9911796707
TMI Blog2004 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... the action taken by authorities was beyond the period of limitation. Even otherwise, the proviso to sub-section (2) of Section 28 is clearly applicable as the materials clearly indicate non levy and short levy on account of misrepresentation of facts by the respondents - Appeals are allowed to the extent indicated. - 4254-4260 of 2003 - - - Dated:- 14-9-2004 - S.N. Variava and Arijit Pasayat, JJ. [Judgment per : Arijit Pasayat, J.]. - Customs authorities question correctness of the judgment rendered by the Customs Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai (hereinafter referred to as the 'CEGAT') setting aside the order passed by the Commissioner of Customs (Airport) confirming demand of duty and penalty. Background facts in a nutshell are as follows : Show cause notice was issued to the respondents alleging shortage of gold and diamonds, capital goods and unauthorized usage of capital goods. It is to be noted that the show cause notice was issued on the basis of certain intelligence gathered regarding infraction of various provisions of the Customs Act, 1962 (in short the 'Act') and Customs Rules, 1966 (in short the 'Rules'), the EXIM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penalty of Rs. 12,00,000/- was imposed on M/s. B.V. Star under Section 112(a). (5) The demand of duty of Rs. 12,94,12,122/- under the proviso to Section 28(2) of the Act on M/s. B.V. Jewels was confirmed. Similar amount was imposed as penalty in terms of Section 114A of the Act. (6) It was held that 73730 cts. of diamonds valued at Rs. 26,29,54,490/- and capital goods found missing valued at Rs. 58,54,698/- were liable for confiscation under Sections 111(d), 111(j) and 111 (o) of the Act. It was noticed that these items were not available for confiscation. 23 pieces of high value diamonds valued at Rs. 39,63,286/- under the aforesaid provisions were directed for confiscation. (7) Broken diamonds valued at Rs. 6,91,139/- under Sections 111(o) and 119 of the Act was also directed for confiscation. The redemption of seized goods on payment of fine of Rs. 70,000/- was allowed. (8) Confiscation of diamonds and diamond studded in semi-finished gold jewellery valued at Rs. 4,03,72,667/- along with inseparable gold weighing 6423.32 gms. valued at Rs. 26,81,736/- were directed to be confiscated. Redemption fine of Rs. 43,00,000/- was fixed. Unacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of duty on gold shortage of 8604.5 gms. valued at Rs. 34,66,889/-. The duty component is Rs. 23,65,652/-. (2) Duty on shortage of 844.16 cts. of diamonds valued at Rs. 26,92,014/-, the duty component on which was Rs. 11,84,372/-. (3) Duty levied on missing capital goods which were imported duty free the value of which was Rs. 2,22,48,876/-. This essentially related to three items i.e. (i) duty on capital goods valued at Rs. 1,06,37,742/- which were imported by M/s. B.V. Star were found to be in illegal possession and usage of M/s. B.V. Jewels; (ii) capital goods valued at Rs. 58,58,696/- which were not found in the unit; and (iii) uninstalled motors, hand pieces and brushes valued at Rs. 36,70,675/- for violation of the notification No. 196/87. (4) Penalty of Rs. 12 lakhs imposed under Section 112(a) of the Act. So far as issues relating to M/s. B.V. Jewels are concerned, they are as follows : (1) Duty on shortage of 73730 cts. of diamonds valued at Rs. 26,29,54,490/-, the duty on which payable was Rs. 12,54,80,309/-. (2) Broken diamonds of 1607.3 carats valued at Rs. 6,91,139/-. (3) Confiscation of high value diamond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable in Custom Notification or EXIM Policy whereby two units can have joint stock of exempted material. Customs Notification 177/1984-Cus. at Para 7(i) stipulates the goods imported by a unit in EPZ can be transferred to other unit only with the prior permission of Asstt. Commissioner of Customs of the Zone, which has not been done. Diamonds are restricted for import and import without licence allowed only to EPZ unit under EXIM Policy and as per Para 9.10 of Handbook of Procedures, goods are to be imported into units' premises. Transfer of goods so imported, to any other unit is in violation of EXIM Policy and Custom Notification. The claim that the stock of gold, diamonds of M/s. B.V. Star is available with M/s. B.V. Jewels was not accepted as detailed stock position of M/s. B.V. Jewels indicated total shortage of 202 grams of gold without considering stock of M/s. B.V. Star. Hence, Commissioner confirmed the custom duty on gold and diamonds, which were