TaxTMI 
TaxTMI 
2022 (2) TMI 468
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.... gold jewellery. In terms of the provisions of 'Export Oriented Unit Scheme' (EOU) as envisaged under Export Import Policy/Handbook of Procedures, the appellant applied for permission to establish a new undertaking at Noida Export Processing Zone, Noida for the manufacture of plain gold jewellery, and vide letter of authorisation dated 16.05.2001 issued by Deputy Development Commissioner (at the relevant time, the appellant- Shri Ajit Singh was Proprietor of M/s Ajit Exports). The approval was for projected export turnover of US$ 64,26,000 in 5 years, subject to penal action, in case of failure to achieve minimum export performance. Accordingly, the appellant entered into an agreement/indemnity bond. Under the agreement, the appellant was obliged to submit to the Deputy Development Commissioner, 'quarterly performance report' and also 'annual performance report' duly certified by a Chartered Accountant. Thereafter, the appellant established its business at premises SDF No.D-8, Noida EPZ, Noida by procuring Plant & Machinery such as wire machine, polishing unit and other tools etc. for the manufacture of gold jewellery. The appellant not only achieved the minimum export performance ....
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.... as directed, physical separation of space and separate entry and exit points were carried out and made, to the satisfaction of NSEZ Customs Authority as stipulated in the permission letter, self-certified layout plan of building was also submitted. The appellant also fulfilled the other conditions, such as maintaining of separate records and accounting of transactions. The appellant was regularly achieving minimum export performance as prescribed in Foreign Exchange Earning (NFE) and was also making other statutory compliances. No objection in this regard was ever made by the jurisdictional authorities. 6. By letter dated 19.01.2005 issued by the Asstt. Development Commissioner, the appellant was granted approval for the following operations: - (i) Plain gold jewellery; (ii) Import of old/idle/outdated gold jewellery for melting and remaking into finished products for export. 7. By letter dated 14.12.2006, the Assistant Development Commissioner, NSEZ, Noida conveyed permission to the appellant to manufacture the following items: - (i) Plain Gold Jewellery; (ii) Import of old/idle/outdated gold jewellery for melting and remaking into finish....
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....ipping bill (containing the details of import-corresponding bill of entry no.), the same was submitted at the customs office situated within SEZ. After checking that the gold jewellery sought to be exported is made out from the stock available in the corresponding bill of entry, as recorded in the import register, the documents were handed over back to the appellant. Export consignment along with invoice, packing list and shipping bill was then handed over to the Preventive officer, Customs and after preparation of report, the same was then handed over to the CWC, and then the same was cleared from exit gate of SEZ only after issuance of 'discharge certificate' by customs. This procedure was in accordance with the provisions contained under Rule 46(2) of Special Economic Zone Rules, 2006. 12. That as explained above, the appellant was legally importing old/outdated/idle gold jewellery and the same was handed over to Appellant firm- M/s Ajit Exports, only after mutilation, inspection and recording in the import register. After remaking/refurnishing/manufacturing, the gold jewellery was exported by the appellant under self-sealing/self-certification procedure, wherein the export c....
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....her brass or iron scrap and the import consignment were found to contain brand new gold jewellery, including some branded jewellery, which does not require melting and re-melting, instead of 'outdated gold jewellery for melting and re-making' as declared in the import documents. Panchnama also records seizure of i) 24,746 grams of gold jewellery (imported vide Bill of Entry No.00622/09 dated 4.2.2009) and ii) brass circles, iron scrap and brass scrap/cuttings weighing 193.676 Kg. B. Business premises of VEJPL at 2127/28, Gali No.48, Naiwala, Gurudwara Road, Karol Bagh, New Delhi. During the course of search at business premises of VEJPL, the officers of DRI, New Delhi, seized assorted gold jewellery weighing 41,315.05 gm valued at Rs. 5,57,75,277/- on the ground that no evidence documentary or otherwise, was produced for the licitpossession/ acquisition of the same. C. Residential premises of appellant-Ajit Singh (Partner of AE) 127, 1st floor, Vaishali, Pitampura, New Delhi. During the search, assorted gold jewellery consisting of 36 sets of ear tops & lockets and 109 pairs of ear tops, collectively weighing 822.17 gm was seized. D. Business premises of one M/s Omka....
