TaxTMI 
TaxTMI 
2025 (10) TMI 825
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....whereby the Commissioner confirmed the respective demand of Customs duty along with interest and penalty on the appellants herein. 2. Brief facts in general are: 2.1 This is a case where duty free gold imported by nominated agencies/appellants (HDFC, MMTC, DIL and SBI) was procured by M/s. P.H. Jewels/exporter [PHJ] to export gold jewellery under the scheme of Exporters of Gems and Jewellery under Foreign Trade Policy 2015-20 [FTP] was not exported but diverted into domestic market without payment of applicable customs duty which led to the violation of the conditions under the exemption Notification No.57/2000-Cus dated May 5, 2000 read with Circular No.27 of 2016-CUS dated June10, 2016 and FTP during the relevant period of export from April 27, 2016 to December 27, 2016. The Proprietor of PHJ, namely, Smt. Radhika Aggarwal entered into agreement with the various nominated agencies for obtaining duty free gold for exporting the gold jewellery within a period of 90 days from the date of purchase. Her husband, Shri Sanjay Aggarwal being the power of attorney holder of PHJ was actively participating in business activities and was looking after the day-to-day affairs of the comp....
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....ers of Directorate of Revenue Intelligence [DRI], case was investigated against PHJ, MMTC, DIL, HDFC and SBI, for diversion of duty free gold bullion into domestic market without payment of applicable customs duties and submission of fraudulent documents to nominated agencies by PHJ. Show cause notice [SCN] dated January 22, 2021 was issued by DRI to all these parties demanding customs duty under Section 28(4) of the Act, read with the relevant notification and the circular, from the appellants being the importer of duty free gold along with interest and penalty under Section 112(a) & (b) and Section 114A of the Act. Smt. Radhika Aggarwal and Sanjay Aggarwal were called upon to pay penalty under Section 112(a) & (b) and Section 114AA of the Act. The Custom House Officer, namely, Shri Manish Kumar Mishra, Shri Shantanu Das and Shri Tapan Kumar Sen were also called upon to pay penalty under Section 117 of the Act. On adjudication, the learned Commissioner passed the impugned order, confirming the demand of Customs duty on the nominated agencies being the importers along with interest and penalty of Rs1,00,00,000/- on each of them under Section 112(a) while setting aside the penalty u....
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....plus the customs duties; that the same was debited from their account and held with the bank till the proof of export was submitted to the bank. 4.3 He also opined that PHJ had filed three Triplicate copies of the same Shipping Bill with three different Nominated Agencies towards proof of export for fulfilment of export obligation; that they have utilised one shipping bill with multiple references (invoice numbers of different agencies) three times to claim the export benefits. The diversion of duty-free gold is established by the Bank Account Statement of PHJ revealing transactions with other buillion trading companies, i.e. M/s. J.J. House Pvt. Ltd., Kolkatta and M/s. Magna Projects Pvt. Ltd., Kolkatta. 4.4 Shri Harshad Ajmera of M/s. JJ House Pvt. Ltd., Kolkata, confirmed that Shri Sanjay Agarwal interacted with them for the sale of 364 Kgs of gold bullion purchased by PHJ from HDFC. He submitted 17 original invoices issued by PHJ, copies of authorizations from Smt. Radhika Agarwal to M/s Brink's India Pvt. Ltd., and delivery challans issued by Brink's India. The gold bar numbers in these documents matched those on the Bills of Entry and Packing Lists of the duty-f....
