TaxTMI 
TaxTMI 
2024 (3) TMI 1295
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....gn Trade Policy (FTP) 2015-20 during the period 2016 to 2017. DIL had, inter alia, imported and sold 1426 kgs of gold to BL and similarly 800 kgs gold were sold to Jurassic Refiners & Jewels Pvt Ltd. The consignments of gold were cleared by DIL as Nominated agency, under bond, claiming exemption under Notification No.57/2000 dt.08.05.2000. DIL is a Nominated agency for import of gold, silver, etc., in terms of DGFT Notification No.88/2008 dt.26.02.2009 r.w. para 4.34 of FTP. Both BL & JR had exported gold kadas under shipping bills and upon fulfilling the prescribed conditions, had claimed replenishment of gold under the 'replenishment scheme' from nominated agency - DIL. 2. As per the two Impugned Orders, customs duty has been demanded from DIL along with equal penalty under Sec 114A in respect of duty-free import of gold supplied to BL & JR and penalty has been imposed on BL and JR as well as on the partner/director of these firms viz., Mr. Rahul Gupta & Mr. Ashish Gupta. Penalty has also been imposed on Mr. Nirakar Chand, CEO of DIL. Penalties on the three customs appointed jewellery valuers has also been imposed. 3. As per CBEC Circular No.27/2016 dt.10.06.2016, the nomin....
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....L/JR had not given them any specific sizes, specification/ design for kadas. They had manufactured various sizes ranging between 40 gms to 80 gms as per the standard sizes. 4.3. The said job worker manufactured and issued jewellery to BL/JR under delivery challans. Delivery challans contained information such as ornaments weight, wastage, receipt challan reference, making charges, etc. 4.4. BL/JR exported the jewellery manufactured by the said job worker, under replenishment scheme and thereafter, obtained gold from DIL under replenishment scheme as per the FTP read with Notification No. 57/2000. At the time of filing the shipping bills, they had submitted provisional invoices to the customs based on the 'notional rate certificate' issued by DIL (as per para 4.81(c) of HBoP). The provisional invoice consisted of information such as (i) Particulars, (ii) Gross weight of jewellery, (iii) net weight with wastage, (iv) rate per gram, (v) Total value in USD, (vi) FOB in USD, (vii) Wastage, (viii) Making charges (+) value addition @ 2.05% and (ix) Weight in 99.5% purity terms. FOB value mentioned in the shipping bills was inclusive of freight. All the exports were made to the forei....
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....ufactured on fully mechanized system. 4.7. It has been alleged that Mr. Rahul Gupta/Mr. Ashish Gupta, partner/director of BL/JR respectively, had admitted in his statement that they had not verified with the job worker as to whether the manufacturing of articles is by fully mechanized process or not. They have calculated the value addition not as per the formula given in the FTP, but by taking value of jewellery (+) value of wastage shown in the export invoice, on the gold rate as on the date of export, as provided by DIL, as the value of input. 4.8. BL also stated by their letter dt.17.06.2017 that they first raised provisional invoice at the time of export and final invoice was raised once replenishment gold was purchased against such export and the account was settled with the overseas buyer (remittance received) on the basis of final invoice. 4.9. It appeared to Revenue based on the statement of job worker, that the jewellery exported by BL/JR under the replenishment scheme, was not manufactured by fully mechanized process, rather semi- mechanized process. Hence the minimum value addition required is @ 3.5% as prescribed in Para 4.61(a) of HBP and not minim....