found short. CEGAT held that no stock taking report was prepared by department and have accepted the unit's contention that while stock taking, department mixed up all stock of diamond and gold and that for working out excess o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese units. The unit's argument of working as one unit being sister concerns was rejected, as vide Para 9.37(x) of Handbook of Procedures of EXIM policy. Units need to obtain specific permission from Development Commissioner for merger. CEGAT observed that the appellants have answered a CRA objection in 1997 stating that M/s. B.V. Star spared their Machinery to M/s. B.V. Jewels for effecting exports, and the department closed the CRA objection. Thus not only were they aware that M/s. B.V. Star's Machinery was used by M/s. B.V. Jewels in the same Zone, but also were satisfied with the reply. Thus it is not a case of transfer of machinery to M/s. B.V. Jewels, but use of machinery by M/s. B.V. Jewels for manufacture of jewellery for exports. Condition No. 4 of Notification No. 177/94 required importer to execute a bond binding himself to bring such goods into his unit and use them within the zone for the purpose specified in the notification. Thus the said goods were brought into their units and those were used within the same zone for the purpose of export. Further importer has to satisfy the Development Commissioner that the goods so imported have been used for that purpose. Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f penalty The Commissioner confirmed duty of Rs. 2,57,90,900/- and imposed equivalent penalty apart from confiscating capital goods installed in the premises of M/s. B.V. Jewels with an option to redeem the same on payment of fine of Rs. 15,00,000/-. CEGAT observed that as there was no shifting or transfer, these goods were lying in plot No. 55 only which is repeatedly accepted as address for both units, and were not removed and use of machinery by M/s. B.V. Jewels was for purpose of manufacture. Section 111(d), (j) (o) invoked by Commissioner has not been violated, and hence confiscation, imposition of redemption fine and demand of duty are not warranted. 11. So far as M/s. B.V. JEWELS is concerned, the issues are as follows : (a) Duty on shortage of 73,730 Ct of diamonds valued at Rs. 26,29,54,490/- Duty of Rs. 12,54,80,309/-. Commissioner observed that Custom Notification 177/94-Cus.; Stipulates that the importer to dispose the diamonds in a manner as specified in EXIM Policy as well as in the Notification. Para 8.29 of the EXIM Policy stipulates that the Exporter is required to achieve an additional value addition of 5% over the imported value of cut and poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific Bill of Entry No. 2977 cited by the unit, and brought out that the difference within the lots of similar range of diamonds is only a fraction of a dollar and rejected the unit's arguments that the diamonds imported at the rate of 50 US dollar per carat can have rate varying from US $ 35 to 65. As an example Commissioner observed that against 1894 carats of diamonds valued at 75 US $ per carat imported by the unit, the unit exported 29931 carats of diamonds at this rate, whereby there was no account for 28037 carats and no explanation was provided by the unit. Based on above method of verification of stock total shortage of 73,730 carats of diamonds valued at Rs. 26,29,54,490/- was confirmed and duty demanded. CEGAT observed that whenever diamond is valued, different people will give different values and variation may be large and that is why value of diamonds declared in the Value Addition Statement can never be the same as declared in the Bills of Entry and declaration of Bill of Entry number in 'Value Addition Statement' is based only on approximation. As no method of co-relating or accounting of imported diamonds is specifically provided in the exemption notification or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner rejected the unit's claim to consider 1607.30 carats of broken diamonds produced by Shri Suresh Mehta on 7-2-2000 on the ground that the stock taking of the unit was first conducted on 31-1-2000 and Shri Suresh Mehta who was in New York came to SEEPZ specifically to explain the stock and after his arrival in SEEPZ on 3-2-2000, he produced 3861.65 carats of diamonds valued between 42 to 50 US $ per carat from his personal cupboard, which also was taken into account for stock taking and stock taking was concluded on 3-2-2000. Shri Suresh Mehta confirmed in writing that the stocks found are as per inventory prepared by the Customs staff and countersigned