AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 746
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....014 to the SEZ to Domestic Tariff Area (DTA) ... ..." which presumably is the reason for the Revenue to initiate search proceedings. On the same day i.e. 11/08/2014, a search was conducted at the Managing Director's (of AGPL) residence during which a statement of Managing Director i.e. Shri Sanjay Subrao Nikam was also recorded under Section 108 of the Customs Act. The above resulted in consequential searches on 12/08/2014 at the premises of M/s. Kallarakkal Jewellery at Angamaly, M/s. Smijo Gold at Vallachira, Trichur and also at M/s. Southern Gold Pvt. Ltd., Anchery, Tiruchur. Statements under Section 108 of one Shri E.N. Girish, Manager of M/s. Kallarakkal Jewellery was recorded and the Revenue had also recovered gold ornaments weighing 11095.90 grams. Similar statements of Shri Jackson A.T., Manager of M/s. Southern Gold Pvt. Ltd. and Shri M.K. Babu, owner of M/s. Smijo Gold were recorded. Thereafter, Revenue examined various firms and has recorded statements under Section 108 of the accountable persons of the above firms. 1.2 In the show-cause notice, the allegation based on the above statements are, inter-alia, that AGPL had violated various provisions / rules of SEZ, the ....
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.....A. Collins, Director of M/s. Southern Gold Pvt. Ltd. and Shri M.K. Babu, Proprietor of M/s. Smijo Gold, M/s. Ajay & Co., M/s. Leo's Angel Gold, Trichur, Shri K. Venugopalan, Accountant for M/s. Kallarakkal Jewellery and S/Shri Ujval Jose, Joemon and Happy Kurien, Partners of M/s. Awesome Jewel Concepts, Trichur under Section 112(b) of Customs Act, 1962. 2.1. To, cut it short, AGPL and its MD Shri Sanjay Subrao Nikam were directed to show-cause as to why: (i) 385512.5 grams of gold bars diverted from the premises of M/s. Ashwin Gold Pvt. Ltd., at CSEZ by Shri Sanjay Subrao Nikam, Managing Director of the firm, should not be confiscated under the provisions of Section 111(b), (d), (j), (k) and (o) read with Section 120 of the Customs Act, 1962. (ii) 11095.90 grams of gold ornaments seized from M/s. Kallarakkal Jewellery, Angamaly, being made of 10 kgs. of gold bars of 995 purity, smuggled out from M/s. Ashwin Gold Pvt. Ltd., should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) of the Act, ibid. (iii) 6499.030 grams of gold articles seized from M/s.Smijo Gold, Trichur on 12-08-2014 being made of 6.5 kg of gold smuggled out f....
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....bid. 2.3. M/s. Joyalukkas Pvt. Ltd., Thrissur and its Managing Director Shri Joy Alukkas were directed to show-cause as to why:- (i) 10 kgs. of gold bars of 995 purity supplied by M/s. Ashwin Gold Pvt. Ltd., CSEZ should not be confiscated under the provisions of Section 111(k), (o) and 121 ibid. (ii) Penalty should not be imposed on them under the provisions of Section 112(b) ibid. 2.4. S/Shri Jeeson Davis, B.Jayakumar and T.R. Saji were directed to show-cause as to why penalty should not be imposed on them under the provisions of Section 112(b) ibid. 2.5. Shri K. Venugopalan, Accountant of M/s. Kallarakkal Jewellery, Angamaly was directed to show-cause as to why penalty should not be imposed on him under the provisions of Section 114AA ibid. 2.6. M/s. Southern Gold Pvt. Ltd., Trichur was directed to show-cause as to why:- (i) 4346.89 grams of gold seized from them should not be confiscated under the provisions of should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) of the Act ibid. (ii) Penalty should not be imposed on them under the provisions of Section 112(b) ibid. 2.7. Shri M.K. Babu, Proprietor o....
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....eared for the Revenue. We have heard the rival contentions and we have carefully considered the documents placed on record as well as various case law that were relied upon by both sides during the course of hearing. 5.1. Statements of Managing Director of AGPL Shri Sanjay Subrao Nikam have been recorded on 7 different dates right from the date of search and admittedly based on his statements alone, the consequential searches were initiated on 12-08-2014. In the earliest statement dated 11-08-2014 it is recorded inter alia that 10.5 kgs. of gold was received at his CSEZ unit on the Friday night on being cleared by the Customs on Friday, the clearance related work was done by his CHA viz. M/s. Sorabji & Company Pvt. Ltd., Cochin and that on Saturday at around 9 O'clock, he took the above 10.5 kgs. of gold in his Activa scooter out of the SEZ without obtaining the permission of the authorities when a person named Jeeson, a staff of M/s. Kallarackal Jwellery came there in a white car with another person, to whom the above 10.5 kgs. of gold was given. In his next statement dated 13-08-2014, it is recorded that his confession made on 11-08-2014 that 10.5 kgs. of imported gold was han....
