2022 (2) TMI 468 - AT - Customs

Tribunal overturns penalties on partnership firm for Customs Act violations

M/s Ajit Exports and Ajit Singh Versus Commissioner of Customs Customs House, Noida

M/s Ajit Exports and Ajit Singh Versus Commissioner of Customs Customs House, Noida - TMI Issues Involved:1. Alleged violation of the Customs Act and the Special Economic Zone (SEZ) Act.2. Confiscation of gold jewelry and penalties imposed.3. Alleged mis-declaration and undervaluation in the import of gold jewelry.4. Alleged clandestine removal of imported jewelry to the domestic market.5. Jurisdiction of the Directorate of Revenue Intelligence (DRI) to issue show cause notices and conduct investigations.Issue-wise Detailed Analysis:1. Alleged Violation of the Customs Act and SEZ Act:The appellants, a partnership firm and its partner, were accused of violating the Customs Act and SEZ Act by allegedly mis-declaring and undervaluing imported gold jewelry and diverting it to the domestic market without fulfilling export obligations. The firm was authorized to import outdated/old/idle gold jewelry for melting and remaking into finished products for export. The approval allowed the import of not only old jewelry but also outdated or out-of-fashion jewelry, which might appear new.2. Confiscation of Gold Jewelry and Penalties Imposed:Gold jewelry weighing 24,746 grams and 822.17 grams was seized from the factory premises and the residence of the partner, respectively. The jewelry was confiscated, and penalties were imposed based on the allegations of mis-declaration and clandestine removal. The Tribunal set aside the confiscation and penalties, stating that the imported consignments were cleared by the proper Officer of Customs and there was no evidence of clandestine removal or non-observance of exemption conditions.3. Alleged Mis-declaration and Undervaluation in Import:The Revenue alleged that the appellants imported brand new gold jewelry by declaring it as old/outdated jewelry and clandestinely diverted it to the local market. This allegation was based on the report of a jewelry appraiser who stated that the imported jewelry appeared new. However, the Tribunal found that the appellants were authorized to import outdated jewelry, which might appear new, and the report of the jewelry appraiser did not support the allegation of mis-declaration.4. Alleged Clandestine Removal of Imported Jewelry:The Revenue's case of clandestine removal was based on statements of various persons and some private records, which were not corroborated by any material evidence. The Tribunal noted that the movement of goods from SEZ to the domestic market required authorization and there was no evidence of connivance with Customs officers. The Tribunal found the allegations to be presumptive and not supported by any cogent evidence.5. Jurisdiction of DRI to Issue Show Cause Notices and Conduct Investigations:The Tribunal held that the DRI officers did not have the jurisdiction to issue show cause notices or conduct investigations before the issuance of Notification No. 2666 dated 05.08.2016, which conferred such powers on them. The Tribunal relied on the Supreme Court ruling in Canon India Pvt. Limited vs. Commissioner of Customs, which held that the notification appointing DRI officers as proper officers was invalid. Consequently, the show cause notices and the subsequent adjudication were deemed without jurisdiction.Conclusion:The Tribunal set aside the impugned orders, holding that the allegations of mis-declaration and clandestine removal were not substantiated by evidence, and the DRI officers lacked jurisdiction to issue show cause notices and conduct investigations. The appeals were allowed with consequential benefits, including the return of confiscated gold jewelry.