TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 739
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....ered to be recovered with interest under section 28AA of the Customs Act, 1962 [the Customs Act] by enforcing the bond executed by MMTC with the customs authorities. The appellant is also aggrieved by that portion of the order that imposes a penalty of Rs. 1,70,000/- under section 112 of the Customs Act for acts and omission of the appellant. 2. Customs Appeal No. 50776 of 2020 has been filed by Sudhir Bhalla, proprietor of appellant, to assail that part of the order dated 09.01.2020 passed by the Principal Commissioner that confirms penalty of Rs. 1 lakh upon him under section 114AA of the Customs Act. 3. The appellant is a manufacturer of gold jewellery, which it not only exports but also sells in the domestic market. 4. The appellant availed the benefit of a Scheme called "Export Against Supply by Nominated Agencies" as contained in the Notification. Prior to 15.05.2015, the nominated agency, which in this case is the MMTC, in terms of the Notification was allowed to import gold without payment of duty after executing a bond with the Assistant Commissioner of Customs. The gold imported by the nominated agency was then required to be exported in the form of jewellery or ....
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.... 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby directs that each of the notification of the Government of India in the Ministry of Finance (Department of Revenue), specified in column (2) of the Table hereto annexed shall be amended or further amended, as the case may be, in the manner specified in the corresponding entry in column (3) of the said Table, namely :- Serial number Notification number and date Amendments (1) (2) (3) ***** ***** ***** 5. 57/2000-Customs, dated the 8th May, 2000, G.S.R. 413 (E), dated the 8th May, 2000 In the said notification,- (I) in the opening paragraph (i) in clause (a), for the word, letter and figures "paragraph 4A.14", the word, letter and figures "paragraph 4.46" shall be substituted; (ii) in clause (b), for the word, letter and figures "paragraph 4A.9", the word, letter and figures "paragraph 4.41" shall be substituted; (iii) the second proviso shall be omitted; (emphasis supplied) 7. It would be seen that prior to 15.05.2015, in terms of the second proviso to the Notification, the importer had to in case of i....
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....ated 10.01.2011 and 1 kg duty free gold procured by said M/s Prem Jewellers vide DG03O/0000163/10-11 dated 19.01.2011 were declared as non export and Customs Duty and Interest totaling Rs. 62,560/- in this regard was deposited vide TR-6 challan dated 30.06.2011 (RUD-53) with the govt. exchequer by M/s MMTC. Further, 2 kg duty free gold procured by said M/s Prem Jewellers vide DG03O/000188/11-12 dated 16.12.2011 were declared as non export and Customs Duty and interest totaling Rs. 66,372/- in this regard was deposited vide TR-6 challan dated 17.05.2012 (RUD-54) with govt. exchequer by M/s MMTC. Further, 500 grams of duty free gold procured by said M/s Prem Jewellers vide DG03O/000093/15-16 dated 17.07.2015 was declared as non export and Customs Duty and interest totaling Rs. 1,37,120/- was deposited vide TR-6 challan dated 26.10.2015 (RUD-55) with govt. exchequer by M/s MMTC." 11. As noticed above, the show cause notice had divided the Bills of Entry into two sets; one for which the exports were not made and the other for which the exports were made. The relevant paragraph of the show cause notice in respect of these two sets of Bills of Entry is reproduced below: "25. ....
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....-B.1. No. Shipping Bill No. Particulars Customs duty demand (in Rs.) 1. S.B. No. 7331 dated 21.10.2015 Invoice No. DG03O/000151/15-16 dated 07.09.2015 (BOE No. 2398703 dated 28.08.2015) 737,498.03 Invoice No. DG03O/000151/15-16 dated 10.09.2015 (BOE No. 2398703 dated 28.08.2015) 220,076.79 2. S.B. No. 7463 dated 26.10.2015 Invoice No. DG03O/000157/15-16 dated 10.09.2015 (BOE No. 2398703 dated 28.08.2015) 517,421.24 Total 14,74,996.05 As discussed in above paras, M/s Prem Jewellers are liable to pay Customs duty forgone amounting to Rs.14,74,996.05/- on 2 export consignments of Gold Jewellery as detailed above in which the duty free gold, totally weighing 6 Kg. procured from nominated agency i.e. M/s MMTC was not utilized for the purpose of export. Further, the purported consignments of Gold Jewellery were diverted in the domestic area through well planned modus operandi which included domestic carriers, international bound passengers, non manufacture of gold jewellery from duty free gold obtained from nominated agency etc. Further, M/s Prem Jewellers are liable to pay Customs duty forgone amounting to Rs. 2,51,983....
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....hir Bhalla and confirmed the demand proposed in the show cause notice. The order proceeds on the footing that the appellant failed to fulfill the conditions contained of the Notification for the reason that the gold jewellery declared by the appellant in the two Shipping Bills dated 21.10.2015 and 26.10.2015 was not manufactured from the duty free gold procured by the appellant from MMTC. The relevant findings recorded by the Principal Commissioner are reproduced below: "65. It has been argued that the notification nowhere says that the very same gold, which is procured from the nominated agency, should be used in the export jewellery; that there is no way of identifying the source of gold in gold jewellery. It has been stated that a jewellery containing gold sourced from India or abroad and of the same caratage will have identical physical and chemical characteristics and there is no way to distinguish gold procured from two different sources. The exporters have thus argued that the very premises of the department's case falls. I have carefully gone through the provisions contained in the notification No. 57/2000-Customs dated 08.05.2000 and find that the benefits if any ....
