Samrah Gold Factory Limited vs The Commissioner Of Customs And 2 ...
2023 Latest Caselaw 694 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Reserved on 17.11.2022
 
Delivered on 9.1.2023
 

 
Court No. - 39
 
Case :- CUSTOM APPEAL No. - 4 of 2022
 
Appellant :- Samrah Gold Factory Limited
 
Respondent :- The Commissioner Of Customs And 2 Others
 
Counsel for Appellant :- Sandeep Srivastava,Arvind Srivastava
 
Counsel for Respondent :- Amit Mahajan
 
Alongwith 
 
(1) Case :- CUSTOM APPEAL No. - 1 of 2022 
 
Appellant :- M/S Deepu Jewellers Llc Dubai 
 
Respondent :- The Commissioner Of Customs 
 
Counsel for Appellant :- Sandeep Srivastava,Arvind Srivastava 
 
Counsel for Respondent :- Dhananjay Awasthi 
 
(2) Case :- CUSTOM APPEAL No. - 2 of 2022 
 
Appellant :- Kishore Ratilal Dhakan 
 
Respondent :- The Commissioner Of Customs 
 
Counsel for Appellant :- Sandeep Srivastava,Arvind Srivastava 
 
Counsel for Respondent :- Gaurav Mahajan 
 
(3) Case :- CUSTOM APPEAL No. - 3 of 2022 
 
Appellant :- Samrah Gold Factory Limited Through Its Director, Kishore Ratilal Dhakan 
 
Respondent :- The Commissioner Of Customs 
 
Counsel for Appellant :- Sandeep Srivastava,Arvind Srivastava 
 
Counsel for Respondent :- S.S.C. 
 
(4) Case :- CUSTOM APPEAL No. - 5 of 2022 
 
Appellant :- M/S Deepu Jewellers Llc 
 
Respondent :- The Commissioner Of Customs And 2 Others 
 
Counsel for Appellant :- Sandeep Srivastava,Arvind Srivastava 
 
Counsel for Respondent :- Gaurav Mahajan 
 

 
Hon'ble Mrs. Sunita Agarwal,J.

Hon'ble Vipin Chandra Dixit,J.

(Delivered by Justice Sunita Agarwal)

1. Heard Sri Arvind Srivastava learned Advocate for the appellants, Sri Amit Mahajan and Sri Gaurav Mahajan learned counsels for the respondent Revenue.

2. Out of the abovenoted five connected appeals, Custom Appeal No. 1 of 2022, Custom Appeal No. 2 of 2022 and Custom Appeal No. 3 of 2022 filed by M/s Deepu Jewellers Llc Dubai, Kishore Ratilal Dhakan and M/s Samrah Gold Factory Limited; respectively, are arising out of the order dated 29.8.2019 passed in three defective Custom Appeals filed by the aforesaid appellants, by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad, whereby the appeals have been dismissed as non-maintainable being defective. The defect in three appeals was with respect to the mandatory pre-deposit in terms of Section 129E of the Customs Act, 1962. The order impugned records that despite adjournment granted on the request of the learned Advocates appearing for the appellants therein, nothing had been deposited towards the mandatory pre-deposit.

The remaining two connected Custom Appeal No. 4 of 2022 and Custom Appeal No. 5 of 2022 filed by M/s Samrah Gold Factory Limited and M/s Deepu Jewellers Ltd; respectively, are directed against the order dated 31.1.2022 passed in Customs Appeal No. 70243 of 2021 (M/s Ajit Exports vs. Commissioner of Customs, Customs House, NOIDA) by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad, whereby the show cause notices issued to the appellants therein namely M/s Ajit Exports and Sri Ajit Singh had been held to be without jurisdiction and the demand of duty and consequential confiscation of goods under the order dated 18.10.2018 passed by the Commissioner of Customs, Greator NOIDA had been set aside. Consequently, the return of confiscated gold jewellery was directed to be made in favour of the appellants therein namely M/s Ajit Exports and Sri Ajit Singh.

3. The challenge to the order dated 31.1.2022 is confined to the plea on the ground that out of the total confiscated gold which was directed to be released in favour of M/s Ajit Exports, the gold measuring 24,746.000 gms belonged to M/s Deepu Jewellers and 41315.020 gms belonged to Samrah Gold Factory Limited. The Tribunal (CESTAT) has, thus, erred in releasing the entire gold of 66061.020 gms in favour of M/s Ajit Exports.

Prayer has been made in the aforesaid two appeals to set aside the order of the Tribunal dated 31.1.2022 to the extent of release of confiscated gold in favour of M/s Ajit Exports and release the same in favour of the appellants herein.

4. Before proceeding further, certain relevant facts of the case are required to be noted here for better appreciation of the arguments put forth by the counsels for the parties.