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....of AE and VEJPL, ld. Commissioner of Customs, Air Cargo Exports, New Customs House, Near IGI Airport, New Delhi, vide O-I-O dated 30.07.2009 extended the period of show cause notice, and later on show cause notice dt. 02.02.2010 was issued to AE and others demanding customs during and cess amounting to Rs. 2,61,36,747/- and also proposing confiscation of seized goods and imposition of penalty. 18. That during investigation, statements of the following persons were also recorded: Sl.No Date Name 1 7.2.2009 8.6.2009 14.1.2009 Sri Bharat JamnadasJagda (Director of Shakti Jewellers & Partner of Omkar Jewellers) 2 7.2.2009 22.4.2009 Kamlesh Bhimraj Jain (alleged Purchaser of jewellery) 3 22.4.2009 Shri Kiran Kumar Singhvi (alleged purchaser of Jewellery) 4 22.4.2009 Sri Hemraj C. Kothari (alleged purchaser of jewellery) 5 22.4.2009 Sri Ramesh Rathod (alleged purchaser of jewellery) 6 22.4.2009 Sri Nitesh Jain (alleged purchaser of jewellery) 7 7.2.2009 22.4.2009 Sri Suresh Bhanwarlal Rathod (alleged purchaser of jewellery) 8 7.2.2009 22.4.2009 Sri DevilalSohanlal Jain (alleged purchaser of....
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....Komal Jain, Shri Sanjeev Verma. DRI F. No. 333/VI/3/2009-GI/PT/26 dt. 03.02.2010. SCN issued to confiscate the seized goods. 3 M/s Vee Ess Jewellers Pvt. Ltd., & thirty four others (including notices mentioned at Sl. No. 1 & 2 above). DRI F. No. 333/VI/3/2009-GI/PT dt. 12.11.2013. Final SCN issued to all thirty five notices involved in the case. 20. It is relevant to mention that the show cause notice dated 12.11.2013 was issued to M/s.V.S. Jewellers and 34 co-noticees, which included the present appellants also, wherein show cause notice, inter alia , proposed or alleged the following :- (i) The duty free gold jewellery imported by M/s. Ajit Exports, Noida during 2006 to February, 2009, by mis declaring and undervaluation, which were clandestinely removed from the SEZ unit as such, without carrying out any process, without payment of customs duties and delivered/sold to the buyers in the local market/DTA, should not be held liable for confiscation under Section 111(d), (j), (m) and (o) of the Customs Act, 1962. (ii) The duty-free primary gold/gold bars procured by M/s Ajit Exports, Noida from Bank of Nova Scoatia, New Delhi, which were clande....
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.... confiscation under Section 113(d) and (i) and (l) of Customs Act, 1962. Penalty under Sections 112, 114, 114 AA of Customs Act, 1962 was also proposed against appellant firm, Shri Ajit Singh (partner of the appellant), along with other persons. 21. Subsequent to issue of show cause notice, corrigendum dated 9.12.2015 was issued as to jurisdiction and making all the three show cause notices answerable to the Commissioner of Customs, ICD, CONCOR Complex, Greater Noida, U.P. 22. The allegations of the Revenue in the show cause notice(s) are as follows: - 22.1 The appellant, M/s Ajit Exports appears to be exporting brass/iron scrap or brass jewellery by declaring the same to be gold jewellery. After having been authorised to manufacture and export in the SEZ, and the benefit of such exports was to flow to one M/s Gold Stone Exports Ltd. Thus, show cause notice proposed to impose penalty on Gold Stone Exports under various sections of the Act. 22.2. Out of 15 packages seized from the business premises of M/s Ajit Exports/Vee Ess Jewellery, 13 packages pertained to export consignments and remaining 2 packs pertained to import consignments. The export packs were read....