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....ll, customs approved invoice and bank letter supporting receipt of amounts/remittance. As per the FTP, to avail facility under replenishment scheme, by accepting EP copy of shipping bill, customs invoice and bank letter regarding receipt of the amount. As per the FT policy, an exporter was required to export jewellery made out of locally procured gold and realize the export proceeds and thereafter, obtain duty-free gold under the replenishment scheme. It appeared that DIL had not verified the required parameters in the shipping bill and corresponding export invoices for issuance of duty-free gold under the scheme. 4.15. It further appeared that there was no written agreement for the job work between BL/JR and the Job worker. It was orally agreed for a rate of Rs.5/gm. Further, the exporters declared higher making charges in their export invoices. There was no specific design and size given to the job worker who was asked to manufacture standard size kadas. All the purchase orders from M/s MN Khan Jewellers (FZE), Sharjah to BL/JR were for handcrafted jewellery with no specification as to weight and size of kadas. Though the purchase order was placed for handcrafted jewellery, BL....
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....num to the exporters. 4.18. It further appeared that while exact value of input was available (domestic price at which BL/JR purchased gold from refiners located in DTA), Appellants adopted the notional value for arriving at value addition to avail undue benefits. The value as per notional rate certificate issued by DIL, reflected value of gold (import price) which was prevalent on the date of issue of certificate, which had no relation with the value of inputs used in the manufacture or export of goods. Thus, it appeared that BL/JR with intent to evade payment of duty on the replenishment gold, which they were clearly not entitled as per the FTP, mis-declared the description of goods, value addition achieved, value of wastage and filed shipping bill which appeared to be mis-declared. It further appeared that BL/JR were required to achieve a minimum value addition of 3.5% instead of 2.05% as claimed by them. It further appeared that as gold jewellery was exported in violation of conditions for replenishment scheme under FTP 2015-20, it further appeared to be covered under definition of 'prohibited goods' as per Sec 2(33) and hence, liable for confiscation in terms of Sec 113(d) ....
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....was not fixed with the buyer. Thus, he was aware of the fact that there would be change in the value in final invoice issued by the exporters, which had bearing on the value addition. But he failed to take any steps to verify the fulfilment of the conditions of the notification and circular read with FTP. It appeared that he connived with the exporters - BL/JR resulting in evasion of customs duty on the gold supplied by them and thus, appeared to be liable to penalty under Sec 114AA of the Act. 4.22. Mr. P. Bhawarilal Jain, Mr. Satyanarayana Sharma and Mr. B. Ramkumar Jain, the Government/authorized jewellery valuers, appeared to have wrongly, and without proper verification, certified the wastage details and the process of manufacture of jewellery in the certificates issued at the instance of the customs dept. to BL/JR. These persons admitted that they were only entitled to certify the purity and not other aspects. The said certificates were presented by BL/JR to mislead the customs and the nominated agency - DIL for availing duty-free gold against the shipping bills, by mis-declaring the rate and value addition. Therefore, it appeared that aforementioned three jewellery valuer....
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....on 28(9) of Customs Act and is also hit by the Judgment of Hon'ble Delhi High Court in Swatch India, wherein it is has been held that adjudication beyond the period laid down in Section 28(9) would be a nullity in law. (e) Whether the Adjudicating Authority have rightly imposed penalty (i) of Rs.8,00,00,000/- under Section 114 (iii) of the Customs Act, 1962 on M/s Bullionline LLP; (ii) of Rs. 1,00,00,000/- on Shri Rahul Gupta, Partner of M/s Bullionline LLP, under Section 114(iii) and 114AA of the Customs Act, 1962, each; Rs. 6 crore on Jurassic Refiners and Rs.70 Lakhs each u/s 114(iii) and 114AA on Mr. Ashish Gupta. (f) Further, in case of BL whether penalties have been rightly imposed as under:- S.No. Penalty imposed on Amount of penalty Penalty imposed under Section 1. Shri P. Bhawarilal Jain (Govt. Approved Jewellery Valuer) Rs.25,000/- Sec 114(iii) of the Customs Act 1962 Rs.25,000/- Sec 114AA of the Customs Act 1962 2. Shri Satyanarayana Sharma (Govt. Approved Jewellery Valuer) Rs.25,000/- Sec 114(iii) of the Customs Act 1962 Rs.20,000/- Sec 114AA of the Customs Act 1962 3. Shri B. Ramk....