5. The admitted facts of the matter are that two appellant-companies namely M/s Samrah Gold Factory Limited, Sharjah and M/s Deepu Jewellers, Dubai are limited liability companies registered under the laws of United Arab Emirates with the share holding of 51% by a UAE National Abdullah Ramdan Moosa Keshwani and the remaining 49% shares of the companies held by Indian Partners namely Dhakan Kishore Ratilal (25% shares) and Deepak Ratilal Dhakan (24% shares). Both the companies were manufacturers and exporters of jewellery made of gold and the Director of both the companies was Kishore Ratilal Dhakan son of Sri Ratilal Dhakan, an Indian National.

6. The above noted two companies were doing business with M/s Ajit Exports and M/s Vee Ess Jewellers Private Limited who were two Indian companies working in the Special Economic Zone (SEZ), NOIDA and the jewellery items made of gold were sent to M/s Ajit Exports and M/s Vss Jewellers for refurbishing, repair, remaking and finishing and after the said exercise, these companies were required to send the jewellery items back to the appellants namely M/s Deepu Jewellers and M/s Samrah Gold Factory Limited, by following the procedure prescribed in law. It is an admitted fact of the matter that the entire confiscated quantity of gold items were exported by two appellant companies herein namely M/s Deepu Jewellers and M/s Samrah Gold Factory to M/s Ajit Exports at NOIDA having its factory at Special Economic Zone and the goods (gold jewellery) were cleared from Customs, New Delhi in favour of M/s Ajit Exports, the importer, without payment of Customs duty.

7. It is sought to be submitted by the learned counsel for the appellants that the Custom Authority at NOIDA cleared the bills of entry, the documents prepared by the importer by checking the consignment through machines. A copy of the register maintained by the Customs Authority, NOIDA had been sent to the Development Commissioner, NOIDA as the consignment had been sent to the SEZ unit, NOIDA. It is contended that during this whole process approximately ten officers involved in the operation had verified the consignment received from other countries through airlines. The bills of entry prepared by M/s Ajit Exports had been verified by the Customs Authority, NOIDA followed by Development Commissioner, NOIDA. The goods (Gold Jewellery) confiscated by the Customs Authority in the search and seizure operations from the custody of M/s Ajit Exports and M/s Vee ESS Jewellers Private Limited have been directed to be released in favour of M/s Ajit Exports by the order dated 31.1.2022 after the show cause notice and the proceedings initiated against M/s Ajit Exports have been set aside on the ground that the transactions between M/s Ajit Exports and appellant companies namely M/s Deepu Jewellers and Samrah Gold were genuine transactions. M/s Ajit Exports being the importer was required to send back the confiscated gold jewellery after the job work to the exporters appellants herein namely M/s Deepu Jewellers and Samrah Gold as the confiscated items had been received in the SEZ unit.

8. In this background, it was argued by the learned counsel for the appellants that the show cause notices issued to the appellant companies namely M/s Deepu Jewellers and M/S Samrah Gold were wholly without jurisdiction, inasmuch as, both the companies were exporters incorporated in Dubai. The Director of the company namely Kishore Ratilal Dhakan was also a non-resident Indian at the time when search and confiscation operations were conducted on 6.2.2009 in the factory premises situated at Special Economic Zone, NOIDA.

9. The contention is that none of the appellants herein namely two companies and the Director Kishore Ratilal Dhakan were amenable to the Customs Act and the Customs Authority had no jurisdiction to impose penalty under Section 114 of the Customs Act, for the appellants being exporters the provisions of Section 114 of the Act cannot be made applicable to them. The cause of action arose in the year 2007-08 as the confiscated goods were exported during the said period by the appellants. The show cause notices were issued on 12.11.2013 and the order of the adjudicating authority was passed on 18.10.2018 pursuant to the said show cause notices.

It was argued that the Customs Act as it then was, i.e. prior to the amendment in Section 1(2) by Act 13 of 2018 w.e.f. 29.3.2018 was applicable only within the territory of India and the subsequent applicability (extension) of the provisions of the Customs Act beyond the territory of India would have no relevance, inasmuch as, the period of transactions, i.e. alleged offence has to be seen.

10. The submission, thus, is that neither the goods exported by the appellants could be confiscated by the Customs Authority for any violation in the importation of the same by M/s Ajit Exports nor penalty can be levied upon the exporters namely the appellants herein under the provisions of the Customs Act. Section 1 of the Customs Act, 1962 which provided for the territorial jurisdiction of the Act has been placed before us to argue that a Foreign National or a Non-resident Indian cannot be held liable for any offence or contravention of the provisions of the Act.