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....further stated that as per advice of Mr. Komal Jain, he had set up proprietorship concern in the name of M/s Ajit Exports as its Proprietor in 1994-95, for export of gold jewellery by making/manufacturing the said gold jewellery from the gold, which was purchased from MMTC for the purpose of export. The business of M/s Ajit Exports was mainly looked after /maintained by Mr. Komal Jain, who compensated him by paying some money for his expenses, that on the advice of Komal Jain, the firm - M/s Ajit Exports was converted into partnership firm by taking Mr. Kirti Jain as partner (younger brother of Komal Jain). The work of M/s Ajit Exports was continued to be looked after mainly by Mr. Komal Jain. This appellant is more or less a sleeping partner. That the idea of sharing premises of office with M/s Vee Ess Jewellers Pvt. Ltd. at 197-198, NSEZ, Noida, was also of Komal Jain and due permission was granted by the Assistant Development Commissioner, that M/s Ajit Exports is importing gold jewellery from Deepu Jewellers, Dubai (Director, Mr. Kishore Dhakan), M/s. Samrah Gold, Sharjah, and M/s. Mahesh & Co., Singapore (owner - Mahesh Kumar), that Komal Jain has got introduced him with the a....
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....out export of gold jewellery under 'third party export procedure'. That he had informed Mr. Sashi Kumar, their Ex-Director that he had received an email from Mr. Komal Jain requesting for supply of IEC code and authority letter in favour of M/s Ajit Exports. From the email, it appeared that Komal Jain was associated with the activities of M/s Ajit Exports and IEC code and authorisation were required for submission to the Customs Authorities for the purpose of exports. However, they had not provided any confirmed order to M/s Ajit Exports for export of gold jewellery, nor they had received any export realization on account of the exports made by M/s Ajit Exports. Further, stated that their company had not exported or sold any gold and gold jewellery, though the invoice was raised in their account. He further, stated that they did not have any business relations with M/s. Samrah Gold Factory, Sharjah and nor they had business relation with M/sMahesh and Company, PTE Ltd., Singapore. 33. Similar statement was given by Shri Shashi Kumar, Managing Director of M/s. Goldstone Infratech Ltd., 34. That Shri Ajit Singh, Partner of M/s Ajit Exports vide his letter dated 14.09.2009 addre....
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....he became the partner in M/s Ajit Exports having its factory at plot no.197-198, NSEZ, Noida. That Shri Ajit Singh was the other partner of M/s. Ajit Exports. That M/s Ajit Exports had also shown export of gold jewellery in the name of M/s.Gopal Sons Jewellers as third-party exporter. That he had been shown file No.163 of M/s Ajit Exports and a copy of shipping bill dated 19.01.2009(and as a token of having seen the same, he signed on these documents) and invoices in File No.164 seized from the M/s Ajit Exports, it appears that 15141 .310 gm of .920 fine gold jewellery was exported to Mahesh & Company, Singapore by M/s Ajit Exports as third party exporter-manufacturer - Gopal Sons Jewellers. 37. He further stated that the day-to-day functioning of M/s Ajit Exports was looked after by Shri Ajit Singh and Shri Komal Jain. That he was aware that on many occasions, M/s. Ajit Exports had imported brand new gold jewellery and exported only metal scrap materials and primary gold. He further stated that on many occasions, he had forged the signature of Shri Ajit Singh and signed the documents of M/s Ajit Exports viz. invoices, shipping bill, packing list, bill of entry, etc. That pursua....
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.... that Shri Komal Jain and Shri Ajit Singh had met him in Dubai in the year 2000 through reference of a common trader friend and they had requested for work of jewellery. That they had also carried samples of jewellery manufactured by them. That they were sending outdated gold jewellery and also gold to M/s Ajit Exports and M/s Vee Ess Jewellers Pvt. Ltd., for making and finishing of jewellery in India and thereafter, for re-exporting the same to them. In the year 2006, Shri Ajit Singh and Komal Jain informed that they had started two units in the SEZ at Noida, which had facilities for refining, polishing, copper and rhodium finishing as well as repairing of jewellery. That they had also told him that their (M/s Ajit Singh and Komal Jain) prices would be more competitive as they would save income tax payable, by the units in the SEZ. That they used to get goods manufactured from M/s. Vee Ess Jewellers at Karol Bagh and also at SEZ, Noida as well as from M/s Ajit Exports, SEZ, Noida. Mr. Ajit Singh and Komal Jain used to tell him as to on which company, he had to place orders.That he also stated in the year 2006, Mr. Ajit Singh and Mr. Komal Jain suggested him that he could despatch ....
