TaxTMI 
TaxTMI 
2019 (12) TMI 295
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....toms, the 16th consignment was stopped. The bill of entry No. 4434128 for the 16th consignment was submitted to Ahmedabad Customs for assessment. The goods were sought to be classified under Customs Tariff Heading 26169010 claiming basic Customs duty (BCD) at the rate 2.5% and nil CVD by virtue of Notification No. 12/2012-CE dated 17 March 2012 (Serial No. 56). All import documents like purchase orders, Dubai customs clearance declaration, packing list, testing report etc. were submitted with bill of entry. The said consignment was seized by Directorate of Revenue Intelligence (DRI) on the basis of intelligence to the effect that the appellants were importing by mis-declaring the goods as 'Natural Gold Ore Concentrate' and wrongly claiming the benefit of notification. The goods were examined under Panchanama. Thereafter, statements of Shri Rohit Harishrao Jadav, Senior Executive of M/s. C.N. Gandevia Clearing and Forwarding Agent was recorded. M/s. MMZ were declaring the imported goods as Gold Ore Concentrate since December, 2013. Shri Rohit Harishrao Jadav in his statement dated 24 January, 2014 stated that the imports made earlier were similar to the one imported vide bill of ent....
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....ge for the purpose of control of samples for valuation by the government approved valuer. Shri Rohit Harishrao Jadav also stated that his observation that past imports were similar to the current import was based on physical appearance only and he cannot be 100 per cent certain in this regard. 2.2 Learned Counsel pointed that Revenue had relied on the report of Dr. George Mathew, Associate Professor at Indian Institute of Technology (IIT for short), Bombay. He pointed out that there were a lot of error in the report made by the Professor and for that purpose he relied on the record of the cross-examination of Dr. George Mathew. Learned Counsel pointed out that the demand, penalties and confiscation was upheld by the Commissioner despite the fact that they had pointed out various lacunas' in the report of the Professor of IIT, Mumbai. In this background of facts, learned Counsel argued that the report of Dr Mathew that the sample tested by them was 'not naturally occurring', is incorrect and cannot be relied on. He pointed out that while the report of IIT Professor stated that in native gold, the gold content should be 90 per cent and during cross-examination, he stated that gold....
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....sages recovered from the mobile phone of Shri Sanjay Patel. He argued that the said messages are not admissible as evidence and the messages do not establish that the partner of the appellant firm had instructed any person to prepare the goods for import in such a manner that they appeared like Natural Gold Ore Concentrates. Learned Counsel argued that there is no evidence showing that the instructions, advices appearing in the WhatsApp message were for the goods imported by the appellant and covered under bills of entry listed at Annexure-A to the show cause notice. He further argued that there is no evidence on record that advices and instructions allegedly given by Shri Sanjay Patel to Shri Sachin, the supplier abroad were actually carried out or implemented. He argued that mere presence of Whatsapp messages does not prove that supplier had actually carried out all the activities mentioned in the Whatsapp. Learned Counsel argued that while Whatsapp messages indicate that Shri Sachin was required to mix silver, zinc, cadmium, copper etc. but cadmium and zinc were not found in the metal portion of the sample tested by IIT, Bombay. He argued that alleged instructions were not follo....
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.... of Chapter 26 of the Customs Tariff. 2.9 He further pointed out that there is no violation of any nature committed by the appellant and there is no question of imposition of penalty. He also argued that penalty has been imposed on the firm as well as on the partner. He relied on the decision of Hon'ble Gujarat High Court in the case of Jaiprakash Motwani - 2010 (258) ELT 204 (Guj.). He further argued that no penalty can be imposed on the firm as there was no malafide. Learned Counsel further argued that the penalty imposed is very high. He also argued that redemption fine of Rs. 60 Lakh is too high as the duty involved is only Rs. 18 Lakhs. 3. Learned Authorised Representative for the Department relied upon the impugned order. He took us through the show cause notice where the product imported by the appellant and the evidence in support of revenue claim is described. He further relied on the statements of partner Shri Sanjay Patel. He pointed out that everything was admitted and the statement was never retracted. He further relied on the documents at page 31 and 33 of [relied upon document No.12] contained in the file seized from the appellant's premises under Panchanam....