11. In support of his argument, Sri Arvind Srivastava learned Advocate appearing for the appellants has placed reliance on a decision of the two Member Bench of CESTAT in M/s Seville Products Limited vs. Commissioner of Customs, New Delhi1 decided on 18.3.2021 wherein the Tribunal has decided the issue as to whether penalty under Section 112(a) of the Customs Act, 1962 can be imposed prior to the amendments brought in Section 1(2) of the Customs Act, 1962, upon an Exporter who has mis-declared the goods located in Dubai, UAE.

Placing the said decision, it was argued that Section 1(2) of the Customs Act, as it stood prior to its amendment on 29.3.2018, provided that the Act shall extend to the whole of India. The Amended section, however, makes the Act applicable also to any offence or contravention thereunder committed outside India by any person. The issue involved before the CESTAT was as to whether during the relevant period, i.e. 2012-13, the Customs Act was applicable only to the whole of India or whether it was applicable also beyond the territorial jurisdiction of India, in which case penalty could be imposed on companies incorporated abroad. It was held therein that since the provisions of the Customs Act would extend to the whole of India, the same cannot be invoked and made applicable to a person who is resident of Dubai. The proceedings against the Company which was incorporated abroad cannot be sustained, inasmuch as, the authorities in India did not have jurisdiction over a company incorporated abroad. It was noted therein that the Division Benches of the Tribunal have repeatedly held that prior to its amendment on 29.3.2018, the Customs Act was applicable only to the whole of India and not beyond the territory of India. It is only by an amendment brought on 29.3.2018 that the Customs Act has been made applicable also to any offence or contravention thereunder outside India by any person. The reference was answered in favour of the appellant therein by placing reliance on an earlier decision of the CESTAT in C.K. Kunhammed vs. Collector of Central Excise & Customs2 and another decision in Shafeek P.K. vs. Commissioner of Customs, Cochin3.

12. Another decision of CESTAT in Shri Ankur Agarwal, Director M/s Asia Pacific Impex Pvt. Ltd. Hong Kong vs. Principal Commissioner, Inland Container Depot, Tughlakabad, New Delhi4 dated 18th February, 2022 has further been placed before us to assert that it was held therein that the appellant therein being a resident of Dubai for the last 20 years, the provisions of the Customs Act, 1962 which only extend to the whole of India, cannot be invoked. The proceedings against a company incorporated abroad cannot be sustained as the Customs Authorities had no jurisdiction over a company incorporated abroad. It was, thus, held that the Customs Act prior to 29.3.2018 was applicable only to the whole of India and not beyond its territorial jurisdiction. The penalty, therefore, could not have been imposed upon the appellant therein under Section 112(a) of the Customs Act.

13. In the second limb of arguments to challenge the order passed by the CESTAT, Allahabad in dismissing the appeals as not maintainable, for non-compliance of the condition of mandatory pre-deposit under Section 129E of the Customs Act, it was argued by the learned counsel for the appellants that once the appellants herein made out a case of lack of jurisdiction of the Customs Authority over the appellants companies incorporated in Dubai and Kishore Ratilal Dhakan being a non-resident Indian between 1982-2010, the appeals filed by them challenging the order in original of imposition of penalty could not have been rejected as not maintainable, inasmuch as, the initial show cause notices issued on 12.11.2013 were required to be quashed being wholly without jurisdiction.

14. In addition to the above, the appellants have also demonstrated before the CESTAT that they were facing acute financial distress and there was high probability of the appeals being allowed for the show cause notices being without jurisdiction, the dismissal of appeals for non-deposit of the amount required under Section 129E was illegal.

15. The contention is that the Tribunal was required to entertain the defective appeals filed by the appellants without insisting for mandatory pre-deposit for the abovenoted situation as reflected on the face of the record. The prayer, thus, is to grant leave to maintain the appeals against the order of CESTAT and allow the same by quashing of the show cause notices and the order in original being wholly without jurisdiction.

Reliance is placed on the decisions of the Delhi High Court in Vijay Chauhan vs. Commissioner of Customs (Export)5 and Nawal Kishore Singh vs. Commissioner of Customs (Exports)6 to substantiate the submissions on the condonation of pre-requisite deposits to maintain appeal under Section 129E of the Customs Act.