by his employees. Thereafter as Shri Suresh Mehta requested for valuation of diamonds by an expert, the stock was kept in the safe of the unit and sealed by Customs officials, and valuation was done on 7-2-2000. The unit never indicated that they had any further stock of diamonds in stock, in their several letters between 3-2-2000 to 7-2-2000. In the EPZ, there is no physical control of goods by customs and all controls are accounts based, and it is for the unit to produce material available for verification at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und in stock. Same was in case of 03 heart shaped diamonds, imported vide Bill of Entry No. 3809 dated 22-1-1999. Commissioner did not agree with unit's claim about certain quantity of diamonds against a particular invoice, as the invoice had endorsement of certificate number for seven diamonds whereas for others, no number was mentioned. Claim that though invoice does not mention invoice number, diamonds were having certificate numbers. It was observed that, a supplier will not supply some certified diamonds mentioning certificate number only in respect of some diamonds and supply other diamonds in the same consignment without indicating certificate number. The Commissioner confiscated the 23 high value diamonds valued at 39,63,286/-, as the unit was not able to prove beyond doubt that these diamonds were imported legally. Import details of diamonds furnished were not found to be in order and certificate numbers of the said diamonds were not found mentioned in the import documents. As diamonds were found to be in original packing of foreign origin and no documentary proof for legal import were produced, the goods were held liable for confiscation. CEGAT observed that weight and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the same Zone. Since in this case capital goods were installed or used within the same Zone, the Notification does not permit the demand of customs duty. CEGAT further observed that in respect of Notification 177/94-Cus., Condition 4 of Para 1 required the importer to execute a bond, to bring the said goods to his unit and to be used within the said Zone. As the goods had been brought into their unit and goods were being used in the same Zone, the notification does not permit demand of Customs duty so long as goods remain within the said Zone and are used for the purpose of exports. (e) Confiscation of 10631.39 carats of diamonds valued at Rs. 4,03,72,667/- that were unaccounted along with 6423.32 of gold. Commissioner observed the unit was in possession of 10631.39 carats of diamonds for which no evidence of legal acquisition existed or was produced. Part of diamonds was claimed to have been studded in jewellery in finished and semi-finished form. The contention that no Panchanama was drawn for seizure of such goods was false as the same were seized under Panchanama dated 26-2-2000, copy of which was received by M/s. B.V. Jewels. There was large scale export of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Policy as well as Para 9.10 of Handbook of Procedures makes the position clear that goods are to be imported into the importer unit's premises. It was, therefore, not permissible for M/s. B.V. Star to claim that the goods imported by it were mixed up with the stock of M/s. B.V. Jewels. CEGAT has proceeded on entirely erroneous premises that it is the department which mixed up the stock in working out the excess or shortage. So far as the expected recovery of 6812.36 grams of gold is concerned, learned Counsel for the respondents submitted that the position of expected recovery as worked out by the department is artificial and hypothetical. There was no material brought on record to show that the expected recovery would be the actual. It is to be noticed as submitted by learned Counsel for the appellant that the expected recovery was worked out on the basis of the figures supplied by the concerned respondents and the average has been worked out. It is of relevance to note that the assessee's employees who are accustomed with the process of recovery have accepted the figure worked out by the departmental authorities. 