ORDER
T.K. Jayaraman, Member (T)
1. These appeals have been filed against Order-in-original No. 04/98 dated 29.12.1998 passed by the Commissioner of Customs, Bangalore.
2. The appellants were availing the benefit of DEEC scheme for import of 24 carat gold free of duty with an Export Obligation. There was intelligence that they were misusing the facility. Hence, on 2.1.1998, the jewellery items, which were about to be flown by Lufthansa Air Cargo Flight, were intercepted at the export terminal of the Air Cargo Complex Bangalore for detailed examination. The inventory of the items to be exported was taken. It was found that there were discrepancies in quantity, purity and weight between the declaration and the test results on the samples of the items to be exported. The declared purity of the jewellery item was 22 carats but the actual purity as ascertained by test was much less than 22 carats. Samples were tested in National Aerospace Laboratories (M/s. NAL), Bangalore. Statements of various persons were taken under Section 108 of the Customs Act. Prima facie, it was found that there was a shortage of 4 Kgs. in the consignment of above 65 Kgs. The value comes to Rs. 16,00,000/-. To put it differently, the mis-declaration of the value of export consignment is to the tune of Rs. 16,00,000/-. The impugned goods were seized but were provisionally released as the appellants had to fulfill the Export Obligation in terms of the advance licence issued to them. Show Cause Notices were issued to the appellants on 29.6.1998 proposing confiscation of the seized items and demanding duty of Rs. 92,824.60 being the duty foregone in respect of primary gold imported under DEEC scheme in respect of 4.2193 Kgs. of gold found short under Section 28(1) of the Customs Act 1962. Penalty under Section 114(i) was also proposed. The original authority held that the goods presented for export under the four shipping bills dated 31.12.1997 totally valued at Rs. 1.97 crores are liable for confiscation under Section 113(d) and 113(i) of the Customs Act 1962. As the goods were released provisionally no redemption fine was imposed. He confiscated the goods covered by shipping bill 049574 dated 31.12.97 valued at Rs. 57.86 lakhs and imposed a redemption fine of Rs. 6,00,000/- under Section 125 of the Customs At, 1962. He demanded a duty of Rs. 90,444/- being the duty foregone in respect of 4.1111 Kgs. of primary gold imported under a licence issued under DEEC scheme and found short in the export goods. He imposed a penalty of Rs. 8,00,000/- on the first appellant under Section 114(i) of the Customs Act, 1962. Further penalties were imposed on the following persons under Section 114(i) of the Customs Act, 1962 as given below:
1. Shri Rajesh Metha - Rs. 2,00,000/- 2. Shri Prashant Mehta - Rs. 1,00,000/- 3. Shri Mahesh Mehta - Rs. 1,00,000/- 4. Shri Gautham Chand - Rs. 1,00,000/- It is seen that the first appellant had already deposited Rs. 2,00,000/-during the course of investigation. The appellants strongly challenge the impugned order. Hence, they have come before this Tribunal for relief. 3. Shri Kiran K. Javali, the learned Advocate appeared for the appellants and Shri K.S. Bhatt, the learned SDR for the Revenue. 4. The learned advocate urged the following points.
(i) At the outset, it was pointed out that the Licencing Authority had already given the certificate of fulfillment of Export Obligation. This means that the appellant company had been absolved of all requirements that they were required to have been complied with in respect of the particular licence in total.
(ii) As the conditions of licence having been fulfilled and the competent authority in respect of the licence viz. DGFT has accepted the same and closed the file, it is not open to the departmental authorities to contend that there is evasion of duty. Hence, duty could not have been demanded legally.
(iii) The Tribunal, in the case of Hy-Grade Pellets Ltd. v. CC, Visakhapatnam , has held that after release from Export Obligation, the Customs authorities could not raise demand alleging non-fulfillment. It has also been held that Authorities other than which granted the licence should not start investigation as Bank Guarantee for export performance is released by licensing authority only after its fulfillment.
(iv) In the case of Ashok Enterprises v. CC, Chennai , it has been held that the charge of breach of conditions of the Customs Notifications does not survive in the wake of JDGFT’s order to the effect that Export Obligation has been discharged in terms of the licence.
(v) In the case of Delco Precitone Jewellers (P) Ltd. v. CC, New Delhi 2000 (124) ET 1105 (Tribunal), it has been held that charge of clandestine removal of 12 kgs. of gold pleaded as operational loss during the manufacture of jewellary is not sustainable in the absence of any evidence in support of clandestine removal.
(vi) In the case of Vorin Laboratories Ltd. v. CC, Chennai , it has been held that when the bond is not in existence and the export obligation has been fulfilled, the question of confiscation in the matter does not arise and hence the order of confiscation and imposition of fine are set aside.
(vii) The appellant is a reputed company who are in business for more than 10 years. It does not stand to reason that an attempt to violate law for making a profit of a few thousands of rupees, as alleged in the Show Cause Notice, would be made by them.
(viii) At the time of inventory and seizure, none of the concerned persons of the appellant company were asked to be present. Further, the expert valuer at that time had clarified that out of six boxes, only one box showed discrepancy.