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.... (A) Are of mineralogical species actually used in the metallurgical industry for the extraction of the metals of Section XIV or XV, of mercury or of the metals of heading 28.44, even if they are intended for non-metallurgical purposes, and (B) Have not been submitted to processes not normal to the metallurgical industry. The term "ores" applies to metalliferous minerals associated with the substances in which they occur and with which they are extracted from the mine; it also applies to native metals in their gangue (e.g., metalliferous sands). Ores are seldom marketed before "preparation "for subsequent metallurgical operations. The most important preparatory processes are those aimed at concentrating the ores. For the purposes of headings 26.01 to 26.17, the term "concentrates" applies to ores which have had part or all of the foreign matter removed by special treatments, either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport. Processes to which products of headings 26.01 to 26.17 may have been submitted include physical, physico-chemical or chemical op....
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....eral" has been defined in Wikipedia is "A mineral is, broadly speaking, a solid chemical compound that occurs naturally in pure form." Then, the Encyclopedia Britanica defines 'mineral' as follow:- 1. Formed by a natural process (anthropogenic compounds are excluded). 2. Stable or metastable at room temperature (25 °C). In the simplest sense, this means the mineral must be solid. Classical examples of exceptions to this rule include native mercury, which crystallizes at −39 °C, and water ice, which is solid only below 0 °C; because these two minerals were described before 1959, they were grandfathered by the International Mineralogical Association (IMA). Modern advances have included extensive study of liquid crystals, which also extensively involve mineralogy." Collins' Dictionary defines the 'mineral' as under:- "A mineral is a substance such as tin, salt, or sulphur that is formed naturally in rocks and in the earth. Minerals are also found in small quantities in food and drink." In Cambridge Dictionary the term 'mineralogical' is defined as follows relating to mineralogy (= the scientific study of minerals): F....
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....mption to 'Ores' falling under heading 2601 to 2617, it does not grant any exemption to 'Concentrates' falling in the same headings. Thus, to claim the benefit of exemption notification, the appellants are required to establish that the goods imported by the appellant are only 'Ores'. In the instant case, the appellants are claiming benefit of Notification No. 12/2012-CE and the notification exempts 'Ores' falling in the specified headings. Since appellants are claiming the benefit of the notification the onus to establish that they are entitled to the benefit of the notification is on the appellants. Revenue has placed on record sufficient evidence, discussed in following paras, to suggest that the goods are not of natural origin and therefore not 'Ores'. 5.1 The basic question that needs to be answered at the outset is if the benefit of exemption to 'ores' be extended to anything that has been artificially produced to resemble naturally occurring 'ores'. In other words, if it is established that the goods imported by the appellants were produced in by them in a workshop, and are not naturally occurring substances extracted from Mines or sand, can they be called 'ores' even if ....
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.... gives the summary of the messages in following words : "38.2 The printouts of the Whatsapp messages relevant to the investigation, contained in the Mobile phone of Shri Sanjay Patel were taken under Panchnama. The messages exchanged between Shri Sanjay Patel and one Shri Sachin No. 971-527247299 of M/s. GStar Jewellers LLC, Dubai, UAE clearly bring out the modus operandi of melting the gold of 995 purity mixed with silver, cadmium, zinc, copper etc., preparing grains/flakes of the mixture of these metals, preparing a wet base of red soil, mixing the metal with the wet soil base and thereafter heating and drying of the composite mixture. The resultant preparation in the form of lumps of red soil containing grains/flakes of gold were imported into India by declaring the same as natural gold ore concentrate. The Whatsapp messages from PK No.6585 to 7264 clearly establish the above fact. These messages pertain to first consignment of gold imported by MIs. MMZ from M/s. Gstar Jewellers LLC, Dubai in the guise of fake gold ore concentrate. In these series of messages during 13/11/2013 to 14/11/2013 Shri Sanjay Patel is giving minute by minute instructions to Shri Sachin for pre....
