Imported diamonds re-export allowed due to procedural defect; Kimberly Process Certificate mandatory for rough diamond imports.

The Court upheld the judgment allowing re-export of imported uncut diamonds due to a procedural defect in import. The appellant's arguments regarding rectification of the defect and lack of basis for confiscation were dismissed. The Court emphasized the mandatory requirement of the Kimberly Process Certificate for rough diamond imports under the Customs Act, highlighting the necessity of compliance with the regulations outlined in the Circular. Failure to produce the required certificate within the stipulated period resulted in the affirmation of confiscation and the need for payment of redemption fee and penalty for release of the goods.

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Issues:
1. Procedural defect in import of uncut diamonds
2. Requirement of Kimberly Process Certificate for rough diamonds
3. Confiscation and re-export of goods under Customs Act

Analysis:
1. The appeal challenges a judgment allowing re-export of imported diamonds on payment of penalty and redemption fine due to a procedural defect in import. The appellant argues that the defect has been rectified, as they are importing uncut diamonds for the first time. The alternative contention is that re-export was sought, and there is no basis for confiscation of the goods.

2. The Department's Standing Counsel asserts that the import of rough diamonds is regulated by Exhibit P5 Circular to prevent financing of conflicts by rebel movements. The Circular mandates the Kimberly Process Certificate to accompany goods, with the certificate number displayed on the container. Failure to comply results in confiscation under Section 111 of the Customs Act. Re-export is only permitted under Section 125 after payment of redemption fee and penalty.

3. The Kimberly Process is an international scheme to prevent conflict diamonds from entering the legitimate trade. India, as a signatory to the Interlaken Declaration, is bound by the regulations. Exhibit P5 specifies the requirements for importing rough diamonds, including the mandatory presence of the Kimberly Process Certificate and submission of related documents for verification.

4. The Court notes that no certificate accompanied the imported goods, nor was a copy filed before arrival in India. The absence of a prior certificate for the imported diamonds is highlighted, emphasizing the necessity of compliance with the regulations outlined in Exhibit P5.

5. The contention regarding a time provision for certification is rejected, as the appellant failed to produce the required KP Certificate within the stipulated period. Exhibit P10, identified as a Technical Certificate for exporting goods back to UAE, does not validate the import into India and necessitates payment of redemption fee and penalty for release of confiscated goods.

6. Paragraph 7 of Exhibit P5 addresses import of rough diamonds through personal baggage, outlining similar procedures under specific export promotion schemes. The Circular mandates absolute confiscation of goods if liable under Section 111 of the Customs Act, emphasizing strict compliance with the regulations.

7. The Court upholds the judgment of the learned Single Judge, emphasizing the mandatory nature of the Kimberly Process Certificate for rough diamond imports and dismissing the appeal. Compliance with the regulations outlined in Exhibit P5 is deemed essential, with confiscation mandated for violations, as per the Customs Act.

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