16. Sri Amit Mahajan learned Advocate appearing for the revenue, in rebuttal, vehemently argued that though the appellant companies namely M/s Samrah Gold and M/s Deepu Jewellers were incorporated in Dubai but their Director Kishore Ratilal Dhakan was an Indian National. Both the companies were limited liability companies having their Indian Nationals as their partners to the extent of 49% of share. In the array of parties in the memorandum of the present appeals, the local address of Mumbai of Kishore Ratilal Dhakan, the Director of both the appellant companies has been given. The Aadhar Card of Sri Kishore Ratilal Dhakan appended with the memo of appeal also mentions his local residential address of Mumbai. The appellant companies were primarily being run by the Indian Nationals, who were holding 49% of its shares. The Dubai National who was holding 51% share was in fact a sleeping partner which is apparent from the Memorandum of Association of both the companies placed on record. Moreover, the offence having been committed within the territory of India, no immunity can be claimed by even a foreign company. The penalty imposed on the companies and its Director, the person who was Incharge of the business of the companies cannot be said to be illegal.

17. The submission is that the object and purpose of the Customs Act is to deal with ''smuggled goods' and ''loss of revenue', which is proved for the illegal import of gold jewellery without payment of Customs duty in SEZ unit, NOIDA. The material on record clearly indicated that the appellants herein had been benefited illegally from the import made by M/s Ajit Exports and M/s Vee ESS Jewellers Private Limited, two Indian companies located in the Special Economic Zone, NOIDA. The sale proceeds of the transactions made by Indian SEZ units were transmitted to the appellant companies and its Director Kishore Ratilal Dhakan. In case the appellant companies are spared only because of being incorporated abroad, i.e. in Dubai, the very purpose of import and export would be frustrated. For any illegal benefits derived by the appellant companies, incorporated outside India, out of any transaction or offence committed within the territory of India, they are liable to penalty, for contravention of the provisions of the Customs Act. All arguments raised by the counsel for the appellants on the plea of lack of jurisdiction are, thus, wholly unsustainable.

18. On the second point, with regard to the financial distress faced by the appellant companies seeking to condone the requisite pre-deposits, it was argued that the said contentions are not open to agitate with the amendment brought in the Customs Act in Section 129E(ii), substituted w.e.f. 1.10.2014. It was placed before us that the discretion conferred upon the Appellate Tribunal to dispense with the requirement of pre-deposit in case of undue hardship, as per the first proviso to Section 129E (as it then was) has been taken away with the amendments brought into force by the Act No. 25 of 2014, w.e.f. 1.10.2014. After amendment, Section 129E(ii) categorically provides that the Tribunal shall not entertain any appeal against the decision or order referred to in clause (a) of Sub-section (1) of Section 129A, unless the appellant deposits seven and a half percentage (7½%) of the duty demanded or penalty imposed or both, in pursuance to the decision of the order appealed against. The pre-deposit to maintain the appeal being a mandatory condition and the discretion of the Tribunal having been expressly taken away by the amendment, the CESTAT was not competent to dispense with the requirement of pre-deposit. All appeals filed after the amendments were required to comply with the condition of amended Section 129E(ii) and the CESTAT had no jurisdiction to condone the mandatory pre-deposit of 7.5% under the amended Section 129E of the Customs Act, 1962, either on the plea of financial distress/undue hardship or lack of jurisdiction of the Tribunal. The appeals filed by the appellants against the order in original, thus, have rightly been dismissed being non-maintainable.

Reliance is placed on the decision of the Apex Court in Chandra Sekhar Jha vs. Union of India7; the decision of the High Court of Delhi in Anjani Technoplast Ltd. vs. Commissioner of Customs8 and of this Court (Allahabad High Court) in Ganesh Yadav vs. Union of India9 to substantiate the above point of argument.

19. On the issue of territorial jurisdiction, reliance is placed on the decision of CESTAT, Mumbai in Prerna Singh vs. Commission of Customs10 to submit that the acts of the appellants herein are of abetment of such wrong doing which had its effect within the Mumbai Customs jurisdiction and the appellants herein who had aided importer in such wrong doing and later subjected themselves to the jurisdiction of Customs Act upon notice sent to them under Section 108 of the Customs Act, cannot challenge the penalty imposed under the Act.

20. Having heard learned counsels for the parties and perused the record, it is pertinent to note at this juncture that the main challenge by three appellants herein is to the order of the CESTAT, Allahabad in dismissing their appeals as non-maintainable on account of the defect, for non-compliance of mandatory pre-deposit in terms of Section 129E of the Customs Act. Three appeals filed by the appellants herein namely M/s Samrah Gold Factory Limited and M/s Deepu Jewellers and Kishore Ratilal Dhakan have, thus, been dismissed being defective. The requirement of pre-deposit as per Section 129E(ii) is mandatory with the amendment brought in Section 129E w.e.f. 1.10.2014. Under the amended provision, to maintain an appeal before the Appellate Tribunal against a decision or order passed by the Adjudicating Authority as referred in clause (a) of Sub-section (1) of Section 129A, the deposit of 7-½ % of the duty demanded or penalty imposed or both, in pursuant to the said decision or order, became mandatory. The discretion provided to the Appellate Tribunal as per the first proviso to the unamended Section 129E has expressly been taken away by legislative amendment. It was, thus, mandatory for the appellants herein to comply with the requirement of Section 129E of the Customs Act, as regards the pre-deposit of the amount in terms of the said provision.

