TaxTMI 
TaxTMI 
2008 (3) TMI 5
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....ss depending on the value addition achieved, on the jewellery of the description specified therein, and provided that scrap, dust or sweepings may be forwarded to the Government Mint by the importer for conversion into standard gold bars and returned to the said zone in accordance with the procedure specified by the Commissioner of Customs in this regard. Amongst other conditions, the said notification required that the importer shall maintain a proper account of import, consumption and utilization of the goods and of exports made by him. Public Notice No.2/1988 dated 28.7.1988 issued by the Commissioner of Customs, Airport in terms of the abovesaid notification required the units in SEEPZ to maintain registers as per proforma annexed thereto. 3. On 11.11.1995, acting on information that the Gem & Jewellery Units in SEEPZ have been misusing the facility by showing excess manufacturing wastage or loss than permissible under the above mentioned notification, causing shortage in physical stock, claiming it to be lying in the form of dust, the Officers of the Mumbai Customs Preventive Commissionerate visited the premi....
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.... 28.7.1988. 9. It also appears that the respondent has failed to export/account for 6410.885 grams of gold valued at Rs.28,72,076.48 claiming it to be lying in dust and claiming protection under sub-proviso to condition. 10. It, therefore, appears that the aforesaid duty free gold weighing 6410.885 grams and valued at Rs.28,72,076.48 were neither exported nor were available in the physical stock and thereby violating the conditions of the aforesaid Customs Notification and, consequently, appear to have rendered themselves liable for confiscation under section 111(o) of the Customs Act, 1962. 11. It, therefore, prima facie indicates that the respondent did or omitted to do an act which act or omission rendered the abovesaid duty-free gold weighing 6410.885 grams and valued at Rs.28,72,076.48 liable for confiscation under section 111 of the Customs Act, 1962 or abetted to do an act or omission of such an act and dealt with the said gold which they knew or had reason to believe were liable to confiscation under section 111 of the Customs Act, 1962 as indicat....
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.... invocation of section 111(o) and section 112 is not sustainable. It was also submitted that section 114A of the Customs Act, 1962 was applicable only in respect of a case where duty has not been levied or has been short levied and since the present case relates to accounting of gold, question of levy or penalty does not arise. 16. The respondent stated that the unit had recovered a substantial amount of metal against the shortage of 6410.885 grams alleged in the show-cause notice. Regarding imposition of penalty under section 112 of the Customs Act, 1962, it was stated that the show-cause notice was issued under section 28 of the Customs Act, 1962 for the purpose of recovery of duty and hence provision of section 112 cannot be invoked. It was asserted that the imported gold has been used for the manufacture of jewellery and that the said section can be invoked only in case where imported gold has not been utilized in a manner prescribed in the said notification. The matter of dispute is only regarding the quantum of wastage and recovery of gold therefrom and, therefore, section 111(o) of the Customs Act, 1962 cannot be....
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....bsp; The respondent took the preliminary objection that the demand of duty under section 28 of the Customs Act, 1962 has been made after six months of the detection of the shortage because the demand has been made to the extent of duty on the goods which were found to have been violated. 20. According to the Commissioner of Customs, the gold imported into the unit was permitted duty free clearance from time to time under Notification No.196/87(Custom) till 21.10.1994 and thereafter under Notification 177/94(Custom). Both these notifications have inherent conditions which are to be complied with by the respondent unit. These conditions inter alia permitted certain quantity of manufacturing loss/wastage on gold and the remaining quantity has to be exported in the form of jewellery. While computing the shortage during the time of stocking this fact has been taken into account and it is not disputed. Therefore, the Commissioner found that the duty on such shortage is recoverable and also such non-fulfilment of the conditions of the Notification and EXIM Policy would render the goods found short, liable for....
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.... not available for confiscation, while confirming its liability of confiscation under section 111(d) and 111(o) of Customs Act, 1962, I am not ordering confiscation of the said goods. (c) I impose penalty of Rs.2,87,000/- (Rupees Two Lakhs Eighty Seven Thousand only) on M/s. M.M.K. Jewellers (M/s. Jewel Exports Pvt. Ltd.) under Section 112(a) of Customs Act, 1962.' 23. The respondent, aggrieved by the said order of the Commissioner of Customs, preferred an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench, Mumbai (for short 'the Tribunal'). 24. The Tribunal decided all these 14 identical appeals by a common judgment dated 19.6.2003. The Tribunal held that the confirmation of demand of duty by the adjudicating authority under Section 28 of the Customs Act, 1962 is wrong in law and facts and the impugned order of the Commissioner of Customs cannot be sustained. The Tribunal also held that the confirmation of duty is barred by limitation. The Tribunal observed regarding clauses (5) ....