(ix) The requirement of the licence granted was to export jewellary of 22 carat purity. The job workers in their statement given under Section 108 of the Customs Act, 1962 have said that they had manufactured and returned ornaments of 22 carat purity only. This is indicated in para 8 of the Show Cause Notice.
(x) The consignments under seizure were once again examined before the Magistrate and samples were drawn and sent to test to the National Aerospace Laboratory. The Valuer, at the time of examination, has confirmed the correctness of the items in five boxes and only in respect of one box, there was some variation.
(xi) The appellants had to meet time schedule for export of goods and, therefore, as a gesture, they voluntarily pre-deposited a sum of Rs. 2 lakhs to secure the release of the goods for export even though they had not violated any law.
(xii) The appellant was granted provisional release of items relating to four shipping bills and those pertaining to one shipping bill were kept unreleased resulting in one box alone being held up and the balance five boxes were provisionally released.
(xiii) The amount of percentage of alleged violation in the totality of exports would be 0.36%, which shows that the same could have been due to human error alone, and not a wanton attempt to mis-declare.
(xiv) There were 8907 pieces of Jewellary checked and out of those only 518 pieces were alleged to be not of 22 carats. Out of these 518 pieces, only 25 pieces were selected and subjected to further testing. In a totality of 62,545.500 gms of gold jewellary, 2016.900 gms. was alleged to have been short shipped due to purity difference. The alleged difference works out to less than 3.25%. The alleged duty benefit on this difference works out to less than 0.40% on the export value of the seized goods.
(xv) The National Aerospace Laboratory is not a recognized Gold Jewellary testing laboratory and the test done by M/s. NAL is not by fire assay method, which is the recognized method internationally and nationally.
(xvi) Even assuming the NAL test report was admissible and reliable, the test report had been obtained in respect of a few numbers of the jewellary and that test report could not have been extended to the entirety of the exports to presume violations of the law. Confiscation on the basis of assumptions and presumptions is not sustainable in law.
(xvii) Though the demand of duty is Rs. 92,824/-, the levy of redemption fine and penalty far exceeded the same in direct violation of Section 125 of the Customs Act.
(xviii) Nobody, whose statements have been recorded, had said that the appellant had directed the manufacture of jewellary of less than 22 carat. In the absence of the evidence, there is no basis for confiscation or imposition of penalty.
5. The learned SDR stated the following points:
(i) There is a clear evidence of mis-declaration in respect of the quantity and description of the export goods and, therefore, the adjudicating authority has rightly held that the export goods are liable for confiscation under Section 113(d) and 113(i) of the Customs Act, 1962.
(ii) The Customs Duty on the gold content of export goods, which have been rendered short by mis-declaration by the Petitioners, is being demanded under proviso to Section 28(1) of the Customs Act, 1962.
(iii) The erstwhile Notification No. 144/93-Cus dated 28.06.1995 envisages a continuous obligation by the importer to execute a bond to the AC/DC binding themselves to pay on demand, duty on the quantity of gold representing the difference between the quantity issued and that contained in the exported jewellary or articles.
(iv) The learned SDR stated that the case-laws cited by the appellants are distinguishable and cannot be applied to the present case. The present case mainly relates to the mis-declaration of quantity and description. As regards the Hy-grade Pellet’s case, it was stated that the department has appealed to the Apex Court and the Tribunal’s decision is contrary to the principles laid down by the Apex Court in the case of Shankank Sea Foods case.
6. We have gone through the records of the case carefully. The jewellary items, which were about to be exported, were intercepted on 2.1.1998. Certain irregularities, prima facie, were found. The impugned goods were meant for fulfilling the export obligations under the Advance Licence No. 2297990. After completing the investigation, a Show Cause Notice was issued on 29.06.1998. However, the Joint DGFT, Bangalore, has given a certificate dated 13.2.1998 to the effect that the appellants had discharged the export obligation in full accord. Further, the Assistant Commissioner of Customs has allowed the cancellation of the legal undertaking given by the appellants in respect of the above advance licence on 13.11.1997. The legal undertaking has been executed by the appellants for delivery of the export obligation certificate. Once the export obligation certificate is delivered within the time limit stipulated in the legal undertaking, the legal undertaking shall be void. That is why, on production of the Certificate of discharge of Export Obligation, the AC had cancelled the legal undertaking. In view of the above developments, legally no duty is demandable from the appellants. There appears to be very little consultancy and co-ordination between the Customs Department and the DGFT in the present case. Even before the issue of Show Cause Notice, the Export Obligation certificate has been issued. It is very clear that the department has not informed the DGFT of the alleged violation by the appellants and also the pendency of the customs investigations. We are also surprised that when the adjudication was pending before the Commissioner, the Assistant Commissioner had already cancelled the legal undertaking. In the light of the case-laws cited especially, the Hy-grade Pellets decision, we are of the view that the demand of duty after the issue of discharge of Export Obligation cannot be sustained. Even though the department has gone in appeal against the above mentioned case, the Apex Court has not stayed the operation of that decision. Hence, we are bound by the ratio of the above decision and also the other decisions cited. Since no duty can be demanded in view of the above legal point, we do not feel it necessary to go into the other issues raised by the appellants. In the facts and circumstances of the case, we allow the appeals with consequential relief.
(Pronounced in open Court on 21 Mar. 2006)