The effect of amendment or deletion of the first proviso to Section 129E came up for consideration before the Apex court in a recent decision in Chandra Sekhar Jha (supra) dated 28.2.2022. The issue raised therein was that since the incident or the act related to the year 2013, prior to the amendment brought into effect on 6.8.2015, the appellant therein must be governed by Section 129E prior to its substitution. The question considered by the Apex Court was as to "whether the appellant therein must be given the benefit of the power available under the unamended provisions of Section 129E, i.e. the first proviso to Section 129E to condone the requirement of pre-deposit on the ground of undue hardship". It was noted therein that with the substitution of the provisions of Section 129E, sweeping changes from the previous regime was brought in by the law makers, under which the amount to be deposited was scaled down and pegged at a certain percentage of the amount in dispute. While under Section 129E, as it stood prior to the amendments, i.e. before 1.10.2014, the appellant was required to deposit the entire duty and the interest demanded or the penalty levied, in the present regime the appeal is maintainable upon the appellant depositing only seven and the half percent (7½%) of the amount of the duty demanded or penalty imposed or both. In the earlier regime, the entire amount which was in dispute had to be deposited and the Appellate Tribunal was conferred with the power under the first proviso to dispense with such deposit, subject to condition as it deemed fit to impose, to safeguard the interest of the revenue. The question whether the deposit of duty and interest demanded or penalty levied would cause undue hardship to such person was relevant in the previous regime. It is in the sharp departure from the previous regime that the new provision has been enacted. Under the new regime, on the one hand, the amount to be deposited to maintain the appeal has been reduced from 100% to 7.5% but, on the other, the discretion which was made available to the Appellate Tribunal to scale down the pre-deposit has been taken away. The argument of the appellant therein that he must be given the benefit of powers available under the unamended Section 129E for the incident having taken place in the year 2013, prior to the amendment, was turned down. It was held therein that the legislative intention clearly was not to allow the appellant therein to avail the benefit of discretionary power available under the first proviso to the unamended provision of Section 129E as the order was passed by the Commissioner in levying duty/penalty was subsequent to the amendment and the appeal was filed in the year 2017.

21. On the same principle, the Division Bench of this Court in Ganesh Yadav (supra) dealing with the amendment brought in Section 35F of the Central Excise Act, 1944 corresponding to Section 129E of the Customs Act, 1962 has held that the requirement of mandatory pre-deposit under the amendment would be applicable to appeals filed on or after the date of enforcement of the amended provision, even if the show cause notice was issued prior to the amendment. The challenge to the constitutional validity of amendment of Section 35F of the Central Excise Act, 1944, corresponding to Section 129E of Customs Act, 1962 was turned down on the first principle of law that a right of appeal is a statutory right and it is open to the legislature which confers a remedy of an appeal to condition the appeal subject to compliance with conditions. A fiscal legislation can stipulate a requirement of pre-deposit as a condition precedent to an appeal to be entertained. The restraint on the power of the legislature to do so, is that the condition which is prescribed should not be so onerous so as to restrict or abrogate the right of appeal altogether. A condition which is unduly onerous will render the right of appeal illusory and would hence run the risk of being held to be arbitrary and of being violative of the fundamental right conferred by Article 14 of Constitution.

22. As a second principle, it was noted therein that the right to appeal is a vested right and such a right to enter the superior court or tribunal accrues to the litigant and exists as on and from the date the lis commences and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails on the date of its decision or on the date of the filing of the appeal. Moreover, the vested right of appeal can be taken away by a subsequent enactment, if it so provides expressly or by necessary intendment and not otherwise. It was on these principles held that the amended provision of Section 35F of the Central Excise Act, 1944 would apply to all appeals which would be filed on and from the date of enforcement of the said provision. The plea of the appellant therein that the amended provisions of Section 35F(1) of the Act would not apply as the notice to show cause was issued prior to enforcement of the amended provision was turned down.

The Delhi High Court in Anjani Technoplast Ltd. (supra) has relied upon the decision of this Court (Allahabad High Court) in Ganesh Yadav (supra) in holding that the CESTAT had to apply the amended Section 129E of the Customs Act since the appeal before it was filed after the amendment was brought into force. While concurring with the decision of this Court in Ganesh Yadav (supra) as regards the interpretation of the amended Section 129E of the Act, it was held that as the pre-deposit made by the appellant therein was not 7.5% of the demanded duty as per the order of the Commissioner of Customs (Export), the dismissal of appeal by the CESTAT cannot be interfered.