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....es of shipping bills along with invoice & packing lists to MMTC as alleged proof of export for 454.6242 kgs. of duty-free gold bullion purchased between April, 2016 and December, 2016. 4.12 MMTC accepted incomplete Triplicate Copies of Shipping Bills from PHJ, which lacked crucial air shipment details such as flight number, date, time, and endorsement of "air shipped" on the second page. MMTC relied solely on the assessment signatures of Customs Officers without verifying the essential export endorsement, thus treating incomplete documents as valid proof of export. On intimation of fraud by PHJ, MMTC deposited the entire duty amount of Rs.4,87,44,885/- with the Government prior to the issuance of the show cause notice, which has been adjusted against their duty liability. Transactions with DIL 4.13 On 02.09.2015, Smt. Radhika Agarwal entered into an agreement with DIL for procurement of precious metals and authorized Shri Sanjay Agarwal to perform all acts relating to purchase, price fixation, documentation, transaction and delivery of gold. Between September 2015 and April, 2017, PHJ procured 839 kgs. of duty-free gold bullion under the Outright Purchase and 99 kgs. un....
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....7/2000-Cus, FTP provisions, and the terms of the Bond executed with Customs. DIL has paid Rs.10,47,15,735/- as duty and Rs.1,08,30,502/- as interest in respect of 373 Kgs, but is yet to pay Rs.11,97,232/- and applicable interest in respect of the remaining 4.499 Kgs. 4.20 Shri Nirakar Chand expressed DIL's inability to pay the outstanding Customs Duty of Rs.11,97,232/- and interest on 4.499 Kgs. citing non-receipt of funds from PHJ. 4.21 Out of the duty-free bullion supplied by DIL, 100 Kgs was diverted and sold by PHJ to M/s. J.J. House and M/s. Magna Projects as evidenced by serial numbers of the gold bars. The proceeds of this domestic sale were received in PHJ's ICICI Bank account, which was then utilized to purchase more duty-free bullion from DIL and HDFC. Transactions with SBI 4.22 Under an agreement, SBI supplied 20 Kgs of duty-free gold bullion to PHJ under Outright Purchase Scheme. In support of the purported export of the said gold, PHJ submitted Shipping Bill No.2324 dated 27.12.2016. However, the same Shipping Bill was also submitted in a fabricated form to MMTC. Further, the Invoice & Packing Lists attached to the Original Copy of the said Shipping....
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....pellant. One of the contentions raised by the learned counsel is that the learned Commissioner has gone beyond the scope of the show cause notice and has, thereby exceeded his powers. On merits, the learned Counsel submitted that the appellant was not under any obligation to execute the Bond for import of gold with regard to the 4 B/Es during the period between 23.06.2016 to 22.08.2016. The bonds were executed by the appellant on its own which are, therefore, without any authority of law. The submissions of the learned counsel is that the requirement of executing the Bond under 2nd proviso to Notification No.57/2000 was omitted vide Notification No.33/2015 and the same were re-inserted in Notification No.57/2000 vide Notification No.56/2015-Cus dt.3.10.2016. During the period between 15.05.2015 to 3.10.2016, there was no obligation on the Nominated Agencies to execute the Bond. Learned counsel also submitted that the export document submitted by the exporters were duly attested by the Customs Officers and hence, there was no reason to disbelieve the same. Once the documents relating to export goods have been verified and sealed by the customs officials, there is no reason to doubt ....
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....ated copy of export invoices. Further, he submitted that the appellants having imported the gold by giving Bond and BG undertaking to export gold Jewellery either by itself or through other exporters equivalent to the gold imported within a period of 90 days. He further submitted that Bond executed by the importer clearly states that the conditions laid down in the customs notifications, if violated or not fulfilled then the importer is liable to deposit the differential duty forgone on account of the notification and therefore the demand has been rightly made against the nominated agencies. As per section 143 of the Act, the differential duty can be realised by the Department without prejudice to the right of the department to demand duty under section 28. The learned Authorised Representative justified the imposition of penalty as well as the invocation of the extended period of limitation and retreated the findings of the learned Commissioner. Analysis On Merits 10. The settled proposition is that importation of gold would come within the purview of prohibited item within the meaning of Section 2(33) of the Act as it falls in the 'restricted' category of goods. The policy ....
