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TMI Blog2005 (10) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be exported to M/s. Diastar Inc., New Jersey, U.S.A., on a value addition of about 6% to the values as in the imported documents, declared and accepted by the proper officer of Customs. 1.3 The shipping bills were not assessed and goods were not allowed to be shipped as it was Revenue's case that the diamonds were in the same form and lots as imported and only the paper packing of the diamonds had been changed, there was no change in form or sorting and the 6% value addition being shown in the export documents was not in order and was only to execute some record for showing export earnings. 1.4 Enquiries were launched, the verification of stocks of gold and diamonds with M/s. Diastar Jewellery Ltd., the appellants, was carried out by the Officers, a physical shortage of 2732.73 grams of gold was detected as compared to the books. 1.5 Based on the enquiries made, the entire export consignment of cut and polished diamonds, covered by the Gold Control Rules, were seized under the reasonable belief that they were liable to confiscation under the Customs Act, 1962. The Commissioner (Airport) allowed provisional release of the diamonds on a bond with deposit of Rs. 10 lakhs an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. Since there is no value addition, it appears that this is a clear violation of provisions of Para 8.13 of the said Policy and accordingly the subject diamonds covered by nine Bills of Entry totally weighing 6588.41 cts. Value at Rs. 3,27,62,763/- is liable for confiscation under Section 111(d) of Customs Act, 1962 because the import of cut and polished diamonds are otherwise restricted under Heading 71021000 of the ITC (HS) Classifications of Exports and Imports of Items are not permitted to be imported except against a licence or in accordance with a Public Notice issued in this behalf. By virtue of the aforesaid acts of omission and/or commission M/s. Diastar Jewellery and its Managing Director, Shri Pravin Kumar Jain, appeared to have rendered the subject goods liable for confiscation under Section 111(d) of Customs Act, 1962 and thereby rendered themselves liable for penalty under Section 112(a) of Customs Act, 1962. M/s. Diastar have filed the nine shipping bills for export of subject diamonds under seizure. Under Section 50(2) of Customs Act, 1962, the exporter of any goods while presenting the shipping bill shall at the foot thereof make and subscribe a declaration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed under the Customs Act, 1962 and the FERA, 1973 and therefore it appears that the aforesaid diamonds covered under the said 9 shipping bills as detailed in the Annexure-II appears to be liable for confiscation under Section 111(d) and (i) of Customs Act, 1962. By virtue of the aforesaid acts of omission/commission M/s. Diastar appeared to have rendered the subject goods under seizure liable for confiscation and thereby rendered themselves liable for penalty under Section 114(i) of Customs Act, 1962". The gold found short was alleged to be removed clandestinely and duty was demanded on the said gold amounting to Rs. 6,65,000/- along with confiscation and penalty liabilities. 1.7 The Commissioner found - "33. Mis-declaration of value in the nine export consignments of diamonds totally weighing 6588.41 cts. Valued at Rs. 3,27,62,762/-. (a) From the Bills of Entry, it is seen that subject diamonds were imported from M/s. Stevens Overall Co. Inc., New Jersey by M/s. Diastar Jewellery Ltd., SEEPZ and were cleared into the Pvt. Bonded Warehouse of M/s. Diastar Jewellery Ltd., SEEPZ. These goods were being exported by the unit from the Bonded Warehouse in SEEPZ to M/s. Diastar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be different entities, being owned by the same group of persons there cannot be some business secrets whereby the buyer-company in New Jersey is not able to get the goods from the supplier company in New Jersey that too at a higher price. Therefore I find that this consignment was routed through SEEPZ not as genuine import/export but for ulterior motives. I also find that the value of the export consignment was flatly enhanced by 6% for all the goods, which I find to be not genuine. Under the circumstances and based on the admissions of the Director, Shri Pravin Kumar Jain, I hold that the value of the export consignment seized by Customs was enhanced only to show value addition to fulfil the conditions of Para 8.13 of EXIM Policy 1997-2002 and therefore are liable for confiscation under Section 111(d) of Customs Act, 1962. (d) For reasons as detailed earlier, I find that M/s. Diastar have mis-declared the value of the seized diamonds in the 9 shipping bills contrary to the provisions of Section 50(ii) of Customs Act, 1962 and Section 18(1)(a) of FERA, 1973 and Notification No. F.1/67/EC/73-A dated 1-1-1974 issued thereunder. In view of the abovesaid violations, I hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llery manufacturing is an on growing process which will alter the stock position. Moreover, till the SCN was issued, the unit has never objected to the stock position as admitted by them during the stock taking which was done in presence of the concerned employees and the Director of the firm. Payment of duty on gold contained in dust sold in DTA after 4 months of the stock taking is not relevant in the subject case because the dust so removed would definitely contained out of the manufacturing activities during 4 months after the stock taking. I therefore hold that there was a physical shortage of 2732.73 gms. of gold on the date of stock taking as admitted by the unit. I therefore hold that customs duty of Rs. 6,65,000/- is payable by the unit on the said quantity of gold found short. (b) I also find that the abovesaid shortage of gold found during stock taking is in violation of the provisions of Exemption Notification No. 177/94-Cus and also of the EXIM Policy 1997-2002, more particularly with reference to the provisions contained in Chapters 7 & 9 of the EXIM Policy and Handbook of Procedures. It was only because of the said provisions contained in the EXIM Policy, the unit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me goods were being exported to the same place to another company M/s. Diastar Inc., New Jersey which also belongs to his brother and that the goods were routed through SEEPZ to show the export turnover and that the vale addition shown on the export invoices were only to meet the requirements of Para 8.13 of the EXIM Policy and also to meet the conditions stipulated by SEEPZ Authorities. He has also stated that his company was facing tremendous labour problems and to overcome this situation his brother had agreed to help him knowing that his brother would be looser as no operation like assorting sieving were carried out on the diamonds imported before export. I find that this statement was not retracted at any stage. In the reply to the SCN, they have contended that all the three firms are separate legal entity and therefore the imports and exports are separate transactions. The investigations also revealed that whatever sorting they have done on the diamonds imported is to satisfy the requirements at US Customs, as reported by M/s. Malca Amit to M/s. Lemuir Express. This was in turn intimated to the unit by M/s. Lemuir Express vide their letter No. LA/MRV/BDB/576/99 dated 3-3-1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, admittedly the packing has been changed, then plea of sorting as being conducted from 11 A.M. to 1 P.M. as per the statements rendered in Para 24 of the order impugned would call for the benefit under Para 9.21 of the EXIM Policy as claimed it has to be granted to the company, as there are no reasons for the value additions not to arise due to sorting of diamonds and the consequent trading activity profit. There is enough evidence on record of diamonds having been sorted. It is well known fact that diamond trade is unique, in arms length transactions taking place between relatives firms and value additions, especially at wholesale levels of transactions, as in this case due to reasons of the nature of commodity. The Id. Commissioner has also recorded in para 33(a) - "33 (a) From the Bills of Entry, it is seen that subject diamonds were imported from M/s. Stevens Overall Co. Inc., New Jersey by M/s. Diastar Jewellery Ltd., SEEPZ and were cleared into the Pvt. Bonded Warehouse of M/s. Diastar Jewellery Ltd., SEEPZ. These goods were being exported by the unit from the Bonded Warehouse in SEEPZ to M/s. Diastar Inc., New Jersey under 9 Shipping Bills. The value declared at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be some business secrets whereby the buyer company in New Jersey is not able to get the goods from the supplier company in New Jersey that too at a higher price. Therefore I find that this consignment was routed through SEEPZ not as genuine import/export but for ulterior motives. I also find that the value of the export consignment was flatly enhanced by 6% for all the goods, which I find to be not genuine. Under the circumstances and based on the admissions of the Director, Shri Pravin Kumar Jain, I hold that the value of the export consignment seized by Customs was enhanced only to show value addition to fulfil the conditions of Para 8.13 of EXIM Policy 1997-2002 and therefore are liable for confiscation under Section 111(d) of Customs Act, 1962". However, investigation revealed that the diamonds were supplied from an office in New Jersey to SEEPZ and is sent back to another office in New Jersey, which may be at a distance of couple of kilometres. Even though the two companies in New York may be different entities, being owned by same group of persons, there cannot be some business secrets whereby the buyer company in New Jersey is not able to get the goods from the supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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