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....exporter, the provisions of this sub-section shall have effect as if for the words "one year" and "six months", the words "five years" were substituted. Explanation.-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or six months or five years, as the case may be. (1A) When any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, to whom a notice is served under the proviso to sub-section (1) by the proper officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under section 28AB and penalty equal to twenty-five per cent. of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice. (2) The proper officer, after considering the representation, if any, made by the person on whom not....
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....h in his opinion has not been paid by such person and, then, the proper officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" or "six months" as the case may be, referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1.-Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or the interest was not paid or was part paid or the duty or interest was erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter. Explanation 2.-For the removal of doubts, it is hereby declared that the interest under section 28AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the proper officer, but for this sub-section. (2C) The provisions of sub-section (2B) shall not apply to any case where the duty or the interest had become payable or ought to have been paid before the date on which the Finance Bi....
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....the court, then, the benefit of reduced penalty under the first proviso shall be available if the amount of the duty or the interest so increased, along with the interest payable thereon under Section 28AB, and twenty-five per cent of the consequential increase in penalty have also been paid within thirty days of the communication of the order by which such increase in the duty or interest takes effect: Provided also that where any penalty has been levied under this section, no penalty shall be levied under Section 112 or Section 114. Explanation.-For the removal of doubts, it is hereby declared that- (i) the provisions of this section shall also apply to cases in which the order determining the duty or interest under Sub-section (2) of Section 28 relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (ii) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.' ....
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....gree of value addition in the jewellery being manufactured. Thus, there was a graded scale for allowable loss, which was linked to the degree of value addition. It is also incorporated that on 28.7.1988, the Collector of Customs issued Public Notice specifying interim procedure for customs clearance at the Gem and Jewellery Complex, SEEPZ. The Units in the SEEPZ were required to maintain accounts of imported raw materials and capital goods, finished goods, rejected goods etc. The units were also expected to maintain registers annexed to the Public Notice. Copy of the Register Format has been annexed along with the additional affidavit as Annexures A1, A2 and A3. 32. In the additional affidavit, it is incorporated that on 13.11.1997, a show cause-cum-demand notice was issued to the respondent both under section 28 of the Customs Act, 1962 and in the terms of the bond executed by the respondent. It has given the details of how the shortage of gold in the stock was calculated. Column 1 of the table indicates the year. Column 2 indicates the direct imports made in the relevant year and column 3....
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....d on inspection cannot be attributed to any particular year. The shortage is calculated based on the difference between total closing balance (for all the years taken collectively since inception of the unit) and physical balance (which is the physical stock lying with the unit at the time of inspection). Thus, a comparison of closing balance and physical balance can only indicate that as of the date of inspection, there had been excess wastage above and beyond the maximum permissible limit. The particular date/year in which the shortage occurred is not determinable. 35. It is submitted that by not maintaining any 'Wastage Account Registers', the respondent suppressed vital information and thus, there is a clear case for invocation of the extended period of limitation of five years under the proviso to section 28(1) of the Customs Act, 1962. With respect to the relevant date from which the limitation period must commence, it is stated that section 28(3)(a) does not apply. Section 28(3)(a) states that the relevant date means '(a) in case where duty is not levied, or interest not charged, the date on which the prope....
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....p; It may also be noted that the rate of duty applied to the goods and the valuation of the goods is based on prevalent rates as on the date of the inspection. In the alternative, therefore, the date of inspection of stock and detection of shortage may be deemed to be the date of clearance and the limitation period may be taken to mean five years from such date. In this case too, the notices are not barred by limitation. 36. The respondent contended that the shortage amount was actually lying with the unit in the form of dust/scrap/slurry, or had been sent for conversion into gold bars, as per the prescribed procedure. It is submitted that the dust/scrap/ slurry which can be converted into gold bars is included in the allowable wastage and not in addition to it. Wastage is allowed up to permissible limits. If some of this wastage is lying with the unit as dust/scrap/slurry, it may be converted into gold bars and brought back to the unit. But the provision for conversion of dust/scrap/slurry cannot be interpreted in a manner where it allows for wastage beyond permissible limits. The respondent's contention th....
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....13.11.1997 demanding duty and the penalty from the respondent. The respondent submitted that the appellant cannot take benefit of the extended period of limitation under the proviso to section 28 of the Customs Act, 1962 in view of the categoric findings of the Commissioner of Customs. The respondent further submitted that the order of the Commissioner of Customs had acquired finality because no appeal was preferred against the said order of the Commissioner of Customs. It was further submitted that the Commissioner of Customs has specifically given findings against the appellant and in favour of the respondent regarding applicability of section 114A of the Customs Act, 1962. Those findings are reproduced as under: '16. I find that section 114A of Customs Act, 1962 has been invoked in the show cause notice without giving any proper reasons thereof. No case of collusion, wilful mis-statement or suppression of facts has been brought out in the show cause notice so as to invoke the provisions of section 114A of the Customs Act, 1962. Therefore, I do not find that this is a fit case for invoking section 114A of ....