14. So far as the shortage of diamond is concerned, it is to be n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer and mere usage and there is no violation. This is clearly contrary to Para 9.16(b) of EXIM Policy, in the absence of stipulated permission and also in terms of Condition No. 7(i) of Notification No. 177/94-Customs. Permissible transfer has to be in the mode noted at Para 9.16 of EXIM Policy which relates to inter unit transfer. It is not that only in the case of transfer permission is necessary. Usage also would be covered because for duty free import the pre-requisite is that it must be used in the premises of the unit. Notification 196/87-Customs makes the position clear. The goods imported were to be used by the imported unit. Permitting another unit to use it is clearly in violation of the stipulations in the notification which clearly mandate use by the imported unit only, except with the requisite permission stipulated which in the instant case was not there. Therefore, the duty on capital goods imported by M/s. B.V. Star and under possession and usage of M/s. B.V. Jewels as ordered by Commissioner needs confirmation which we direct. 18. So far as the confiscation of capital goods valued at Rs. 58,58,696/- is concerned, the Commissioner found that M/s. B.V. Star had w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with the promotion of export of gems and jewellery is permissible. For retaining the goods within the same Zone a satisfaction is required to be recorded that the same was for the purpose of export. Clause xiv(b) in its entirety reads as follows : "the importer shall pay, on demand, an amount equal to the duty leviable : (b) on goods, other than capital goods as are not proved to the satisfaction of the Assistant Collector of Customs to have been : (i) used in connection with the manufacture or packaging of gem and jewellery within the said Zone for export out of India or for the promotion of export of such goods or re-exported within a period of one year from the date of importation thereof or within such extended period as the Assistant Collector of Customs may, on being satisfied that there is sufficient cause for not using them or for not re-exporting them within the said period allow; (ii) retained within the said Zone in connection with the promotion of exports of gem and jewellery." 22. Undisputedly, Clause (b)(i) has not been complied with because the articles have not been used in connection with manufacture or packaging of gems and jewellery within the Zone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the requirements of 8.78B are concerned, relate to a stage when the exporter is required to account for the total quantity of imports and the comparison has to be made with total quantity of exports and the balance stock including broken diamonds and other gemstones. 27. Paragraphs 8.34 and 8.35 operated at the time of export when the bills have to be verified in the prescribed manner. That is a stage different from one contemplated in Para 8.78B. 28. Paras 8.34 and 8.35 read as follows : "8.34 - At the time of export of jewellery, the shipping bill and the invoice presented to the customs authorities shall contain the description of the item, its purity, weight of gold/silver/platinum content, wastage claimed thereon, total weight of gold/silver/platinum content plus wastage claimed and its equivalent quantity in terms of 0.995/0.999 fineness for gold/silver and in terms of 0.9999 fineness for platinum and its value, fob value of exports and value addition achieved. If the purity of gold/silver/platinum used is the same in respect of all or some of the items made out from each of these metals for export, the exporter may give the total weight of gold/silver/platinum a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f diamonds and alleged unaccounted gold and diamonds. 32. The Tribunal shall permit the respondents-assessees to produce the original records which shall be verified by it. Definite stand of the department as to how there are suppressions resulting in either excess or shortage of gold shall be considered. CEGAT shall consider the basic features to work out the details and find out whether there is any excess or shortage as alleged by the departmental authorities. If after considering the explanation of the respondents-assessees and that of the departmental authorities already on record it finds that the plea of the concerned assessees, is without substance it shall work out the suppression, if any, and the duty payable. The quantum of penalty would be equal to the sum of duty leviable in terms of confirmation of Commissioner's order as done by us supra. The penalty to that extent stands confirmed. The balance of penalty, if any, would depend upon re-examination by CEGAT as directed supra. 33. Respondents also urged before us that the demands raised were clearly barred by limitation and though the plea of limitation was specifically raised the same was not considered by the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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