2008 (1) TMI 77 - SC - Customs

Supreme Court overturns lower court decision on customs duty liability for jewelry export

The Supreme Court set aside the High Court's decision confirming the Tribunal's order in a case involving a Public Sector Undertaking importing gold for ... Assessee filed 4 appeals before the Tribunal relating to EPZ as demand was confirmed - Tribunal consolidated 5 appeals & disposed them of by a common order dismissing assessee appeals - assessee, being aggrieved, filed a Reference application in HC u/s 130(A)(i) - HC, instead of proceeding u/s 130A; confirmed the order of the Tribunal as if it is deciding the appeal finally on merits – HC is required to direct tribunal to refer the questions of law raised within 120 days – Matter remanded to HC Issues:1. Import of gold by a Public Sector Undertaking for manufacturing and export of gold jewelry in Export Processing Zones.2. Failure to utilize imported gold for manufacturing and export as per conditions of the scheme.3. Recovery of customs duty, penalty, and penal action against the undertaking and manufacturing units.4. Adjudication orders confirming duty demands and penalties for non-compliance.5. Tribunal's decision to dismiss appeals and impose penalties.6. Reference application in High Court under Customs Act raising legal questions.7. High Court confirming Tribunal's order without following the proper procedure.8. Appeal challenging High Court's decision on the procedural error.Analysis:1. The case involved a Public Sector Undertaking importing gold for manufacturing and export of jewelry in Export Processing Zones (EPZ) under specific schemes governed by the Export and Import Policy of the Government. The appellant was authorized to import gold for supplying to manufacturing units in EPZs subject to export obligations and value addition norms.2. The issue arose when the imported gold was not utilized by the manufacturing units for manufacturing and exporting jewelry as required by the scheme and conditions of the notification. This non-compliance led to show cause notices for recovery of customs duty, penalties, and penal actions against both the undertaking and the manufacturing units.3. The Commissioner of Excise and Customs confirmed duty demands and penalties for the non-utilization of imported gold by the manufacturing units, leading to separate adjudication orders and imposition of penalties. Appeals were filed before the Tribunal, resulting in the consolidation of appeals and dismissal of the appellant's appeals while upholding the revenue's appeal and imposing additional penalties.4. The Tribunal's decision was based on the scheme's provisions regarding the issuance of gold to units based on filed Bill of Entry, transferring the duty payment liability to the unit receiving the gold. The Tribunal also highlighted the appellant's responsibility to monitor unit activities and ensure timely exports, with penalties for delays.5. The appellant filed a Reference application in the High Court under the Customs Act, raising legal questions regarding the liability of the undertaking, the role of the canalizing agency, and the imposition of penalties without evidence of wrongdoing. However, the High Court erred by confirming the Tribunal's order without following the proper procedure under Section 130A of the Act.6. The Supreme Court accepted the appeal, setting aside the High Court's order, and remitted the case for a fresh decision in accordance with the law. The Court emphasized the need for the High Court to handle the reference application expeditiously and address the legal questions raised by the appellant regarding customs duty liability and penalty imposition.