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....e had removed machineries like the power press machine used in the manufacturing of ornaments and hence, the only way in which Shri Sanjay could deal with the 4 kg of gold, if released to him, would be by removing the same out to DTA clandestinely as he was doing earlier. Moreover, the license of the unit of M/s. Ashwin Gold within SEZ was suspended and hence the said unit has ceased functioning within CSEZ. Neither, in his statements recorded under Section 108 of Customs Act, 1962 nor in his reply to SCN, has Shri Sanjay submitted any details/documents to prove either bonafide nature of the transactions or as to show how he intended to use it, especially when licence of his unit within SEZ was suspended and he himself had removed all essential machinery from there. In this circumstance, the import of 4 kg of gold by M/s. Ashwin Gold cannot be considered as a bonafide import for use by unit within CSEZ but acquires the character of a transaction where gold was attempted to be imported for removing it clandestinely to DTA without payment of Customs duty thus making it liable for confiscation under Section 111(d) and (o) of Customs Act, 1962." 6.2. This finding has been seriously ....
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....he appellants M/s. Ashwin Gold Pvt. Ltd. cannot be sustained and therefore, the impugned order of confiscation of 4 kgs. gold is set aside. JURISDICTION 8. Learned advocates appearing for the appellants raised a common preliminary objection on the jurisdiction, to contend that SEZ Act is a complete code by itself, any violation committed by a SEZ unit, the SEZ Act and Rules incorporate sufficient safeguards and therefore, customs authorities have no jurisdiction. They have urged that the Customs (preventive) Commissionerate of Cochin is not the 'Authorised Officer' nor are they the 'Specified Offiers' under SEZ Act 2006, in terms of S. 21(2) &(3) of the said Act. They have also submitted that vide Notification Nos. S.O.2665(E) & S.O.2667(E) dated 05.August.2016 the Ministry authorised the jurisdictional officers of customs central excise to perform some functions in respect of any violations to the SEZ Act, inside a SEZ unit, that too, after obtaining permission from the Development Commissioner. It was further argued that it was only w.e.f. 16.09.2014 did the Ministry identify correct jurisdictional officers [Notification 15/02 - customs (NT) dated 07.03.2002, as amended by ....
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....the case and the submissions of both sides, we find that during the relevant period, the customs did not have necessary jurisdiction within the territory of Special Economic Zone. Hon'ble Gujarat High Court in Bharat J. Gandhi Vs. Union of India - 2010 (257) ELT 168 (Guj.) and Morgan Tectronics Ltd. Vs. CC, New Delhi - 2005 (316) ELT 276 (Tri. Del.) = 2014-TIOL-3113-CESTAT-DEL make the matter clear. CESTAT, Delhi in the case of Morgan Tectronics (supra) has inter-alia in para 8 of its decision observed as under: "8. Moreover, in terms of the Section 53(1) of the SEZ Act, 2005, the SEZ is deemed to be territory outside the Customs Territory of India, and the goods imported were meant for the unit in SEZ Noida. In our view, the Commissioner of Customs, Air Cargo, New Customs House, New Delhi had no jurisdiction to confiscate these goods and impose penalty on the appellant and it is only the Joint/Dy. Commissioner/Asst. Commissioner of Customs, in Noida SEZ Unit, who had the jurisdiction to take necessary action. For this reason also, the impugned order are not sustainable. 6.1 Hon'ble Gujarat High Court in the case of Bharat J. Gandhi (supra) has i....
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....se Act, 1944. This scheme had been subsisting for long under the Foreign Trade Policy with supporting notifications under Customs Act, 1962 and Central Excise Act, 1944. All that changed with the notification of the Special Economic Zones Act, 2005 and with section 51 specifying : '51(1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any other law than this Act. With this it is unambiguously clear that a proceeding under the Customs Act, 1962 in relation to a unit or developer in a Special Economic Zone will fail owing to lack of jurisdiction. More so, when section 53 states 53(1) A Special Economic Zone shall, on and from the appointed day be Deemed to be territory outside the customs territory of India for the purposes of undertaking the authorised operations. Authorized operations under the special economic zones Act, 2005 are the activities permitted to a developer by the Board of Approvals or those permitted to units by the Approval Committee. For units, the activities revolve around manufacture of goods....