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.... of M/s Ajit Exports being exported under self-declaration/self-certification and declared as gold jewellery, as well as with respect to V.S. Jewellers Pvt Ltd, revealed that Shri Kishore Dhakan of Deepu Jewellers LLC Dubai and M/s Samrah Gold Factory LLC Sharjah, Shri Mahesh Kumar of Mahesh & Company, PTE, Singapore, Shri Komal Jain, the managing person of both V.S. Jewellers &M/s Ajit Exports, Noida, Shri Ajit Singh, entered into a conspiracy to smuggle high end foreign made branded, finished new jewellery into India from Dubai/Sharjah/Singapore in the guise of duty free import of raw materials through SEZ route, on the pretext of using the same for manufacture of gold jewellery to be exported, but it appears have diverted the same clandestinely in the local market. Both Appellant and V.S. Jewellers were SEZ units located at the same premises at Noida SEZ. Both the SEZ units were permitted to import duty free semi-finished or old/ outdated gold jewellery for assembling/ plating /refinishing and/or remaking, and thereafter the same was required to be re-exported after completing the process required to be carried out, as per the direction of the Supplier (as declared in the bill o....
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....rocured from the Bank of Nova Scotia as raw material. The file also contained remarks written on the file cover showing the receipt of primary gold/gold jewellery from the local market /DTA and the actual nature of goods exported under the respective export documents. 44. Thus, it appeared that the Appellant M/s Ajit Exports in collusion with V.S. Jewellers, as both the firms/company were controlled by Mr. Komal Jain, in collusion with others have imported new branded jewellery or finished jewellery which they were diverting in the DTA, thus evading customs duty on import in the garb of reprocessing in their Unit situated at Noida SEZ, and were re-exporting Indian made jewellery etc., which was violation of the scheme under the SEZ Act and the notification thereunder. Most of the files found/seized from the business premises of M/s Ajit Exports and V.S. Jewellers regarding the export and import, bore some remarks on the file cover indicating the actual nature of goods procured from the local market and exported in that particular consignment. Copies of the export documents are available in the particular file. Such remarks on the files are also corroborated by the fax messages r....
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....8.10.2018, all the aforesaid show cause notices dated 02.02.2010, 03.02.2010 and 12.11.2013 have been adjudicated, and the proposals made in the show cause notices were confirmed. Thus, gold jewellery weighing 24.746 gm and 822.17 gm seized from the factory premises and the residence of Shri Ajit Singh respectively, had been ordered to be confiscated, duty foregone at the time of import of duty free gold jewellery and seized gold jewellery have been directed to be recovered under Section 28 of the Customs Act, the declared transaction value of duty free imported gold jewellery (including past imports) has been rejected under Customs Valuation Rules, duty free gold jewellery and gold bars alleged to be clandestinely removed into DTA have been confiscated, exemption available under Section 26 of SEZ Act has been denied and the exempted amount of Custom duty has been directed to be recovered under Section 28 of the Act, the amount deposited during investigation have been appropriated and penalties have been imposed upon the appellants and others. 47. The impugned order-in-original (in earlier round) was challenged in separate appeals by these appellants, as well as nine other appel....
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....were duly examined, purity of gold was checked on the karatometer and thereafter the imported jewellery was mutilated by the authorized / preventive officer. The procedure prescribed for export also does not bar examination of export goods and merely because the appellant was working under self-certificationprocedure, allegation of mis-declaration is only presumptive, not corroborated by any material. 51. Vide approvals dated 14.12.2006 and 03.09.2007 by the Competent Officer of Noida Special Economic Zone, the appellant's firm was authorized to import old/ idle/ outdated gold jewellery for melting and re-making into finished product for export. Thus, import of not only old jewellery but also outdated or out of fashion jewellery was permitted. Since the goods or imported jewellery was outdated in the country of origin (Dubai and Singapore), hence the same was declared as outdated gold jewellery, also at times such jewellery appears, to be new. Therefore, the report of jewellery appraiser that the imported consignments seized from the SEZ Unit,contained new jewellery, does not in any manner support the case of Revenue. 52. Learned Counsel further urges that the allegation of c....