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.... in the event of the exporter not fulfilling his export obligation within the period prescribed under the foreign trade policy: (ii) For the purpose of para (i) above, the Nominated Agencies may execute a bond for an amount equivalent to the duty involved on the import of a particular consignment, or, a general bond for an amount equivalent to the duty involved on quantity of precious metal likely to be imported over a specified period as declared by the importer; (iii) The Nominated Agency shall, along with the bond, furnish a bank guarantee equal to 25% of the estimated amount of duty involved. (vii) As far as exporters operating under replenishment scheme are concerned, they may be permitted to receive precious metal from the Nominated Agencies on submission of EP copy of the shipping bill. Nominated agencies shall also monitor the export proceeds realization of such shipments against which they have replenished precious metal, on the basis of Bank certificate of realization to be submitted by exporters to the nominated agencies, as a proof of having exported the jewellery. (viii) The Nominated Agencies would supply the gold/silver/ platinum f....
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....be followed by the Nominated Agencies for the import of gold and other precious metals under the Scheme of Gold Import. Para 4.77 Export Against Supply By Foreign Buyer (a) Before clearance of each consignment of import supplied by foreign buyer, Nominated Agency/Status Holder having Nominated Agency Certificate shall execute a bond with Customs, undertaking to export within stipulated period in contract, gold/silver/platinum jewellery or articles equivalent to entire import quantity of gold/silver/platinum, mountings and findings etc. excluding admissible wastage. Para 4.78 Payment of duty for quantity not exported. Nominated agency/Status Holder having Nominated Agency Certificate/exporter shall be liable to pay customs duty leviable on that quantity which is proved to have not been exported. Para 4.78 also prescribes that Exporter may also obtain, in advance, gold/silver/platinum etc. supplied by foreign buyer by furnishing a BG/LUT for an amount equal to international price of such items plus customs duty payable thereon. 15. From the aforesaid legal framework, it is evident that the responsibility to pay the Customs duty is on the nominat....
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....ith the Bank at any time for the amount so paid by the Bank by way of customs duty and other levies and such debit shall be binding on the Purchaser. The covenants above would stand modified to be in congruence with changes in the relevant legislation governing the sale of bullion to exporter clients by the regulatory/statutory authorities." The terms of the aforesaid clause are plain and simple declaring the intent of the parties that the liability to pay the customs duty in the event the purchaser fails to export the jewellery made from the gold so imported is on the Bank. At the same time, the responsibility of the Bank is secured as the purchaser is required to indemnify the Bank against the payment of all the customs duty, penalty and other expenses and charges which the Bank may be liable to pay due to the failure of the purchaser to export the gold jewellery. The mechanism is such that the government dues by way of customs duty are secured by the Bank and the Bank is also secured by the purchaser authorising them to debit any amount from their account towards customs duty. It is in these circumstances, the nominated agencies had discharged the duty liability towards the i....
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....ported, they have been pilfered and the appellants are required to pay duty, in terms of the said condition of bond. Further we also note that as per the bond, it remains in force even after the transfer of the goods. 20. In case of Bombay Dyeing & Manufacturing Co Ltd. [2020 (371) ELT 11 (SC)] Hon'ble Supreme Court held as follows: 31. Similarly, the exposition of this Court in Metal Forgings (supra) and Hindustan National Glass & Industries Ltd. (supra) to urge that specific order was required to be passed before an assessment is treated as a provisional assessment, will be of no avail considering the execution of bonds in Form B-13 by the appellant-assessee at its own volition, which is referable to provisional assessment procedure under Rule 9B of the Rules. Once the appellant submitted itself to that procedure without any demur pending disposal of the writ petitions, it is not open to later on resile therefrom. Permitting the assessee to do so, would inevitably result in giving undue advantage and favour to the assessee, who had invoked the remedy under Article 226 of the Constitution of India and sought interim protection on offering to execute bonds in Form B-13 ....
