is not open to the respondent to pass the impugned order and it was passed without jurisdiction. 8. The learned counsel for the petitioner would further contend that in the impugned order, it was claimed by the respondent that though the customs tariff does not differentiate between 'pendant' and 'medallion', in Para Nos. 4.A2 of the Handbook of Procedures of Foreign Policy it was prescribed that wastage permitted for pendant is at 3.5% while for medallion, the permissible wastage is 0.25% and therefore it was concluded that 'medallion' are not 'pendant' as per the Foreign Trade Policy. According to the petitioner, when the Income Tax Appellate Tribunal has concluded that 'pendant' and 'medallion' are one and the same and the petitioner firm had not claimed any wastage as prescribed in the Handbook of Procedure, such a conclusion arrived at by the respondent is erroneous especially when the petitioner has made a value addition at 7% which is over and above the norms prescribed in the handbook of procedure. 9. The learned counsel for the petitioner also relied on the Corrigendum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licitor General, the Act and Rules do not differentiate these two items namely 'medallion' and 'pendant' however, the handbook of procedure and foreign trade policy clearly describe that wastage permitted for 'pendant' is at 3.5% while for medallion, the permissible wastage is 0.25% and therefore it was rightly concluded by the respondent that 'medallion' are not 'pendant' as per the Foreign Trade Policy. When a specific finding was rendered as regards the violation committed by the petitioner, opportunity of hearing was given to them to putforth their submission and thereafter, in exercise of power conferred under Section 13 of the Act, the respondent has imposed the penalty on the petitioner and it calls for no interference by this Court. Even though the petitioner unit was permitted to export the 'medallion' by mistake, the respondent has come to a right conclusion that an oversight cannot be ignored just because the officials had earlier failed to notice the flaw and such lapses cannot be allowed to perpetuate. In such view of the matter, the learned Assistant Solicitor justify the order dated 20.04.2015 passed by the respondent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above categories contained in the Customs tariff, it is contended that medallions are large medals. A pendant on the other hand, is an object that is allowed to hang freely from something else. Hanging light fixtures too, for example are called 'pendants'. Thus, medallions can be made into a pendant and worn, but that would not be the case with all medallions and vice-versa. As per the customs tariff, medals and medallions (other than for personal adornment) are classified under Heading 71.14 which relates to articles of goldsmiths or silversmith wares and part thereof contains precious metal or metal clad. Therefore, it is contended by the learned Assistant Solicitor General that the medallions exported by the petitioner are manifestly different in terms of classification under the customs tariff. In this case, the petitioner was issued with LoA for manufacture and export of 'pendants and bangles' which are classified under the category of Articles of Jewellery and parts thereof provided under Customs Tariff No.71.13, whereas, 'medallions' are classified under customs tariff 71.14. Therefore, it is reiterated that medallions exported by the petitioner are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate the unit under the provisions of Act and accordingly the respondent has passed the order of adjudication imposing the penalty. 16. I heard the learned counsel on both sides and perused the materials placed for consideration. The petitioner was given Letter of Approval (LoA) on 10.02.2008 for manufacture of 'gold bangles and pendants' within MEPZ-SEZ, Chennai. On the basis of such approval, the petitioner firm continued to manufacture 'gold medallions' and exported the same. Subsequently, since the Government withdrawn the income tax concessions hitherto conferred to the persons like the petitioner who carry out the manufacturing activities inside MEPZ-SEZ, on and from 31.03.2012, the export activities carried on by the petitioner have come to a close. While so, on 21.02.2014, a show cause notice was issued to the petitioner to show as to why action should not be taken against them for having violated the terms of the LoA. The petitioner submitted a reply on 07.03.2014 denying the allegations. Thereafter, the matter was placed before the Unit Approval Committee in the meeting held on 11.04.2014 and the committee unanimously decided to examine and investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'medallion'. 