23. In light of the above discussion, we are of the considered view that as the appellants herein have failed to fulfill the pre-condition of 7.5% of the demanded duty/penalty as per the order of the Commissioner of Customs, NOIDA dated 18.10.2018, this had to necessarily result in dismissal of their appeals by the CESTAT. There was no discretion with the tribunal to condone the pre-condition of mandatory deposits on the ground of undue hardship. As far as lack of jurisdiction to issue show cause notice is concerned, the said issue could have been considered once the appellants were able to maintain their appeals by making mandatory pre-deposits before the CESTAT. The appeals before us challenging the orders of the CESTAT dated 29.8.2009 in dismissing three appeals as not maintainable on account of defect of mandatory pre-deposit under Section 129E, therefore, deserve dismissal.

24. However, in view of the submissions of the learned counsel for the appellants about the jurisdiction of the Customs Authority in imposing penalty upon the appellants herein, we are required to answer the issue of jurisdiction raised before us, to examine as to whether any substantial question of law arises for determination in the instant appeal.

25. While answering the said issue, we are required to note certain findings from the order in original, i.e. the order of the Commissioner of Customs, NOIDA, in light of the admitted facts that the import of the confiscated gold jewellery was made to two companies namely M/s Ajit Exports and M/s Vee Ess Jewellers in Special Economic Zone as SEZ units. The exemption or the benefit of duty free Customs clearance of import consignment to SEZ units was on the basis of "self declaration" without any examination for the special provisions pertaining to SEZ units.

The finding of the Commissioner of Customs, NOIDA is that gold jewellery were imported by SEZ units were in the guise of old/outdated gold jewellery for carrying out the processes of assembling, refinishing, plating and remaking and then returning them to the appellants herein. The exemption of Customs duty and Cess was with the special condition that the imported jewellery were not to be sold and be sent back to the appellants namely M/s Deepu Jewellers and Samrah Gold Factory Ltd., the companies located in Dubai. The findings returned by the Commissioner of Customs, NOIDA is that Sri Kishore Ratilal Dhakan, the Managing Director of M/s Deepu Jewellers and the Director of M/s Samrah Gold Factory, the limited liability companies registered at Dubai, and Sharjah; respectively, and the share holder of M/s Vee Ess Jewellers [which was later converted into M/s VSS Jewellers (F) Limited] was the conspirator along with Sri Mukesh Kumar of M/s Mahesh & Company PET Ltd. Singapore to smuggle high and foreign made branded, fully furnished and new gold jewellery into India through the above mentioned companies located in Dubai, Sharjah and Singapore. To evade Customs duty and other taxes in India, the appellant Sri Kishore Ratilal Dhakan had conspired to export the said jewellery to SEZ units in the guise of old/outdated gold jewellery for carrying out the processes of assembling, refinishing, plating and remaking with the preconceived motive to remove the said jewellery clandestinely from the SEZ units, without payment of Customs duty and Cess, for delivering/selling the same to the customers in the local market, domestic market in India, whose identify was conveyed by the appellants to the SEZ units in "coded" form through Fax messages, SMS and telephonically. The sale proceeds of such high end foreign gold jewellery sold in the India were sent to the appellants Sri Kishore Ratilal Dhakan and another person namely Mahesh Kumar through illegal channels as well as through SEZ units in the form of primary gold/gold bar/Indian made jewellery processed locally by misdirecting it as refurbished foreign made gold jewellery.

The appellants were found to be the direct beneficiaries of the evasion of Customs duty and Cess besides additional amount collected by them from the buyers of such foreign made gold jewellery in the form of carrying/handling charges and making/labour charges. It was, thus, held that the appellants namely Sri Kishore Rati Lal Dhakan, M/s Samrah Gold Factory, M/s Deepu Jewellers had contravened the provisions of the Customs Act, 1962, SEZ Act, 2005 and the Rules made thereunder and, thus, rendered themselves liable to penal action under Sections 112, 114, 114AA of the Customs Act, 1962. The order was passed for confiscation of gold jewellery seized under Panchnama dated 6.2.2009 from the factory premises and residential premises of M/s Ajit Exports under Sections 111(j) and 111(o) of the Customs Act, 1962. The demand of Customs duty and Cess amounting to Rs. 2 crores and odd was confirmed against M/s Ajit Exports and the order for recovery of the same under Section 28 of the Customs Act, 1962 along with interest thereon under Section 28(A)(D) of the Customs Act, 1962 was passed. Similarly the order for confiscation of gold jewellery recovered and seized from the business premises of M/s Vee ESS Jewellers under Sections 111(j) and 111(o) of the Customs Act and confirmation of demand of Customs duty and Cess amount to Rs. 1 Crore and odd against M/s Vee Ess Jewellers and the order of recovery of the same under Section 28 along with interest thereon under Section 28(A)(D) of the Customs Act, 1962 was passed besides imposition of penalty and other charges from M/s Ajit Exports. Three appellants herein along with other noticees were held liable for imposition of penalty under Sections 112, 114 and 114AA and Section 117 of the Customs Act, 1962 for the illegal benefits received by them out of the illegal import by M/s Ajit Exports NOIDA under misguise of the "self certification" procedure by misdirecting the same as gold jewellery in lieu of duty free imported gold jewellery.