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....same to various exporters for the manufacture of jewellery and subsequent export. The Exemption Notification No. 57/2000 dated 08.05.2000 gives outright exemption to the import made by Nominated agency, in case of 'Export against supply by Nominated Agencies'. Duty is payable only when exports quantity do not tally (short fall) with quantity given to exporters, in advance procurement scheme. 10. In the instant case, DIL imported goods during the period 2016-17 and supplied by way of replenishment (post export) to M/s Bullion Line LLP (BL) and to M/s Jurassic Refiners Pvt. Ltd. (JR). 11. The exemption notification (as amended till December 2016) is reproduced below:- Notification No. 57/2000-Customs In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962, (52 of 1962), and in super- session of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 144/93-Cus. dated the 28th June, 1993 [G.S.R. 480(E) dated the 28th June, 1996] except as respects things done or omitted to be done before such super-session, the Central Government, being satisfied that it is necessary in the public....
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....r / platinum representing the difference between the quantity issued and that contained in the exported jewellery or articles. Provided also that the nominated Agencies ( except for those authorised by RBI) shall follow the procedure and fulfill the conditions as specified in the Policy circular no. 77 (RE-2008)/2004-09 dated 31st March 2009 as amended from time to time, issued by Director General of Foreign Trade.-, Explanation-for the purpose of this notification,- (a) "Foreign Trade Policy, 2015-2020" means the Foreign Trade Policy, 20152020, notified by the Government of India in the Ministry of Commerce and industry published in the Gazette of India, Extraordinary, Part - II, Section 3, Sub section (II) vide notification No. 01/2015-2020, dated the 1st April, 2015, as amended from time to time; (b) "Handbook of Procedures, Volume-1" means the Handbook of Procedure, Volume-1, notified by the Government of India in the Ministry of Commerce and industry published in the Gazette of India, Extraordinary, Part - I, Section 1 vide Public NoticeNo. 01/2015-2020dated the 1st April, 2015, as amended from time to time; (c) "Nominat....
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....ewellery sector are given in paragraph 4.61 of Handbook of Procedures. It would be calculated as under: VA = (A-B)/B x 100, where A = FOB value of the export realised / FOR value of supply received. B = Value of inputs (including domestically procured) such as gold / silver / platinum content in export product plus admissible wastage along with value of other items such as gemstone etc. Wherever gold has been obtained on loan basis, value shall also include interest paid in free foreign exchange to foreign supplier. 4.39 Wastage Norms- Wastage or manufacturing loss for gold / silver / platinum jewellery shall be admissible as per paragraph 4.60 of Handbook of Procedures." 14. Relevant provisions of Hand Book of Procedures 2015-20 related to Gems & Jewellery sector are as under: "2.57 Interpretation of Policy (a) The decision of DGFT shall be 'final and binding' on all matters relating to interpretation of Policy, or provision in Handbook of Procedures, Appendices and Aayat Niryat Forms or classification of any item for import / export in the ITC (HS). 4.60 Wastage Norms....
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.... of gold/ silver/ platinum content plus wastage claimed and its equivalent quantity in terms of 0.995/0.999 fineness for gold / silver and in terms of 0.9999 fineness for platinum and its value, (vi) FOB value of exports and value addition achieved. If purity of gold/silver/platinum used is same in respect of all or some of items made out from each of these metals for export, (vii) exporter may give total weight of gold/silver/platinum and other details of such similar items which are of same purity. In case of studded items, shipping bill shall also contain description, weight and value of precious/ semi-precious stones/ diamonds/ pearls used in manufacture and weight/ value of any other precious metal used for alloying gold/silver. 4.67 Conditions of Exports Exports shall be allowed by customs authorities provided endorsement made on shipping bill and invoice are correct and value addition achieved is not below minimum prescribed in FTP. 4.68 Proof of Exports (a) Exporter has to furnish the proof of exp....