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....der the said bill of Entry No.3820322 dated 16/11/ 2013 is communicated by Shri Sanjay Patel to Shri Sachin at PK No.8139. 38.4 For the subsequent consignments Shri Sanjay Patel advises use of Cement and Geru (red Indian soil). These communications are at PK No.7944 to 9007. Shri Sachin informs Shri Sanjay Patel at PK No. 9017 and 9018 that using geru would be expensive and for 2 kg geru of 400 Dirhams would be used. In response Shri Sanjay Patel informs him at PK No. 9019 to 9023 that he would send 100kg Geru. Shri Sanjay Patel subsequently informs him at PK No.9090 to 9099 that he is sending Geru and asks Shri Sachin for the name and address of the consignee. Shri Sachin at PK No.9106 and 9110 communicates the consignee name and address as :- No.+ 971 52247299, To- Jasmine Patel, Gallops Trading LLC, Khalid bin-al -walid Road, Opp. Askot Hotel, Bur Dubai, Dubai, UAE. At PK No.9213 and 9215 Shri Sanjay Patel informs Shri Sachin that they have to do another shipment of 2200gms immediately. 38.5 The conversations from PK No.11619 to 12491 between Shri Sanjay Patel and his Dubai based counterpart pertain to the preparation of the fake gold ore concentrate for import....
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....price to which Sachin replies that it will cost 1300 with premium Sanjay Patel asks Sachin whether the rate is per ounce or what He then again asks about the price in grams Sachin replies that it will cost 1300 with premium He further tells that if it is fixed at 1300 them cost in USD will be 41.80 per gram. iv) That proforma invoice as approved by Sachin and an amount of 80,000 AED was transferred by Sanjay Patel to Sachin for this purpose. v) From one stage onwards the messages are relating to actual preparation of mixture by Sachin at Dubai under the guidance of Sanjay Patel from Ahmedabad. During the course of this exchange Sanjay Patel has asks Sachin whether he is ready to prepare the mixture and he replies that he is already on the point. Sanjay Patel has explained to Sachin various activities which are required to be done. vi) WhatsApp message dated 13.11.2013 between Sanjay Patel and Sachin are relating to preparation of mixture containing gold and other metals, soil and chemicals. During the course of these messages method of preparation, the material to be used and the quantity used, temperature to be maintained, etc. have been explained. In ad....
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....l guides Sachin how to prepare soil mixture. He asks Sachin to get 50 grams of sodium silicate + 400 grams of Geroo + ½ liter of water, mix all these materials in ½ liter of water and stir it till it gets sticky. In addition, he asks to get 3.2 kg of fine sand + 1 liter of water and boil it. Meanwhile Sanjay asks about the availability of water glass (sodium silicate). He suggests that if the same is not readily available, caustic soda can also be used (PK 6874 to 6892). Preparation of soil mixture with gold 21.8 At one stage, while sand. mixture is being prepared Sanjay Patel asks Sachin to keep gold flakes ready by the side. He inquires whether the color of sand mixture has changed from red to brown because of the effect of the caustic soda. At this stage, Sanjay Patel asks him to mix gold flakes in the sand mixture and put water in the same. He has also advised to lower the temperature. After seeing the image, Sanjay Patel comments that the sand is very sticky. During the course of preparation, Sachin informs that he has used 200 grams of caustic soda, to which Sanjay informs that the total weight of the mixture will be 5100 grams and asks him to ....
