TaxTMI 
TaxTMI 
2026 (6) TMI 195
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....ion fine, but also confirms the proposed duty demand with interest to be recovered from Bharti Gems and P P Jewellers jointly and severally under section 28(4) of the Customs Act. The order also imposes penalty under section 112(b)(ii) of the Customs Act upon Bharti Gems, P P Jewellers and M/s. Its My Name [Its My Name] jointly and severally. The order also imposes penalty upon Bharti Gems and P P Jewellers under section 114A of the Customs Act jointly and severally. 2. Customs Appeal No. 51906 of 2024 has been filed by Its My Name to assail that portion of the order dated 08.01.2024 passed by the Commissioner that imposes penalty upon it under section 112(b)(ii) of the Customs Act jointly and severally with Bharti Gems and P P Jewellers. 3. Customs Appeal No. 51900 of 2024 has been filed by Amit Pal Singh, an employee of P P Jewellers and Its My Name, to assail that portion of the order dated 08.01.2024 passed by the Commissioner that imposes penalties upon him under section 112(b)(ii) of the Customs Act as also under section 114AA of the Customs Act. 4. Customs Appeal No. 51903 of 2024 has been filed by Gopal Gupta, an employee of P P Jewellers and Its My Name, to assail....
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....ut by the department in the show cause notice is that Bharti Gems imported silver and gold bars free of cost without payment of customs duty and these goods were diverted to the domestic tariff area. It is also alleged that Bharti Gems exported other goods in the guise of silver and gold jewellery as it did not have manufacturing facility (machines) or the work force required for manufacturing silver and gold jewellery. 10. A detail reply was filed contesting the allegations made in the two show cause notices. 11. However, the Commissioner confirmed the demand proposed in the show cause notices. The Commissioner framed three issues for determination, as can be seen from the order. The relevant portion of the order is reproduced below: "4.1 xxxxxxxx. I have carefully gone through the facts of the case and written submissions available on record and oral submissions made during the course of personal hearing. I observed that it is alleged that M/s. Bharti Gems, a SEZ, unit procured Gold and Silver and claimed to have exported jewellery without having manufacturing facility of jewellery, except bangles of Silver, and thereby diverted the procured Gold and Silver and eva....
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....r and Platinum Jewellery - 200kg. * Manufacture of articles of Goldsmiths and silversmiths wares and parts thereof of precious metals or metal clad with precious metals - 100Kg 4.5 Whereas, from the documents resumed and submitted by various persons and provided by SEZ, it has been detected that the Unit had procured through import 330 kg Silver & 11 kg Gold during 2015-16 and 768 kg Silver and 24 Kg Gold during the FY. 2016-17 (up to Dec 2016). Further, it has also been found that the Unit had manufactured and subsequently claimed to have exported 1149.595 kg Silver Jewellery and 37.535 kg Gold jewellery during the period November, 2015 to January, 2017. The quantity of Gold and Silver imported and claimed to have been exported, are detailed in Para 10 of the show cause notice dated 30.12.2020. Thus, I find that M/s Bharti Gems thus exceeded the prescribed Limit of procurement through import as specified in the JSEZ Bond No 173 and also the capacity of manufacture far beyond the limit approved in the LoA." (emphasis supplied) 13. The Commissioner concluded that Bharti Gems had not carried out any manufacturing activity. The relevant portions of the order ar....
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.....9 From the above, manufacturing of chains by the Unit in absence of chain manufacturing machines or through job-work/ sub contract forms a reasonable belief that no manufacturing activity was carried out at that place by the M/s Bharti Gems. I observe that confiscation of the silver jewellery found in the unit premises during search proceeding has been proposed under Section 111 of the Customs Act, 1962. I observe that the noticee has argued that "On 20.01.2017, Stock verification was done in the unit of the noticee and only one silver bangle weighing 26.580 gms was found. Prior to that, on 18.01.2017, the noticee had entered for export a consignment of silver jewellery which was lying with the custodian of SEZ. The noticee did not get permission to export the goods covered by the shipping bill dated 18.01.2017. The customs officers again visited the unit of the noticee on 29.05.2017 when the sealed boxes in which silver jewellery was to be exported vide shipping bill dated 18.01.2017 was presented before the officers. The officers were fully satisfied that the said jewellery was fully accounted for. The officers did not detain or seize this jewellery and it was handed over by the....
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....y items, no skilled artisans were ever hired for the purpose, whereas, they had claimed to have exported the jewellery item. This clearly indicates that the unit had infact not exported the jewellery item but have exported the other goods in the guise of silver and gold jewellery and thus had diverted the duty free imported gold and silver on which Customs duty amounting to Rs. 1,44,04,165/- was foregone. Here, I find that in SEZ, the goods are not examined in routine and Let Export Order are given on basis of Self Certification given by the unit as per the Rule 46(1)(c) and 46(1)(d) of the SEZ Rules, 2006. Thus, the exported goods of M/s Bharti Gems were also not examined. The unit has also not put forth any evidence that their export parcels were ever examined or checked by the Customs Authority at SEZ or Port. 4.11.3 I observe that the noticee has argued that the statements of Sh. Amit Pal Singh, Sh. Gopal Gupta and Sh. Mohd. Nashruddin were recorded while they were in judicial custody in Tihar Jail. These persons were arrested by DRI on 25.04.2019. The statements were recorded under threat by the officers. Subsequently COFEPOSA was imposed on these three persons. The s....