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....pies of exporter's application together with copies of purchase certificate for exporter shall be sent by nominated agencies to concerned Custom House as well as to the negotiating bank who will confirm realization at which gold has been purchased. Exporter exporting under notional rate will get replenishment only after proceeds are realised. (d) Exports shall be effected within a period of 120 days from date of booking and drawal of precious metal shall be completed within a period of 150 days from date of booking or within 30 days from date of export whichever is later." 15. Relevant Circulars are: a) Customs Circular No. 27/2016 dt.10.06.2016: Nominated agency to take EP copy of shipping bill and monitor export realisation. b) DGFT Policy Circular No. 28/2019 dated 27.09.2019: Clarifying cost of input to be that of duty free gold. c) Office Memorandum DGEP/G&J/06/2017/904 of September 2019: Interpretation of DGFT is final regarding FTP. d) Clarification dated 13.11.2020 of DGFT that duty free gold refers to the gold given by nominated agency to exporter. e) Clarification DGEP/G&J/06/2017/1344 dt.03.02.2020 abou....
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....lus admissible wastage along with value of other items such as gemstone etc. Wherever gold has been obtained on loan basis, value shall also include interest paid in free foreign exchange to foreign supplier. Hence Para 4.34 of FTP needs to be read with Para 4.82 of the HBP. Where it is clearly stated in Para 4.82(c) as below:- "Price shall be actual price at which gold/silver/platinum is purchased by nominated agencies plus permitted service charges levied by nominated agencies shall be included with the price of gold/ silver/ platinum for value addition." 16.4. The formula is a generic formula for advance as well as replenishment, whereas method of calculation is clarified in 4.82(c) for Replenishment scheme, does not leave any ambiguity regarding which price to consider for calculating 'value of inputs'. 16.5. That the value addition in export of jewellery was always to be assessed as per Para 4.38 of FTP 2015-20 (subject to minimum value addition as prescribed in Para 4.61 of HBP 2015-20) read with Para 4.82(c) of HBP 2015-2020 (i.e., Price should be actual price at which gold/silver/platinum was purchased by the nominated agencies plus permitted service charges ....
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....ree either on advance or on replenishment basis". 16.10. It was further argued that as per Para 2.57 (supra) of the FTP, it is the DGFT, and not DRI, the final authority on interpretation matters relating to FTP. 16.11. It was further submitted that the Customs authorities had duly verified the export goods as well as export documents i.e. shipping bill, export invoice and the certificate which was issued by the Govt. appointed Jewellery Valuer (as jewellery being fully mechanised) and the contents as mandated under the Section 50 & 51 of the Customs Act, including description of goods, value addition etc. The endorsements of Customs as prescribed under Para 4.67 of HBP i.e., checking export promotion copies of shipping bills and invoices was also verified by the nominated agency before the release of gold under the replenishment scheme. Section 50 & 51 of the Customs Act are reproduced hereunder: "50. Entry of goods for exportation.- (1) The exporter of any goods shall make entry thereof by presenting to the proper officer in the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of....
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....hich includes use of machines/machine tools at all the stages of manufacture. Have categorically stated in Hindi during cross examination - 'Pura Machine Se' 16.14. That the Appellant had sought Cross Examination of all the persons whose statements were relied upon by the Department including the Customs Officers and Customs Valuers. The Adjudicating Authority had sent multiple communications to custom valuers who failed to appear on flimsy reasons. Thus there was provided Cross Examination only of the Appellant's Job Worker - M/s Ghanshyam Das Jewellers' proprietor Mr. Harish Aggarwal. The Ld. Counsel also drew our attention to section 138B of Customs Act, which states that the statement are admissible in evidence (acquire relevance), only when they are, tested by cross-examination. Section 138B of Indian Evidence Act is reproduced here under: "138B. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of....