The appellants had, thus, been found to be involved in the act of abetment, of having aided the importer in such wrong doing.

26. In view of the admitted fact that the confiscated gold jewellery from the factory and residential premises of M/s Ajit Exports and factory premises of M/s Vee Ess Jewellers two SEZ units were exported by M/s Deepu Jewellers and M/s Samrah Gold Factory, the Managing Director and the Director of whom was Sri Kishore Ratilal Dhakan at the relevant point of time, we are required to examine as to whether the penalty imposed upon the appellants herein under Sections 112, 114, 114AA is without jurisdiction.

27. While examining the said question, it is pertinent to note that the offence of diversion of gold jewellery imported by the SEZ units without payment of Customs duty and Cess, for delivering/selling the same to the customers in the local market/DTA (Domestic Market), had been committed within the territory of India. Section 1(2) of the Customs Act, 1962, even prior to its amendment/insertion by Act No. 13 of 2018 was extended to the whole of India. The addition of words with the amendment that the provisions of the Act applies also to "any offence or contravention under the Act committed" outside India by any person, makes it clear that Section 1(2) of the Customs Act, 1962 as it originally stood, talks of "commission of offence" "by any person" "within the territory of India". The Customs Act, 1962 is principally an enactment to consolidate and amend the law relating to Customs. It provides for the levy of duties of Customs. Amendment Act No. 13 of 2018 only extended the scope of the Act by now applying it to "any offence or contravention of the Customs Act, 1962 committed outside India" "by any person".

Section 2(15) defines "duty" means a duty of Customs leviable under this Act.

Section 2(18) defines "export", with its grammatical variations and cognate expressions, means taking out of India to a place outside India.

"Import" defines in Section 2(23) is with its grammatical variations and cognate expressions, means bringing into India from a place outside India.

Section 2(25) defines "imported goods" means any goods brought into India from a place outside India excluding goods which have been cleared for home consumption.

Section 2(27) defines "India" including the territorial waters of India.

"Smuggling" defined in Section 2(39) is in relation to any goods, means any act or omission which will render such goods liable to confiscation under Section 111 or Section 113.

Section 111 in Chapter XIV provides for confiscation of "improperly imported goods".

Section 111(o) provides that:

"(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;"

Section 112 provides for penalty for improper importation of goods by any person.

Section 112(a) relevant for our purpose is to be extracted hereunder:-

"(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act;"

Section 113 provides for confiscation of goods attempted to be improperly exported.

Section 114 provides for penalty for attempt to export goods improperly by any person.

Section 114AA provides for penalty for use of false and incorrect material.

Section 114 and Section 114AA are relevant to be extracted hereunder:-

"Section 114. Penalty for attempt to export goods improperly, etc.--

Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable,--

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding three times the value of the goods as

declared by the exporter or the value as determined under this Act], whichever is the greater;

[(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five

thousand rupees, whichever is higher:

Provided that where such duty as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such

person under this section shall be twenty-five per cent. of the penalty so determined;]

[(iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.]"

Section 114AA. Penalty for use of false and incorrect material:-

If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods.]"

28. A conjoint reading of Sections 112 and 114 of the Customs Act which deal with penalty for ''improper import' and ''improper export' or attempt to export goods improperly clearly shows that the penalty can be imposed on "any person", not only such person who does or omits to do any act in relation to any goods liable to confiscation under Section 111 or 113, but would also include such person who abets the doing or omission of such an act. The penalty, thus, can be imposed under Section 112 or Section 114 upon not only the importer or exporter; respectively, but also upon ''any person' who commits an act of abetment, i.e. to help or aid exporters or importer in such wrong doing.

29. In the instant case, the appellants companies incorporated in Sharjah and Dubai which were limited liability companies, 49% of share of which were held by Indian Nationals namely its Managing Director/Director Sri Kishore Ratilal Dhakan and Deepak Ratilal Dhakan were doing illegal business in India through two SEZ units namely M/s Ajit Exports and M/s Vee Ess Jewellers. Sri Kishore Ratilal Dhakan was also the share holder of M/s Vee Ess Jewellers. The permission to import gold jewellery without Customs duty and Cess was with the specific condition that the old/outdated gold jewellery imported to carry out process of assembling, refinishing, plating and remaking would be sent back to the exporters the appellants herein. The clear condition, thus, was that the gold jewellery imported by M/s Ajit Exports NOIDA and M/s Vee Ess Jewellers, two SEZ units (exported by the Appellants) was not to be diverted/sold in the local market.

