Substantial benefit of Advance Authorisation cannot be denied on procedural lapse when the requirement is curable

The Customs, Excise and Service Tax Appellate Tribunal ('CESTAT'), Eastern Zonal Bench, Kolkata in M/s. Noor Jewel Impex, Mohammed Kaiser, J.N. Shabeer Ahamed, Mohammed Azhar, SK. Pintu Versus Commissioner of Customs (Airport & A.C.C.), Kolkata - 2026 (7) TMI 335 - CESTAT KOLKATA held that the benefit of the Advance Authorisation scheme cannot be denied, where the names of supporting manufacturers for the jewellery, which was about to be exported, were not mentioned in the Authorisation scheme. It was held that if the requirement is a curable one, it cannot become the ground for denial of benefits of the Advance Authorisation.

Facts:

The M/s. Noor Jewel Impex ('the Appellant') was a partnership firm, engaged in the business of exports of gold jewellery. The appellant itself did not have any manufacturing facility; it relied on supporting manufacturers to fulfil its export obligations. The Appellant was permitted to import 1000 KG duty-free gold under Advance Authorisation ('AA') in the terms of the Foreign Trade Policy ('FTP') and Customs Notification No. 18/2015-Cus dated April 01, 2015.

On July 8, 2021, the Directorate of Revenue Intelligence ('DRI') conducted various searches of the premises of several supporting manufacturers and alleged the diversion of foreign-origin gold imported duty-free in violation of post-import conditions. Meaning thereby, many non-listed manufacturers under the AA were found to be in possession of the imported gold in violation of the AA. Also, in an export invoice, the declared gold jewellery was 26.466 kg while during its actual weighment by the DRI, the same was found as 31.410 kg. A quantity of 4.083 Kg of gold jewellery was found to be in excess.

On July 3, 2022, the Show Cause Notice ('SCN') was issued proposing confiscation of primary gold, jewellery and imposition of penalties. The Ld. Principal Commissioner through Order-in-Original ('Impugned Order') dated July 01, 2024 ordered the confiscation of 266 KG of primary gold under Section 111(o) of the Act, confiscation of 4.083 KG of excess jewellery under Section 113(h) of the Act, customs duty of Rs. 12,48,302/- with applicable interest and penalties against appellant with his associates under Section 112(a)(i) and 114(iii) of the Act. Aggrieved the same, the appellant filed this appeal.

Issues:

• Whether the confiscation of 266 kg of gold for alleged violation of 'actual user condition' tenable in the eyes of law?
• Whether the 4.083 kg of gold jewellery found in excess was about to export illegally? and is its confiscation valid?
• Whether the absolute confiscation of 1.796 Kg of Gold was procured from the unauthorised sources?
• Whether the imposed penalties on the appellant and his alleged associates are valid?

Held:

The Customs, Excise and Service Tax Appellate Tribunal ('CESTAT'), Eastern Zonal Bench, Kolkata in [M/s. Noor Jewel Impex, Mohammed Kaiser, J.N. Shabeer Ahamed, Mohammed Azhar, SK. Pintu Versus Commissioner of Customs (Airport & A.C.C.), Kolkata - 2026 (7) TMI 335 - CESTAT KOLKATA] held that:

• Noted that the Appellant is not the manufacturer of the gold jewellery but got it manufactured through certain supporting manufacturers. Some of the supporting manufacturers were not enlisted in the AA due to shortage of time.
• Found that the appellants had also applied for necessary addition of these supporting manufacturers in their Advance Authorization and subsequently, the same has also been allowed/permitted by the DGFT. However, since the gold found with these supporting manufacturers were not entered in the Advance Authorization during the material period, the same was seized during the investigation.
• Observed that in these circumstances, not entering the names of these supporting manufacturers in the Advance Authorization before sending the gold to them is only a procedural lapse, which can be cured. However, the DGFT had later endorsed these supporting manufacturers also in the Advance Authorization and regularised the same.
• Noted that the there was no mala fide intent on the part of the appellants for excess export of the gold jewellery weighing 4.083 Kg, which was merely a clerical mistake in their invoice. By exporting more jewellery in quantity than what was declared, the appellants were not going to get any benefit. Hence, mens rea cannot be established.
• Observed that the time-limit to fullfill the export obligations against the AA dated. March 03, 2020 was about to expire on September 03, 2021. Whereas the seizure took place on July 10, 2021 which was before the expiry of time-limit. Hence the seized gold of 1.79 kg with the supporting manufacturer, was for manufacture of gold jewellery towards fulfilment of their export obligations and it cannot be said that the said gold was not imported under the AA.
• As no mala fides intentions have been proved against the Appellants. No penalties can be imposed under Section 114(iii) and 112(a)(i) of the Act.

Hence, the tribunal set aside the impugned order passed by the Ld. Principal Commissioner.

Our Comments:

Section 111. Confiscation of improperly imported goods, etc.-The following goods brought from a place outside India shall be liable to confiscation:-

(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;

Section 113. Confiscation of goods attempted to be improperly exported, etc.-The following export goods shall be liable to confiscation:-

(h) any goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77;

Section 114 of the Act: Penalty for attempt to export goods improperly, etc.

Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable,

[(iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.