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....udgement passed by Hon'ble Delhi High Court in Swatch Group India case, where SCNs adjudicated, have been quashed. Reliance has been placed on Ruling in Gautam Spinners Vs. Commissioner Of Customs (Import), New Delhi & Anr. 16.17. The Ld. Counsel for Appellant M/s DIL submitted that DIL had imported gold under bond as per exemption Notification No. 57/2000 dt.08.05.2000, with only condition to verify - exporter have exported jewellery having gold content of equivalent quantity. DIL was only liable to account for the "quantity" imported which has been fully discharged by submitting proof of exports for the full quantity imported, and the bonds have been cancelled by the Customs after verifying the proof of exports submitted, in compliance to the provisions of the FTP. There is no whisper either in SCN or in Impugned Order(s) about bonds already cancelled in favour of DIL. 17. The Adjudicating Authority has erred in holding that the Appellants M/s BL/JR has wrongfully claimed replenishment and that they have done misdeclaration qua the manufacturing process as "Fully Mechanised" and Value Addition at "2.05%". The Adjudicating Authority has erred in holding that the App....
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.... example- Appellant BL sent 26 kg of gold plus 2 kg of alloy (approx), on 28.09.2016 vide challan No. 8 and received 28 kg of jewellery on 30.09.16. 23. Even the averment of Revenue- the order of the foreign buyer M/s M.N. Khan Jewellers (FZE), Sharjah was for "handcrafted plain gold jewellery" is incorrect. After perusal of the Purchase Order, it is evident that the request was for not only "handcrafted plain gold jewellery", but for "Indian Plain/Studded Gold/Diamond Jewellery handcrafted plain/ meena with KDM soldering". Further the purchase order is also subject to orally agreed variation, as mentioned in clause 8 of purchase order. Further, if the Appellant had sent goods not meeting the requirement of the buyer, it would have not been accepted at the very first instance, seeing the description on the documents. However this is not the case in the present matter and even the payment has been realized, that too after the shipment has been exported, and cleared by the foreign buyer. The goods exported were Plain Gold Kadas which has not been disputed by the Department and the only dispute is about the manufacturing process, which has been clarified as above. 24....
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....oice/price. Adjudicating Authority has reworked the valuation and arrived at '-6.25%' on final FOB prices as against the value addition claimed by the exporters @ 2.05%. 27.2. Two key issues having a bearing on the merits of the Appeals are: i) Whether or not the subject 'kadas' were manufactured by a 'fully mechanized' process as declared by BL/JR in the shipping bills. ii) Whether or not the claim made by BL/JR that the value addition was "2.05%" of the export FOB value, is correct? 27.3. The preliminary ground urged in the Appeal memorandum is that M/s BL/JR was not allowed to peruse the original documents and the case file. Para 5.1.2 & 5.1.3 of the OIO deal with the objection raised by BL/JR relating to providing of certain documents including non-relied upon documents (RUDs). The Adjudicating Authority has rightly dismissed the objections by pointing out that BL/JR had already received the documents not relied upon and copies of all RUDs were provided. In these circumstances, there was no need to allow examination of the case file of the department. Since copies of all RUDs were furnished to BL/JR and the OIO has not relied upon any material other than....
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.... Adjudicating Authority further observed that the three jewellery valuers in their respective statements have averred, inter alia, that - the certificate with respect to wastage, is as per the wastage stated in the export documents and he had not examined the wastage with any authentic method. Further, he had copied down the wastage as 0.896% as mentioned in the export document. As regards method of manufacture, they had stated that they had not seen the process of manufacture and only the manufacturer or the job worker could precisely tell whether the subject gold jewellery was manufactured with fully mechanized process or not. Without intervention of artisans, it was not possible to manufacture gold jewellery. As it was stated in the export invoices "fully mechanized", the same was copied by them in their report. Further, they were not authorized to issue certificate, certifying the method of manufacture and they were authorized to certify only the purity and content of gold. They also requested to consider the certificate only to the extent of purity of gold and not as regards wastage and process of manufacture, as they have not been authorized to certify the same. Further, they....