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....n submissions on 15.04.2021 and further submission on 13.12.2022, which shows they were aware of the proceedings which have been initiated against them along with other conoticees. The Adjudicating Authority had fixed the personal hearings for 16.12.2022, 23.12.2022, and 04.01.2023 and the notice for personal hearing were issued, mentioning the names of the respective noticees/appellants. All the parties had received the memo of hearing and appeared for personal hearing on the schedule dates and submitted their written submissions. The Revenue has pointed that the claim of HDFC that they received only the third memo for personal hearing does not seems to be bonafide, however, the said memo granted period of one month before the schedule date thereby providing sufficient opportunity. The submission of the Revenue is that the SCN was issued on 22.01.2021 and granting further time of two months as requested by the appellant vide their letter dated 21.12.2022 could have made the SCN beyond the period of two years granted for concluding the proceedings under Section 28(9) and, therefore, the Adjudicating Authority was right in concluding the proceedings. 22. The submissions of Shri B....
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....3. Moreover, import of precious metals is governed and controlled by various provisions of law under the Foreign Trade Development & Regulation Act, Customs Act, the Notifications and the Circulars issued in accordance therewith, FTP and HBP which provides for ensuring the government revenue. The Bond has been issued as per the condition prescribed by the EXIM Policy and Hand Book of Procedures and in terms of the Conditions of License issued by the RBI. Para 6 of the authorization issued by the RBI clearly directs the bank to approach Custom CBEC, for getting details guidelines for the operation of the scheme. In terms of the above, CBEC has issued detailed guidelines for the nominated agencies including the Authorized banks to follow and have prescribed the Bond to be executed. If the duty free gold is found to be diverted in the local market, instead of manufacture and export of gold jewellery, it amounts to non-fulfilment of the conditions stipulated under the Customs Notification, Customs Circular and FTP/HBP, therefore, the appellant being the nominated agency for importing the gold is bound to pay duty on demand, which has been done. An important factor relevant in the prese....
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....has acknowledged the liability and discharged it suo motto. What is in question is the issue of SCN to claim duty for 277 kgs, (i.e to "show cause why duty will not be demanded") from the Appellant when duty is already paid for nonsubmission of proof of export under Circular 27/2016." 25. During the course of arguments, the learned Senior Counsel representing MMTC also categorically made a statement that the duty paid by them shall not be recovered. The basic reason is that the amount of the customs duty involved has already been deposited by the exporters with the appellant at the time of purchase of gold. Thus all the parties had paid the customs duty much before the issuance of the show notice as they were aware that being the importer, and also in view of the legal provisions allowing such duty free import and the agreement entered with the exporter, they are liable to pay the customs duty in the event of default of the conditions of the notification. Consequently, the Bonds have been cancelled in all the cases. In fact, the matter should have ended here and there was no need for SCN as the Department had already received the entire customs duty along with interest. This is ....
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....ld/jewellery within a stipulated period of time following which M/s. MMTC has to inform the Customs authorities and to levy penalty on the unit for extension of period on expiry. M/s. MMTC was charging commission of approximately 0.88% for their services. We also notice that M/s. MMTC supplied gold on loan basis only on the strength of 'issue applications' filed by the respective units and such applications are not the documents prescribed under the Scheme for the purpose of release of fixed quantities of gold to the units. It is also significant to note that the bill of entry cited in the applications is that of M/s. MMTC and the issue applications do not refer to any other bill of entry. The Scheme provides for issue of gold by M/s. MMTC to the units only on the strength of bill of entry filed by the unit and duly assessed. M/s. MMTC had also executed bond with NEPZ Customs under the Warehousing Provisions of the Customs Act and had undertaken to satisfy the customs authorities that the gold imported by them will be utilised for export as per scheme of export of gold jewellery by units in the EPZ and they were also under an obligation to pay the Customs duty and penalty chargeabl....