18. The learned counsel appearing for the petitioner placed strong reliance on the order dated 19.02.2016 passed by the Income Tax Appellate Tribunal, Chennai Bench C in the appeal filed by the petitioner company itself in Income Tax Appeal Nos. 2311 and 2312 (MDS) of 2015. In the said order, the Appellate Tribunal while considering the claim of the petitioner firm relating to deduction under Section 10AA of the Income Tax Act, has given a categorical finding that the words 'Medallion' and 'Pendant' have same meaning and usage in common parlance and therefore, merely because the product manufactured by the assessee (petitioner herein) was described as medallion, it could not be said that there was any violation of approval granted by the Development Commissioner, Special Economic Zone for manufacturing gold pendants. In Para No. 9 of the order, the Appellate Tribunal held as follows:- 9. We have carefully gone through the orders of the lower authorities below. The CIT (Appeals) found that what was manufactured by the assessee is 24 Carat gold medallion. The CIT (Appeals) has also found that the gifts presented on special occasions wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee is pendant. Therefore, there is no violation of conditions imposed by the Development Commissioner. 19. It is evident from the order passed by the Appellate Tribunal that the very same issue as to whether 'pendant' and 'medalliion' are one and the same came up for consideration before the Tribunal at the instance of the petitioner and the Tribunal gave a categorical finding that both the commodity are one and the same with respect to their usage in common parlance. Therefore also, it can be safely concluded that what was manufactured and exported by the petitioner is 'medallion' and it can also be called as 'pendant' in the common trade parlance and consequently, there is no violation of the LoA issued to the petitioner. Even according to the respondent, nowhere in the Act or Rules, there is any whisper made to the differences between the two commodities. 20. The learned counsel for the petitioner also brought to the notice of this Court a letter dated 12.03.2014 addressed by the Customs Department to the Assistant Development Commissioner of MEPZ, SEZ. In the letter dated12.03.2014, it was stated as follows:- As per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. In such circumstances also, it can safely be concluded that the very basis on which the impugned order came to be passed by the respondent has no force and consequently it has to be set aside. 22. The respondent would contend that 'pendant' and 'medallion' have two distinct value addition and wastage norms. Even though these products are not defined anywhere in the statute and they are different items in terms of the value addition and wastage norms, in the Handbook of Procedure describe it is prescribed that wastage permitted for pendant is at 3.5% while for medallion, whereas the permissible wastage for 'medallion' is 0.25% and therefore 'medallion' are not 'pendant' as per the Foreign Trade Policy. In this context, the petitioner would contend that the value addition prescribed in Foreign Trade Policy is only 1.5% but they have achieved value addition of 7% which was more than 400% of the prescribed value addition. I find force in such submission of the learned counsel for the petitioner. When the petitioner has admittedly achieved 7% of value addition which is more than the prescribed value addition in the Foreign Trade Policy, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged that the Court or Tribunal acted against the provisions of law and in violation of principles of natural justice. 24. The learned Assistant Solicitor General appearing for the respondent relied on the decision of this Court passed in WP Nos. 33741 and 33742 of 2016 dated 30.09.2016 in the case of (M/s. Visal Lubtech Corporation and another vs. The Additional Commissioner of Customs) to buttress his submission as regards maintainability of this writ petition. In the said decision, the petitioner challenged an order passed by the Enquiry Officer to cross-examine the witness. However, a separate order was passed by the disciplinary authority rejecting the request of the petitioner therein to cross-examine the witness, but such order was not challenged by the petitioner therein. In such circumstances, this Court held that the writ petition is not maintainable when the petitioner did not challenge the consequential order passed by the respondent. The said decision rendered by this Court, which was relied on by the learned Assistant Solicitor General appearing for the respondent, cannot lend support to his case. 25. The fact remains that there was an appellate remedy but wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were sandals and not chappals was deemed insufficient. Apart from these, the court wonders whether any of the experts in this case was a women, the ultimate customers. In such cases, the commercial parlance test would predominate..... 27. It is evident from the order passed by the Division Bench of the Delhi High Court that when expert body has given an opinion that there is no distinction between chappals and sandals merely because there was no back strap, it cannot be said that the petitioner therein is not entitled to customs duty drawback. Applying the anaology made by the Division Bench of the Delhi High Court to this case, in this case also, as mentioned supra, the Specified Officer of the Customs department, in their letter dated 12.03.2014 clarified that medallions and pendants are one and the same and inspite of the same, the respondent has come to a conclusion contrary to such clarification made by the Customs Department without any basis. 28. The learned counsel for the petitioner relied on the Full Bench decision of this Court in the case of (State of Tamil Nadu vs. Nu-tread Tyres) (2002) 142 STC 256 (Madras) wherein the Full Bench of this Court has held that th ..... 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