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....r, the Adjudicating Authority did not see any justification to accede to the request citing support from case law. Further, no statements were recorded from them and nowhere, they had averred about the aspects of value addition or process of manufacture. 32. The cross-examination of Mr. Harish Chand Agarwal (job worker) was held on 11.03.2020 wherein he made it clear that no statement in English was given by him, nor he stated manufacturing process as 'semi mechanised'. He had stated- "pura machine se", i.e. fully mechanised. The Adjudicating Authority has held that wherever the witnesses co-operated by way of accepting the request to appear for cross, he had conducted the same. The Adjudicating Authority has relied upon several pronouncements concerning denial of cross of witnesses. 33. Further urges, the Adjudicating Authority has dealt with each request fairly and has met them wherever found feasible, allowing also cross-examination through virtual mode. Thus, the argument of violation of principles of natural justice on this account has no merit. 34. The contention of the Appellants - BL/JR that they will file their final reply only after completion of cross-examinatio....
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....s of Customs Act read with Notification No. 57/2000-Cus. 37.3. So far the issue regarding manufacturing processes is concerned, we find that the job worker has categorically stated that he has used machines and/or machine tools at each stage of the manufacturing process. Firstly, he has used electric furnace to melt the metal that is gold with the alloy. Thereafter, the alloyed gold was fed into rolling machine and the said machine gives flat sheets (patty) of about 1 inch width and thickness, which varies on the size of the Karra. Thereafter, the gold sheet so obtained is fed into the design printing machine and embossed sheets are obtained. Thereafter, cutting as per the required length for making the kada of particular size, is done by Cutter and further, chiselling is done by mechanised handheld Chiseller device. Thereafter, polishing is done by putting the Kadas in the polishing drum/machine. The aforementioned process, in trade parlance, means fully mechanised. The Adjudicating Authority has misconceived the fully mechanised process with automation. Mechanisation and automation are quite different and not the same thing. Manufacturing with the use of machines means mechani....
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....nd clarifications issued in this regard. As already discussed and elaborated upon in view of the extent policy guidelines as well as clarifications, it is obvious that the interpretation of DGFT Authority would prevail over Customs Authority, which has also been admitted by DGEP in their circular (quoted supra). Therefore, if that norm is followed instead of the calculation method adopted by the Revenue, the requirement of Notification No. 57/2000 is met, in as much as, the conditions for duty-free imports stand fulfilled and therefore, there is no short levy. In this regard, it had already been discussed in foregoing Paras that having regards to the statements and factual position narrated and arguments made by the Appellants, the process of manufacturing of jewellery is 'fully mechanised' and therefore, the value addition norm would also be 2% and not 3.5% as alleged by the department in the SCN and upheld by the Adjudicating Authority. 37.6. As regards submission of the Revenue that there is no evidential value of email clarification dt.13.11.2020 produced by the Appellant on 03.10.2023 i.e., after issue of OIO in relation to clarification with regard to Policy Circular No. 2....
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....he customs attested invoice. The Appellant - DIL has stated that the customs attested documents give exporter the entitlement for quantity of duty-free gold and the Appellants were bound by it. 37.9. We further find that such verification, as regards the percentage of wastage declared and value addition etc., was to be done by the customs authorities at the time of export, especially, when it is declared to be an export under replenishment scheme. That is, before giving the let export order. There is no allegation in the SCN that the customs authorities - proper officer did not perform their duty diligently or have abetted with the exporter. Further, all duly endorsed documents were submitted by DIL to jurisdictional Customs officer for final assessment and closure of the bond and the said bonds were closed without raising any doubt or query based on endorsement of proper officer of customs, at the time of export of gold jewellery. Thus, the whole allegation is not substantiated and has got no legs to stand. 37.10. We further find that there is also no allegation that the Appellant have exported gold jewellery using less quantum of gold, than declared or made by some other me....