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....jewellery which they knew are liable for confiscation. In view of the above undisputed fact that penalty under the provisions of Section 112 of the Customs Act, 1962 becomes imposable on them." (emphasis supplied) 16. The Principal Commissioner also imposed penalty upon Sudhir Bhalla under section 114AA of the Customs Act for the following reasons: "82. I also find that so far as the penalties under Section 114AA are concerned, these are imposable if a person knowingly or intentionally makes, signs or uses or causes to be made, signed or used, in a declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purpose of the Customs Act. Accordingly, considering the facts of the case where the export bound gold jewellery has been tried to and has actually been diverted to the domestic area thereby blatantly misusing the documentation made for the purpose of custom clearance tantamount to making a false or incorrect statement which falls under the acts of omission and commission categorized under Section 114AA of the Customs Act, 1962. The roles played by each and every person in committing the fra....
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....tom clearance." (emphasis supplied) 18. It would, thus, be seen that the duty foregone determined at Rs. 17,26,979/- covers both the set of Bills of Entry involving 4.5 kgs of gold and 6 kgs of gold. 19. Shri Rajat Dosi, learned counsel for the appellant made the following submissions: (i) There is no requirement of one-to-one co-relation under the Notification between the consignment of gold imported by MMTC and the export of jewellery. Thus, customs duty foregone could not have been confirmed. In support of this contention, learned counsel placed reliance upon the Circular dated 23.07.2018 issued by the Central Board of Indirect Taxes & Customs, New Delhi; (ii) In respect to the first set of the Bills of Entry concerning 4.5 kgs of gold, MMTC had already paid the applicable customs duty with interest before the initiation of the investigation and, therefore, the demand could not have been confirmed; (iii) The period involved in respect of 6 kgs of gold is from 21.10.2015 to 26.10.2015. During this period the second proviso to the Notification, of which violation has been alleged, had been omitted and, therefore, there was no obligation on the p....
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....otification also requires that in case the quantity of gold issued has not been utilized for exporting jewellery, the department can demand duty only the quantity of gold that has not been manufactured. The MMTC, on its own, had deposited the entire amount of duty with interest. It, therefore, cannot be alleged that the appellant had violated the conditions of the Notification. The order also does not give any reason for confirming the duty in respect this 4.5 kgs of gold. 23. In respect of second set of the Bills of Entry contained in Table-B, it seen from the impugned order passed by the Principal Commissioner that violation of the Notification has been found for the reason that the appellant exported jewellery by Shipping Bills dated 26.10.2015 and 21.10.2015, but the jewellery was not manufactured from the duty free gold procured by the appellant from MMTC. 24. The contention advanced by the learned counsel for the appellant is that in terms of the Circular dated 23.07.2018 issued by Central Board of Indirect Taxes & Customs, New Delhi, there is no requirement of establishing one-to-one co-relation between the consignment of gold imported by MMTC and the export of jewelle....
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....5. 28. The appellant has brought on record Notification No. 33/2015-Cus dated 15.05.2015. At Serial No. 5 (iii) of this Notification, the second proviso to the Notification has been omitted. On omission of the second proviso, the condition that required MMTC to execute a bond with the Assistant Commissioner to the effect that MMTC may either itself or through other exporters export gold equivalent to the imported gold within a period of 120 days from the issue of gold to the exporters was not in existence. The Principal Commissioner is, therefore, not justified in asserting that either MMTC or the appellant had failed to fulfil the conditions stipulated in the Notification. The appellant may have given an undertaking to the MMTC and MMTC may have executed a bond with the Assistant Commissioner, but as the second proviso to the Notification had been omitted on 15.05.2015, and the period involved is from 21.10.2015 to 26.10.2015 recovery of duty from the appellant could not have been made. Any demand, therefore, made for non-fulfillment of the conditions stipulated in the second proviso to the Notification is without any authority of law. 29. The submission advanced by the lear....
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....hould be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain." (emphasis supplied) 32. After examining various judgments of the High Courts and the Tribunal, the Tribunal observed as follows: "28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate that when the provisions of clause (a) of these two sections are not applicable, then the statements made under section 14 of the Central Excise Act or under section 108 of the Customs Act during the course of an inquiry under the Acts shall be relevant for the purpose of proving the truth of the facts contained in them only when such persons are examin....
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.... has been held in a catena of judgments including Jindal Drugs Pvt. Ltd. versus Union of India [2016 (340) E.L.T. 67 (P&H)] that section 9D is a mandatory provision and if the procedure prescribed therein is not followed, statements cannot be used as evidence in the proceedings under Central Excise Act. The relevant extracts are as follows: "13. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof. 14. Clause (a) of Section 9D(1) refers to the following circumstances : (i) when the person who made the statement is dead, (ii) when the person who made the statement cannot be found, (iii) when the person who made the statement is incapable of giving evidence, (iv) when the person who made the statement is kept out of the way by the adverse party, and (v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense. 15. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is sel....
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....cer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. 19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during invest....