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.... sent via Emirates Airlines through Transguard Express. At this stage, Sachin again forwards images of the mixture, which is found satisfactory by Sanjay Patel. After inquiring the gross weight of the mixture, Sanjay prepares the commercial invoice and sends to Sachin. Sachin indicates the gross weight of the consignment and net weight. 21.13 In message nos. P1K 7313 to 7365 Sanjay Patel asks Sachin to check the invoice and further asks him to prepare covering letter, packing list, commercial invoice on his letterhead, stamp and sign it and after scanning it send all three documents to him. 21.14 According to WhatsApp messages, the consignment is submitted to the Dubai Customs. Next day on 15th evening, Sanjay Patel confirms arrival of consignment at Air Cargo, Ahmedabad. Next day on 16th Sanjay Patel informs that he has filed BE No. 3820322 dated 16.11.2013. 21.15 In messages exchanged on 22.11.2013, he informs Sachin that the goods have been cleared from the Customs and he is already in the process of cleaning the mixture of gold. Relevance of WhatsApp message 21.16 From the above discussion, I find that the aforesaid exchange through ....
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....e aforesaid consignment of fake 'gold ore concentrate' was sent by M/s Gstar, Dubai. The reasons for preparing the 'gold ore concentrate' was clarified by Shri Sanjay Patel vide PK 6541 to 6572 i.e. the misdeclaration was done with intent not only to circumvent the RBI regulations but also to evade payment of appropriate customs duty. Therefore, I find that there is no basis to 'disown' these messages and the same is overwhelmingly corroborated. 21.18 Therefore, I hold that the consignment no. 3 imported vide B/E No. 3820322 dated 16.11.2013 is not naturally occurring "Gold Ore Concentrate" but 'man made gold nuggets' mixed with other metals, soil, cement, etc. classifiable under CTH 7108. Consignment No. 4- B/E No. 3986187 dated 04.12.2013 22.1 This Bill of Entry is mentioned at sl. No. 4 of Annexure-A to the SCN. (hereinafter referred to as consignment no. 4) 22.2 Relevant messages are from PK 7941 dated 16 11 2013 onwards Regarding an enquiry by Shri Sachin, Sanjay Patel informed that the same was discussed over phone earlier but again repeated the formula viz, 'Gem + Red Cement + water + gold = gold ore concentrates' and for drying the same v....
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....om Kerala (PK 9016), Shri Sanjay Patel replied that he would arrange the same and accordingly sent 100 kg. geru (PK 9110). Subsequently, on 19.11.2013 Shri Sachin had sent the images and informed that the goods were ready and its weighment was 500 gms. 22.4 Shri Sanjay Patel on 20.11.2013 had asked Shri Sachin to immediately make another shipment of 2200 gms. (PK 9213 onwards) Subsequently, they had shared the information/documents required for submission in Bank for preparations of advance payment towards next consignment. On 26.11.2013, Shri Sachin asked to check the mail as he had already sent the proforma in letterpad and after making certain modifications Shri Sanjay Patel sent it back and further asked him to write Ethiopia as country of origin instead of Ghana, West Africa. On 29.11.2013, it was informed that an amount of Rs. 29,17,593 i.e. USD 46,500/- had been debited from the account. On 30.11.2013 Shri Sachin had sent an image and subsequently mentioned the ratio of different ingredients viz., Zinc 100gm, Copper 200gm, cadmium 5 gm, silver 30 gm. per kg. gold, for which Shri Sanjay Patel suggested to reduce the silver 1mg and instead advised to put palladium 1mg....