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....e the name of the head karigar / artisan, under whose supervision jewelry was melted or remade and remarks made on private records, the erroneous view has been presumed by the Adjudicating Authority on the basis of Section 139 of the Act, which can be invoked only in prosecution proceedings, that too before a Court. Whereas the proceedings before the Adjudicating Authority where adjudication proceedings and were not prosecution proceedings. Further, the Adjudicating Authority is also not a Court. 55.1 It is further urged that rejection of declared value under the Customs Valuation Rules read with Section 14 is illegal and bad. The value of the imported goods declared by the importer can be rejected under Section 14 of the Act read with Rule 12 of the Valuation Rules, only if - (i) the Proper Officer has reason to belief or doubt the truth or accuracy of the value declared or; (ii) on request of the importer. Once the allegation of mis-declaration at the time of import are not sustainable, then the proper Officer cannot have any reason to doubt the truth or accuracy of the value declared and there was also no such request from the appellant's firm. 55.2 It is....
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....o stay was allowed. Similar view has also been reiterated by Hon'ble Supreme Court in the case of CC vs/ M/s Agarwal Metals and Alloys, Order dated 31.08.2021 in C.A No. 3411/2020 reported at 2021-TIOL-233-SC-CUS.LB. 59. Thus, seizure and confiscation of gold jewellery from the unit of appellant situated in Noida Special Economic Zone and from the residence of its Partner Shri Ajit Singh is illegal. On the date of seizure (06.02.2009) 24,746 gm of gold jewellery (recently imported) from the SEZ unit was made by the officer of DRI, whereas the power of seizure was vested in such DRI Officers vide Notification No. 2666 dt. 05.08.2016, and thus the seizure itself is patently illegal. Prior to 05.08.2016 such powers of inspection and seizure was vested only on the specified Officer (by Notification) under Section 20 and/or 21 of the Special Economic Zone Act read with the Customs Act. 60. The confiscation of aforementioned jewellery under Section 111 (j) and (o) is illegal as the two imported consignments were allowed to be cleared for processing/ manufacture in the SEZ unit by the proper Officer, and there was no occasion for the appellant not to observe the conditions for exemp....
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....h. The documents relating to this package were prepared by Shri Vikas Sharma, employee of M/s V.S. Jewellers Pvt. Limited, who admitted forging of signature of the Partner of the firm Shri Ajit Singh for preparing export documents of the 13 packages. Same quantity or matching quantity of jewellery was seized from the office of M/s V.S. Jewellers Pvt. Limited situated at Karol Bagh, New Delhi. The Directors and employee of M/s V.S. Jewellers Pvt. Limited could not give any cogent explanation regarding the source of jewellery seized on 06.02.2009 at their Karol Bagh Office. It is the case of these appellants that such jewellery was stolen from the premises of the appellant firm by Shri Komal Jain in collusion with his brother Shri Kirti Jain and the staff of their company Shri Vikas Sharma. After stealing, these persons replaced the gold jewellery with brass jewellery/ scrap. These appellants have also filed FIR before the Police at Noida of such theft committed bythe named persons, being FIR dated 08.02.2009. 60.6 Even if adverse inference is drawn in respect of 13 export packages, then also the offence can only be that of mis-declaration, for which penalty under Section 114 can ....
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....d jewellery and thereafter such jewellery was diverted in the local market. However, we find from the letters of approval dated 14.12.2006 and subsequent renewal dated 03.09.2007, issued by the competent authority of the Special Economic Zone, not only authorized the import of old/ outdated jewellery but also idle and outdated / out of fashion jewellery for melting and re-making into finished product/ new jewellery, for the purpose of export. Thus, the appellant's firm was evidently authorized to import old/ outdated jewellery or damaged jewellery for melting and re-making into finished product for export. Such outdated jewellery or out of fashion jewellery may also appear at times to be new.Once this is so,we fail to understand how the report of jewellery appraiser supports the allegation of mis-declaration. The report of jewellery appraiser nowhere states that the jewellery was not outdated, but it states that the jewellery was appearing as new. Thus, all that glitters is gold. Thus,we hold that the report of jewellery appraiser does not advance or support the allegations of Revenue. 62.4 Further, it is admitted case on facts that during the period in question, the proper Offi....
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....d-newjewelry in the guise of old jewelry for the purpose of remaking, re-polishing etc. of the same and then exporting the gold bars or gold jewelry locally procured by them. In terms of the provisions of the Customs Act, the goods imported as well as at the time of export are required to be examined by the Customs Authority and it is only thereafter the goods are allowed clearance either for export or for import. It is reasonably expected that the Customs Authority must have done their job and must have examined the goods at the time of import as well as at the time of export. There is nothing on record to show that any discrepancy was found either in the import or export consignment of the two SEZ units. Neither it is Revenue's case that the Customs Officers connived with the SEZ units who clear their consignment for import or export without examination. The assessment having been done by the Customs at the time of import of gold jewelry from Dubai, Singapore or other countries and at the time of the export of remade jewelries to the said countries and having not been revoked by the proper officer under the provisions of Customs Act, we really fail to understand as to how Revenue....