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....of raw material free of cost from overseas entities, nor does it render a manufacturing activity carried out by an SEZ unit, non-compliant merely because the finished goods are produced pursuant to contractual arrangements or job-work type models; (ii) The distinction sought to be drawn by the Commissioner in the show cause notices dated 30.09.2020 and 31.12.2020 as well as in the order between the expressions "manufacture" and "manufacturing services" is artificial and is not supported by the SEZ Act and the SEZ Rules; (iii) The finding recorded by the Commissioner that Bharti Gems had exceeded the prescribed limit of procurement through Bond cum Legal Undertaking dated 23.01.2009 and the capacity of manufacture is beyond the limit approved in the Letter of Acceptance is against the records. Bharti Gems had furnished an additional Bond cum Legal Undertaking dated 05.01.2016 for an amount of Rs. 224.73 crores, which was approved by the Assistant Development Commissioner, and such approval was formally communicated to the unit by Letter of Approval dated 15.01.2016. Bharti Gems had carried out the manufacturing activities and related authorised operations during th....
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.... of the Customs Act cannot be considered as relevant if the procedure contemplated under section 138B of the Customs Act is not followed; (viii) The finding recorded by the Commissioner that the payments made by Bharti Gems to the workers was not genuine is not correct; (ix) The finding recorded by the Commissioner that the unit could have not manufactured the goods, since from the NSDL system it is clear the unit had procured only 8 kilograms of alloy and during the relevant period it exported 1149.59 kgs of silver jewellery and 37.535 kgs of gold jewellery is not correct. The relevant records had been placed to show the procurement, consumption and manufacture of silver and gold jewellery. The order ignores these documents and relies upon the NSDL system data to draw a conclusion which is based on assumptions; (x) The finding recorded that Bharti Gems did not have manufacturing facility and did not manufacture gold and silver items, as no skilled artisans were ever hired and, therefore, the unit had exported other goods in the guise of silver and gold jewellery and had diverted the duty free imported gold and silver to the domestic trade is not correct;....
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....e been considered. 20. The first issue that requires examination is as to whether Bharti Gems had exceeded the prescribed limit of procurement under the Letter of Approval issued by the competent authority. 21. In this connection, it needs to be noted that earlier by a Letter of Approval dated 23.01.2009 permission was granted to Bharti Gems to register in the Special Economic Zone to manufacture silver and gold jewellery. In terms of rule 22 of the SEZ Rules, Bharti Gems submitted a Bond cum Legal Undertaking on 21.12.2010 for Rs. 25.37 lakhs, which was accepted by the Development Commissioner by Letter of Approval dated 13.04.2011. The Commissioner has found as a fact that Bharti Gems had exceeded the prescribed limit of procurement by only considering the Bond cum Legal Undertaking executed by Bharti Gems for Rs. 25.37 lakhs, as is clear from paragraphs 4.3, 4.4 and 4.5 of the order, which paragraphs have been reproduced above. 22. Bharti Gems had contended before the Commissioner that it had not exceeded the prescribed limit of procurement as it was covered by the subsequent Bond cum Legal Undertaking submitted by Bharti Gems on 05.01.2016, which was accepted by the co....
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...., for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the court and the court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a court, as they apply in relation to a proceeding before a court." 28. It would be seen that section 108 of the Customs Act enables the concerned Officers to summon any person whose attendance they consider necessary to give evidence in any inquiry which such Officers are making. The statements of the persons so summoned are then rec....
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....) 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 examined as witnesses before the adjudicating authority and the adjudicating authority forms an opinion that the statements should be admitted in evidence. It is thereafter that an opportunity has to be provided for cross-examination of such persons. The provisions of section 9D of the Central Excise Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act. The Courts have also explained the rationale behind the precautions contained in the two sections. It has been observed that the statements recorded during inquiry/investigation by officers has every chance of being recorded under coercion or compulsion and it is in order to neutralize this possibility tha....
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....ial procurement and the manufacture of goods by a SEZ unit cannot be disbelieved because all transactions are not reflected, deserves to be accepted. 36. Bharti Gems had also placed on record the following documents to show procurement, consumption and manufacture of silver and gold jewellery: (a) Contemporaneous Stock Register; (b) Purchase Ledger of Alloys; (c) Invoices of Alloys and other Consumables; and (d) Shipping Bill/Invoice along with the Packing List dated 18.01.2017. 37. The aforesaid documents were maintained by Bharti Gems in the ordinary course of business. The Commissioner could not have ignored the same without giving any good reason. The Commissioner, on the other hand, placed reliance only on the NSDL system data. 38. In M/s. Kronos Solutions India (P) Ltd. vs. Commissioner of Central Excise and Service Tax, Noida [Service Tax Appeal No. 59615 of 2013 dated 01.10.2015] the Tribunal held that denial of CENVAT credit, which was the subject matter before the Tribunal, could not be sustained solely on the ground that particulars of the service providers were not reflected in the NSDL website when the receipt of services an....
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....s entities nor do they render manufacturing activity carried out by SEZ unit non-compliant merely because the finished goods are produced pursuant to some contractual arrangements. Thus, the distinction sought to be drawn by the Commissioner between the expressions "manufacture" and "manufacturing services" is artificial. 43. The Commissioner has also observed that during the period of dispute, the operations of Bharti Gems were directly and indirectly carried out by P P Jewellers and Its My Name. All three are different entities. Bharti Gems functions as a SEZ unit while P P Jewellers is not a SEZ exporter. Its My Name carries on its business under advance authorization scheme and the export exhibition scheme under the Foreign Trade Policy 2015-20. 44. During the period of dispute, Amit Pal Singh was the authorised representative of Bharti Gems in terms of the power of attorney dated 11.02.2016 executed by Bharti Sharma. Amit Pal Singh was also associated with P P Jewellers but this does not mean that there was any inter-mingling of finances or statutory benefits. 45. It now needs to be examined whether penalty under section 112(b)(ii) and section 114A of the Customs Act ....