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....and advance payment received as US$ 46,500 and balance US $ 35030 to be paid within 7 working days which is matching with the messages Vide PK 11251 whereby it was informed that an amount of Rs. 29,17,593 i.e. USD 46,500/- was debited. Further vide PK 15168, it was confirmed that balance amount of US$35030 received. iii) The total weight mentioned in the invoice was 6200gms. which is matching with the message at PK 12334 to 12337 iv) Similarly, purity was mentioned in the Kaloti report 75.94% i.e. 18.23 Kt. which is matching with the messages at PK 12340, 12342 v) BE was filed on 04.12.20 13 which is matching with messages at PK 12504, 12561, etc. vi) The said goods were sent via Emirates Airline, through Transguard which is matching with many messages at PK 12606, 12617, 12655, 12701, 12763 22.6 In view thereof, it is established by way of corroborative evidences like in the case of consignment No. 3 that the goods prepared by M/s GStar as per the instruction of Shri Sanjay Patel through these WhatsApp messages and imported by M/s MM Zaveri vide B/E No. 3986187 dated 04.12.20 13 were the same and all these descriptions are perfectly mat....
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.... noticees have argued that the WhatsApp messages pertaining to consignment no. 3 and 4 even if considered true, cannot be made applicable to consignment at sl. no. 5 to 15. 24.2 The WhatsApp messages pertaining to consignment no. 3 and 4, as discussed above, clearly indicate that the goods imported were not gold ore concentrate but an artificial mixture of gold with other metals in soil, sand etc. The process of preparing such artificial mixture has already been elaborated and discussed in above paras. The subsequent WhatsApp messages therefore, do not cover the process of manufacture elaborately again and again. However, in the subsequent messages there are clear indications that the same process has been used to prepare subsequent consignments. I may mention that next 11 consignments have been imported into India during a short span of roughly about 40 days (from 14.12.13 to 23.01.14). Some of relevant messages are mentioned below: Consignment No. 5 - B/E No. 4080363 dated 14.12.2013 24.3 The messages exchanged from 4.12.2013 onwards indicate that draft purchase order and draft proforma invoice is sent by Sanjay Patel to Sachin. On 7.12.13 Sachin inform....
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....ges were acted upon. We find that the appellants have not challenged the recovery of cell phone under a panchnama and the recovery of messages under panchnama. Even otherwise the statement of Sanjay Patel also supports it. The appellants have not sough cross examination of Sanjay Patel. Cross examination of all persons whom they wanted to cross examine was granted under directions of Hon High Court. We find that the whatsApp messages are sufficiently corroborated and therefore relevant and admissible. The analysis of the messages shows that the messages were not only exchanged but the instructions were also executed. 5.6 The messages are further corroborated by the recovery of a cost sheet during search of the appellant's premises. The said cost sheet contains details as follows: Sr. No. Detail Amount $ 1 Pure gold Bar (995) 1237 $ = $ 126619/FOR 0.995 KG 3.200 PURE GOLD 126619 2 Transguard $ 430 (5KGS) + 1 (over weight 5kg) $490 490 3 Kaloti Test Report $18 18 4 Silver Metal (for mixing) = $28 28 5 Melting charges & other metals used like zinc cadmium and copper = $ 140 140 6 Packing materi....
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.... (a) A real gold nugget has a wax like yellow color, however, the present samples do not show waxy luster and show brighter yellow with pale pinkish shade. (b) Real gold nugget usually posses pitted surface and signs of abrasive polishing. If the nugget is man-made from melted scrap gold pits and larger craters are usually, not seen and the surface would appear smooth with no pits/crater. The present sample of gold metal do not show pits or cavities/craters and have smooth surface. (c) Natural gold nuggets posses a regular shape rather than highly irregular or varied shapes ranging from pear, round, elongated, flat and dendritic etc. Careful observation of the plate-1 of the present sample reveal that gold metals are mostly bulbed, tear drop or highly irregular very sharp edged, or elongated needle shaped features. The tear and bulbed shaped nuggets clearly show sharp pointed features indicating extracting out from melted concentrate, as high specific gravity of gold develops into tear drop with sharp pointed end on opposite side. Sharp pointed features are never observed in Natural Gold Nuggets. (II) Soil Analysis (A) The soil along wit....