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....icating Authority have erred in presuming the contents of fax message, parallel invoices and the notings in private records, as reliable by applying the provision of Section 139 of the Customs Act. However, as learned AR have vehemently relied upon the contents of the fax messages, parallel invoices and the notings in private records, hence, we are dealing with the same in details in the following paragraphs. 64.1 The fax message sent by M/s Mahesh & Co. PTE Ltd., Singapore shows receipt of 32,834.02 gm, which matches with the quantity disclosed in export consignments, and hence we fail to understand how the fax messages supports the case of clandestine removal in the local market, when the fax message was sent by a person from outside the country. At best, the same may lead to inference that the appellant firm exported goods of M/s V.S. Jewellers Pvt. Limited against its export invoices, but the same does not prove the charge of clandestine removal of imported gold jewellery in the local market. 64.2 As far as the fax messages allegedly sent by M/s Shakti Jewellers Pvt. Ltd., are concerned, the Coordinate Bench of this Tribunal in its Final Order dated 12.09.2019 have alread....
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....roduced the person before the Adjudicating Authority for examination and consequent cross-examination, whose statements have been relied upon in support of the allegations by Revenue, for cross-examination. Therefore, in our opinion all such statements cannot be read as evidence against the appellant, being in violation of the provisions of Section 138B of the Customs Act. The Adjudicating Authority have not stated any of the exception as provided in Section 138B, for not examining the witnesses of Revenue. We further find that these appellants have made specific prayer for examination of the witnesses including cross-examination, which have been rejected without any cogent reason or order. Therefore, we hold that all these statements recorded during investigation have to be ignored and the same cannot be read as evidence in support of the allegation, in the show cause notice. We refer to the similar views taken by the coordinate Bench at Allahabad in the aforementioned Final Order dated 09.07.2019, we reproduce para 27 from the said order: - "27. At this state we may refer to certain precedent decisions on the issue of the findings of clandestine activities based upon the....
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....ner of Central Excise, Lucknow vs. M/s Shyam Traders reported as 2016 (333) ELT 389 (All.) a reference was made to the same and the Hon'ble Supreme court decision in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata reported at 2015 (324) ELT 641 (SC), the Tribunal's decision allowing cross-examination of the witnesses was upheld." 64.6 Once the statement(s) recorded during investigation are ignored and the other material relied upon against the appellant have been held to be insufficient, we find there is no other evidence to support the charge of mis-declaration and clandestine removal. We further take note of the admitted facts that the movement of goods in and out of the SEZ, or from the SEZ to the domestic tariff area restricted subject to approval. It is also not the case of the Revenue that the appellants have connived that the Officer of the Customs or the Special Economic Zone who were monitoring the movement of the goods. In absence of any cogent evidence and any allegation of connivance, we hold that the allegations of clandestine removal are clearly presumptive. We further observe that the charge of clandestine removal is a seriou....
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....ers including the Officers of DRI, we take notice that the Hon'ble Supreme Court in its ruling in Canon India Pvt. Limited vs. Commissioner of Customs -2021 SCC ONLINE SC 200 hasheld that Notification No. 40/2012 dt. 02.05.2012 appointing the Officers of DRI as proper Officer (under Customs Act), having been issued by an Authority which has no power to do so in purported exercise of power under a Section, which does not confer such power. We reproduce the findings of Hon'ble Supreme Court in para 22 of the order, which reads as follows: - "22. If it was intended that officers of the Directorate of Revenue Intelligence who are officers of Central Government should be entrusted with functions of the Customs officers, it was imperative that the Central Government should have done so in exercise of its power under Section 6 of the Act. The reason why such a power is conferred on the Central Government is obvious and that is because the Central Government is the authority which appoints both the officers of the Directorate of Revenue Intelligence which is set up under the Notification dated 04.12.1957 issued by the Ministry of Finance and Customs officers who, till 11.5.2002, w....