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....s and the exporters was ascertained. Further, in the light of the legal provisions, the duty and responsibility of the nominated agencies in importing the gold by availing the duty exemption and without fulfilling the condition of export was evaluated. No doubt, actual export of the gold jewellery made from the duty free gold was to be effected by the exporter, however, the nominated agencies being the importer of duty free gold were responsible for ensuring the compliance of the same. On such determination, the liability of the nominated agencies towards payment of customs duty in respect of the duty free gold was imputed. Since the transaction on the part of the importer and exporter was in respect of the same gold/bullion being fraudulently diverted, common show cause notice was issued. On the contrary, the submissions of the Revenue is that the provisions of section 28(4) have been rightly invoked since the case as such was a case of fraud and, therefore, reliance was placed on the decision of the Supreme Court in Munjal Showa Limited versus Commissioner of CUS & CEX Delhi-IV [2022 (382) ELT 145 (SC)], where DEPB licenses/Scrips purchased by the appellant of which the exemption....
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....rder No.50095/2022 dated 04.02.2022 (ST Appeal No.51370 of 2016)] are relevant in the present context although the same has been passed with reference to liability of service tax and refund thereof. The relevant para reads as:- "Secondly, if service tax is payable, the charge of tax continues to exist. The limitation of time - either normal period or extended period- apply only to the remedy available to the Revenue by issuing a demand. Efflux of time does not extinguish the underlying liability. It is like a time-barred debt. After the time limit, the charge of debt remains and only the remedy to the lender gets extinguished. If the debt is time barred and thereafter it is repaid, the borrower cannot claim refund of what has been paid on the ground that the lender could not have sued him for recovery of the debt." 30. The learned Counsels for the appellants referred to the Order-in Original dated February 13, 2023, passed by the Commissioner, New Delhi against the exporter, PHJ where some of the appellants herein are also parties and the demand has been dropped against the nominated agencies, and instead, the Customs duty was claimed from the exporter. Similarly, Order....
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....President of India. Throfigh The Commissioner of Customs, Kolkata. West Bengal. BE No. Dated Bond No. Dated WE, HDFC BANK LIMITED, having our registered office at HDFC Bank House, Sonapati Bapat Mare, Lower Parel (West), Mumbai-400 013 and having a branch at corporate office HDFC BANK LIMITED, STEPHEN HOUSE, 4D, BBD BAG EAST, KOLKATA 700 001 hereinafter referred to as the Obligors (which expression shall, unless repugnant to the context or meaning thereof, include our hers, successors, executors, Administrators, liquidators, legal representatives and assignees) hereby hold and firmly bind ourselves jointly and severaly unto the President of India, hereinafter referled to as the Government in the sum of Rs 3,07,04,300 /- (Rupees Three Crores Seven Lacs Four Thousand Three Hundred Only ) for which payment to be well and truly made, we, the obligors, bind ourselves by these presents. WHEREAS, we the obligors have been granted by the Reserve Bank of India the permission vide effer ref no DBR.IBD.16209/23.67.002/2015-16 Dated 27.06.2016 (Valid till the 31st March 2017) as one of the nominated agencies for Import of Gold. We the obligors have decided to import Gold, without p....
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....ade there under in respect of the said goods. 2.We, the obligors shall, pay on or before a date specified in a notice of demand all duties, and Charges claimable on account of the said Goods under the Customs Act. 1962. Central Excise Act, 1944 and rules/regulations made there under together with interest on the same from the date so specified at the rate applicable, 3. We the obligors, shall comply all the provisions contained in Board Circular No: 027/2016 dated 10m June 2016 and Board notification No: 057/2000 and shall be wholly and solely responsible for ensuring that there shall be no pilferage during transit of the said goods when despatched from the place of import or from the warehouse to the unit or vice or versa and we, the obligors shall pay the duty on pilfered goods, if any. We as a nominated agency undertake that: (a) We have not defaulted in following the procedure and conditions specified by DGFT: (b) We have not defaulted in payment of duty within the specified period in cases where there was a default in export of jewellery by an exporter to whom the gold/silver/platinum had been supplied; (c) We have not been Involved in any violations involving f....