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....9.135 carat. Is this right? Ans. Yes. q.34 On page-5 of your report in para-2 contain observations about colour of gold nugget are recorded. Did you conduct any test like Spectrophotometer, and did you use an equipment like spectrometer for colour? Ans. No. It is only physical observation." 6.2 Learned Counsel argued that the report of Shri George Mathew cannot be relied on as Shri Mathew is not expert of gold. He relied on question No. 5 of the cross-examination which indicates that Shri Mathew has research in minerals and not in gold. We do not find any merit in the argument of the learned counsel as the term 'Mineral' covers gold ores also. Gold is a metal and gold ore is a mineral. 6.3 Learned Counsel also seeks to draw support from the fact that chemical examination was not done personally by the Professor but by the technical Superintendent. It is not necessary for the Professor to do the actual lab work by himself. He is only required to interpret the result of the tests done in the labs. Thus, we do not find merit in the argument of the learned Counsel to do lab test personally and discredit the report in any manner. 6.4 Learned counsel h....
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....e minerals are generally described. 6.7 The impugned order relies on the observations regarding the absence of pits or cavities/craters and have smooth surface of the gold metal found in the sample. It is seen that in the cross-examination the said observations regarding presence or absence of cavities/pits and regarding the smoothness of surface has not been challenged. Learned Counsel has pointed out the use of word usually in the report and it would indicate that such smoothness of surface can be found in the naturally obtained substance also. The report/result of report is as follows:- 1. Chemical Analysis of Gold Metal: The chemical analysis as shown in the table indicates that the gold metal contains 79 % Au, 17% CU and 0.11% Ag. This composition of the gold alloy indicates it to be 18 carat gold variety. About -1.6 wt% are non-soluble residues. 2. Gold metal morphology - A real gold nugget has a wax-like yellow color, however, the present samples do not show waixy luster and show brighter yellow with pale pinkish shade (plate I) . - Natural gold nuggets typically contain plenty of quartz and other mineral and dirt trapped within. ....
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..... Minor amount of hematite is also observed. Surprising the present soil sample show absence of any clay minerals less than 10 A d-spacing. The soil seemed to have been partially heated or baked, Based on above results and observation the sample given for analysis is not NATURALLY OCCURING. It contains man-made 18 carat GOLD NUGGETS mixed in red soil in the form of lumps. Presence of the cement variety is not detected. However, the use of some form of cement is not ruled out. The soil is reddish brown coloured soil, however, it cannot be concluded whether it is the Red-Indian soil (GERU). Natural native gold nuggets usually have > 90 wt% Au. Presence of ~18% Cu in the sample seems to have been added or 18 carat gold or gold jewellery has been melted produce gold nuggets to show it as gold ore placer deposits. It is seen that in the above report of IIT Professor clearly states that Sharp pointed features are never observed in Natural Gold Nuggets. He has also pointed out that gold metal are bulbed, tear drop or highly irregular very sharp edged, or elongated needle shaped features. He also observed that the tear and bulbed shaped nuggets clearl....
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....eal has bearing on issues like the bonafide nature of our imports, assessment of consignments of gold ore concentrate by proper Customs Officers upon proper scrutiny and verification, irrelevance of WhatsApp messages and thus, wrong invocation of longer period of limitation in these proceedings. 8.1 We find that the WhatsApp messages clearly show that the previous consignments were produced in the workshop. It has been corroborated by the detailed analysis in the impugned order. It has also been corroborated by the recovery of document from appellants premises and also from the sample tested. The appellants had contended that the assessment of previous consignments was done after drawl of sample and therefore the assessment cannot be reopened by issue of this notice. While there is no clear evidence of drawl of samples in earlier consignments, we find that the same will not have any impact on the present proceedings. Samples may be drawn for testing or valuation. The actual composition of the sample has no relevance to the facts of the present case. Even if the samples answered to all physical and chemical parameter of 'Ore', the same does not qualify to be 'ore' for the purpose....