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.... of such annual review. And shortage or failure to account for inputs is visited by recovery of duty and other penal action in accordance with the Special Economic Zones Act, 2005. There are adequate safeguards in that Act without the need to indulge in misadventure under the Customs Act, 1962 that does not extend to special economic zones. There are also provisions for action in the event of illicit removal by units. The notice issued by the Development Commissioner SEEPZ Special Economic Zone is testimony to it; proceedings thereon will suffice to safeguard the economic integrity of the nation. ...." [ Emphasized in italics by us] 8.5. The above two speaking orders have been subsequently, consistently followed in Sangam International (supra), Kishan Lal Jewels (supra), and Chetan Mayach (supra), to name a few. 9. Per contra, Revenue has relied on a decision of the Hon'ble Gujarat High Court in Oswal Agricomm (supra) wherein the questions that were required to be determined in the case as notified at paragraph 18 of the said decision are: 1. whether the customs authorities have the jurisdiction to issue any notice or to take any penal action under Sectio....
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....es of Meenakshi International, Charisma Jewellery, Sangam International, Bajirao Ghosalkar, Kishan Lal Jewels, Chetan Mayach and Morgan Techtronics, either co-ordinate division benches or single members of this Tribunal have consistently held that the authorities under the Customs Act do not enjoy such jurisdiction. The only discordant note has been struck by a Division Bench in Jatin Arora's case (supra). 10.1. However, in our opinion, we are not required to reconcile between these orders of this Tribunal as there is, already available to us, guidance from a High Court on this question. We are required, therefore, to reconcile between two decisions of the Hon'ble Gujarat High Court in Bharti Gandhi dated 07.12.2009 and Oswal Agricomm dated 06.07.2010. Whereas Bharti Gandhi holds that authorities under the Customs Act do not enjoy jurisdiction over SEZ units, Oswal Agricomm reaches the opposite conclusion, but without referring to its own earlier decision in Bharti's case. In any case and in our opinion, it is not for us to weigh the relative merits of the reasoning adopted by these two judgements, both being rendered by a High Court, to which we must defer. 10.2. How then mu....
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....insofar as the present appeals are concerned. The same reads as under: " DIFFERENCE OF OPINION 1. ..... 2. Whether Customs officer have jurisdiction to investigate the case and demand duty as held by the Member (Technical) or the issue is irrelevant and need not be considered as held by the Member (Judicial)...." 10.4.2. The relevant observations of the Learned Third Member are reproduced below for the sake of convenience: "88.5.1 Before the creation of the SEZ Act, 2005, the working of Special Economic Zones was regulated by the provisions contained in Chapter XA of Customs Act, 1962. As per Notification No. S.O. 320(E), dated 14-3-2006, issued under Section 52(1) of SEZ Act, 2005, the provisions of Chapter XA of Customs Act, 1962 were made inapplicable to the working of the Special Economic Zones. There is, thus, no linking provision under the SEZ Act, 2005 making the provisions of Customs Act, 1962 applicable to the working of Special Economic Zones after 14-3-2006. Section 51 of SEZ Act, 2005 conveys that in the event of any inconsistency in the provision of any other law/instrument and the provisions of the SEZ Act, 2005 the provisions of....
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....e made in the light of the 'Statement of Objects and Reasons' contained in the beginning of the SEZ Act, 2005 and is reproduced below : "Statement of Objects and Reasons :- .... . . . 88.5.3 In order to protect the genuine Special Economic Zones and Units a consultation machinery has been provided between different agencies as per the provisions contained in Section 12(1)(c), read with the first proviso to Section 22 of the SEZ Act, 2005. Such provisions for mutual consultations are essential for the working environment intended for Special Economic Zones as one of the functions of SEZ Development Commissioner, under Section 12 of the SEZ Act, 2005, is to guide the entrepreneurs and to ensure taking up of suitable steps to promote export from SEZ and to monitor the performance of the Developer and the units in the SEZ. In the absence of any consultation done by the Revenue with the SEZ authorities and no action taken by the SEZ authorities under the SEZ Act, 2005 holding that operations undertaken by the appellants were not 'Authorized Operations', no duty and interest on the goods removed from SEZ to permitted storage area or a....
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....9) of Customs Act, 1962. Having said that, however, a situation as per situation (iv) of Para 89.1 above, may still exist where strict action against a defaulter could be required. 89.3 ..............In case, Revenue was of the opinion that action under the Customs Act, 1962 was required then there was a need for discussions between the appropriate authorities created under the SEZ Act, 2005 and the investigating agency as per the provisions contained in the First Proviso to Section 22, read with Section 51 of the SEZ Act, 2005. This aspect of consultation with the Development Commissioner/Officer has also been touched upon by Member (Technical) in Para 80 of his reasoning that such removals could have been regularized by Development Officer and that Customs officers could have waited before proceeding further. In the absence of any approval taken by investigating agency under Section 22 and due to the fact that all operations undertaken by the appellants was after approvals and intimations to the appropriate authorities under the SEZ Act, Customs Officers had no jurisdiction to investigate this case and demand duty under Customs Act, 1962 when the entire proceedings relat....