30. In contravention of the condition of grant of benefit of exemption under Section 26 of the SEZ Act, 2005 read with Rules 25, 27 and 34 of the SEZ Rules, 2006 from the duty of Customs under the Customs Act, 1962, the importer and exporter both had indulged in illegal business in India by import and export of gold jewellery with preconceived motive to remove the said jewellery clandestinely from SEZ units without payment of Customs duty and Cess, for delivering/selling the same to the customers in the local market/DTA.

The finding in the order-in-question is that the identify of the customers in the local market/DTA, was conveyed to SEZ units by the appellants/exporters through Fax messages/SMS/Telephone etc. in coded form. Sri Kishore Ratilal Dhakan, the Managing Director of M/s Deepu Jewellers and Director of M/s Samrah Gold Factory had preferred the SEZ units to avail the benefit of duty free Customs clearance of import consignments and, thereafter, the imported gold jewellery was clandestinely removed from the SEZ units without carrying out any process as per the condition of exemptions from payment of Customs duty and Cess and delivered/sold to the respective buyers domestically. The sale proceeds were sent to Sri Kishore Ratilal Dhakan through SEZ units in the form of primary gold/gold bar/Indian made jewellery processed locally by misdeclaring it as refurbished foreign made gold jewellery in the export documents under ''self-certification'. The appellant Sri Kishore Ratilal Dhakan was found to be the direct beneficiary of evasion of Customs duty and Cess besides the additional amount collected by him from the buyers of foreign made gold jewellery in the form of carrying/handling charges and making/labour charges.

Sections 111(d), 111(j) and 111(o) of the Customs Act, 1962 are, thus, attracted.

31. Similarly Section 113(d), (i) and (l) of the Customs Act, 1962 are also attracted for confiscation of Indian Jewellery/goods attempted to be improperly exported in the garb of refurbished foreign made gold jewellery through SEZ units. The appellants herein being the conspirator/abettor of the act of improper import and attempt to improper export thus, render themselves liable to penalty for the goods confiscated under Sections 111 and 113 of the Customs Act, 1962. The penalty for the use of false and incorrect material in the form of declaration statement and document which were found false in material particulars in the transaction of the business for the purposes of the Customs Act has, thus, rightly been imposed upon the appellants under Section 114AA of the Customs Act, 1962.

32. As noted above, the offence of improper importation and attempt to improper export by diversion of gold jewellery in the local market under mis-declaration from SEZ units had been committed within the territorial limits of India as defined in Section 2(27) of the Customs Act, 1962, the issue of jurisdiction of the Customs Authorities in India to impose penalty upon the Appellants does not arise.

33. The plea of the learned counsel for the appellants based on the decisions of the CESTAT about the liability of the exporter for improper import is not available in the facts and circumstances of the case. In view of the findings returned by the Commissioner of Customs, in the order-in-original that the entire illegal business of improper import and attempt to improper export had been committed within the territorial limits of India through SEZ units, which had availed exemption from Customs duty and Cess by mis-declaration of foreign made gold jewellery for diverting/selling in the domestic market in India, in the guise of old/outdated gold jewellery for carrying out the process of assembling/refinishing/plating and remaking and sending them back to the exporters outside India, i.e. the appellants herein, the question of jurisdiction of Customs Authorities to confiscate the gold jewellery under Sections 111 and 113 and impose penalty upon the appellants under Sections 112 and 114 cannot be raised as the violation of the provisions of Customs Act or the offence under the Act has been committed within the territory of India.

34. Moreover, the appellants herein have submitted themselves to the jurisdiction of the Customs Act upon the notices issued to them under Section 108 of the said Act and filed appeals against the order of the adjudicating authority under Section 129A(a) of the Customs Act, 1962, without complying with the mandatory condition of pre-deposit under Section 129E(ii) of the Customs Act, 1962, the appeals filed by them have been rightly dismissed as non-maintainable for non-fulfillment of mandatory condition of pre-deposit.

35. No infirmity could be found in the decisions of the Appellate Tribunal in dismissing the appeals as not maintainable. No substantial question of law arises for determination in all the appeals.

All the connected appeals are, thus, dismissed. No order as to costs.

(Vipin Chandra Dixit, J.) (Sunita Agarwal, J.)

Order Date :- 9.1.2023

Brijesh