Customs exemption for diamond-studded jewellery applied, but later SAD relief and demand reduction claims failed.

Diamond-studded jewellery cleared from an export processing zone to the domestic tariff area was treated as covered by the exemption for articles of gold and ornaments, because the notification expressly extended to ornaments set with stones, gems or pearls. By contrast, special additional duty relief under Notification No. 6/2004-Cus could not apply to removals said to have occurred between 2000 and 2002, since the notification was not in force during the relevant period. Alleged contra entries in the work-in-progress register did not justify reduction of the demand where the claim of diamond return lacked supporting evidence, and the promoter's personal penalty was left undisturbed.

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Issues: (i) Whether diamond-studded jewellery cleared from an export processing zone to the domestic tariff area was eligible for exemption from additional customs duty under Notification No. 6/2002-CE. (ii) Whether exemption from special additional duty was available under Notification No. 6/2004-Cus when the notification came into force after the period of alleged removal. (iii) Whether the alleged contra entries in the work-in-progress register justified reduction of the duty demand. (iv) Whether the personal penalty on the promoter called for interference.

Issue (i): Whether diamond-studded jewellery cleared from an export processing zone to the domestic tariff area was eligible for exemption from additional customs duty under Notification No. 6/2002-CE.

Analysis: The notification exempted articles of gold and ornaments and the like articles, whether or not set with stones or gems or pearls. The definition of ornament in the notification was broad enough to include jewellery meant for personal adornment, and the express wording covered jewellery even when studded with diamonds. The order under challenge had wrongly focused on an entry that was not claimed, instead of the serial claimed by the assessee.

Conclusion: The exemption from additional customs duty was available and the assessee succeeded on this issue.

Issue (ii): Whether exemption from special additional duty was available under Notification No. 6/2004-Cus when the notification came into force after the period of alleged removal.

Analysis: The duty liability had to be tested with reference to the period of removal, which lay between 2000 and 2002. The notification relied upon for SAD was issued only in 2004 and was not in force during the entire alleged clearance period. A notification not in existence during the relevant period could not be applied on the basis of the later show cause notice date.

Conclusion: The exemption was not available and the finding was against the assessee.

Issue (iii): Whether the alleged contra entries in the work-in-progress register justified reduction of the duty demand.

Analysis: The demand was founded primarily on notebooks and other documents, with the work-in-progress register used only as supporting material. The claimed return of diamonds was not substantiated by documentary evidence, and the register did not show the quantity asserted as rejected or returned.

Conclusion: The claim for reduction of the demand on this basis was rejected.

Issue (iv): Whether the personal penalty on the promoter called for interference.

Analysis: The promoter's role had already been considered in the original proceedings, the rejection of his defence had attained finality, and no new material or legally sustainable ground was shown to unsettle the penalty.

Conclusion: The penalty was upheld.

Final Conclusion: The duty demand was sustained except for the benefit of the customs exemption on additional duty for the specified jewellery, while the claim for SAD exemption, the challenge based on work-in-progress entries, and the personal penalty did not succeed.

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