Bombay High Court
Jewelex India Pvt Ltd vs Union Of India And 2 Ors on 18 November, 2022
Bench: K.R. Sriram, Shri Arif Doctor
Digitally signed
by GAURI
GAURI AMIT
AMIT GAEKWAD
GAEKWAD Date:
2022.11.19
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13:26:52 +0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2003 OF 2009
M/s. Renaissance Global Limited )
a Company Incorporated under the provisions )
of the Companies Act, 1956, having its )
Registered Office and factory at Plot No.36A & )
37, SEEPZ, Andheri (E), Mumbai - 400 096 ) ....Petitioner
V/s.
1. Union of India )
through the Joint Secretary in the Ministry of )
Law, Justice and Company Affairs, Aayakar )
Bhawan, M.K. Road, Churchgate, Mumbai - )
400 020 )
2. The Commissioner of Customs )
Chhatrapati Shivaji International Airport, )
having his office at Avas Corporate Point, )
Makwana Lane, Behind S.M. Centre, Andheri - )
Kurla Road, Andheri (East), Mumbai - 400 059 )
3. The Assistant Commissioner of Customs )
Air Intelligence Unit having his office at Avas )
Corporate Point, Makwana Lane, Behind S.M. )
Centre, Andheri - Kurla Road, Andheri (East), )
Mumbai - 400 059 )
4. The Secretary, Ministry of Commerce & )
Industry, having his office at Udyog Bhavan, )
New Delhi - 110 001 )
5. The Development Commissioner )
SEEPZ Special Economic Zone, Ministry of )
Commerce & Industry, Andheri (East), Mumbai )
- 400 096 ) ....Respondents
WITH
WRIT PETITION NO.2004 OF 2009
M/s. Gold Star Jewellery Designs Pvt. Ltd. )
a Company incorporated under the provisions )
of the Companies Act, 1956, having its )
Registered Office and factory at Unit Nos.38 )
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and 39 SDS-II, SEEPZ, SEZ, Andheri (East), ) ....Petitioner
Mumbai - 400 096 )
V/s.
1. Union of India )
through the Joint Secretary in the Ministry of )
Law, Justice and Company Affairs, Aayakar )
Bhawan, M.K. Road, Churchgate, Mumbai - )
400 020 )
2. The Commissioner of Customs )
Chhatrapati Shivaji International Airport, )
having his office at Avas Corporate Point, )
Makwana Lane, Behind S.M. Centre, Andheri - )
Kurla Road, Andheri (East), Mumbai - 400 059 )
3. The Assistant Commissioner of Customs )
Air Intelligence Unit having his office at Avas )
Corporate Point, Makwana Lane, Behind S.M. )
Centre, Andheri - Kurla Road, Andheri (East), )
Mumbai - 400 059 )
4. The Secretary, Ministry of Commerce & )
Industry, having his office at Udyog Bhavan, )
New Delhi - 110 001 )
5. The Development Commissioner )
SEEPZ Special Economic Zone, Ministry of )
Commerce & Industry, Andheri (East), Mumbai )
- 400 096 ) ....Respondents
WITH
WRIT PETITION NO.1945 OF 2009
M/s. Jewel Art )
a Partnership Firm registered under the )
provisions of the Partnership Act 1932, having )
its Office and factory at Unit II, Unit Nos.G-19 )
& 22, G & J Complex II, SEEPZ, SEZ, Andheri )
(East), Mumbai - 400 096 ) ....Petitioner
V/s.
1. Union of India )
through the Joint Secretary in the Ministry of )
Law, Justice and Company Affairs, Aayakar )
Bhawan, M.K. Road, Churchgate, Mumbai - )
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400 020 )
2. The Commissioner of Customs )
Chhatrapati Shivaji International Airport, )
having his office at Avas Corporate Point, )
Makwana Lane, Behind S.M. Centre, Andheri - )
Kurla Road, Andheri (East), Mumbai - 400 059 )
3. The Assistant Commissioner of Customs )
Air Intelligence Unit having his office at Avas )
Corporate Point, Makwana Lane, Behind S.M. )
Centre, Andheri - Kurla Road, Andheri (East), )
Mumbai - 400 059 )
4. The Secretary, Ministry of Commerce & )
Industry, having his office at Udyog Bhavan, )
New Delhi - 110 001 )
5. The Development Commissioner )
SEEPZ Special Economic Zone, Ministry of )
Commerce & Industry, Andheri (East), Mumbai )
- 400 096 ) ....Respondents
WITH
WRIT PETITION NO.1993 OF 2009
M/s. Jewelex India Pvt. Limited )
a Company incorporated under the provisions )
of the Companies Act, 1956, having its )
Registered Office at 124-C, Mittal Court, )
Nariman Point, Mumbai 400 020 & )
manufacturing unit at Plot No:56-B, Seepz, )
Andheri (East), Mumbai - 400 096 ) ....Petitioner
V/s.
1. Union of India )
through the Joint Secretary in the Ministry of )
Law, Justice and Company Affairs, Aayakar )
Bhawan, M.K. Road, Churchgate, Mumbai - )
400 020 )
2. The Commissioner of Customs )
Chhatrapati Shivaji International Airport, )
having his office at Avas Corporate Point, )
Makwana Lane, Behind S.M. Centre, Andheri - )
Kurla Road, Andheri (East), Mumbai - 400 059 )
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3. The Assistant Commissioner of Customs )
Air Intelligence Unit having his office at Avas )
Corporate Point, Makwana Lane, Behind S.M. )
Centre, Andheri - Kurla Road, Andheri (East), )
Mumbai - 400 059 )
4. The Secretary, Ministry of Commerce & )
Industry, having his office at Udyog Bhavan, )
New Delhi - 110 001 )
5. The Development Commissioner )
SEEPZ Special Economic Zone, Ministry of )
Commerce & Industry, Andheri (East), Mumbai )
- 400 096 ) ....Respondents
WITH
WRIT PETITION NO.2039 OF 2009
1. M/s. Bombay Jewellery Manufacturers )
A partnership firm registered under the Indian )
Partnership Act, 1932 having its head office at )
G-47, GNJ Complex - I, SEEPZ SEZ, MIDC )
Andheri (E), Mumbai - 400 096 )
2. M/s. Bombay Jewellery Manufactures Pvt. )
Ltd. )
a Company incorporated under the provisions )
of the Companies Act, 1956, having its )
Registered Office at 2301, Panchratna, Opera )
House, Girgaon, Mumbai - 400 004 and )
factory at Complex - I, SEEPZ SEZ, Andheri ) ....Petitioners
(East), Mumbai - 400 096 )
V/s.
1. Union of India )
through the Joint Secretary in the Ministry of )
Law, Justice and Company Affairs, Aayakar )
Bhawan, M.K. Road, Churchgate, Mumbai - )
400 020 )
2. The Commissioner of Customs )
Chhatrapati Shivaji International Airport, )
having his office at Avas Corporate Point, )
Makwana Lane, Behind S.M. Centre, Andheri - )
Kurla Road, Andheri (East), Mumbai - 400 059 )
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3. The Assistant Commissioner of Customs )
Air Intelligence Unit having his office at Avas )
Corporate Point, Makwana Lane, Behind S.M. )
Centre, Andheri - Kurla Road, Andheri (East), )
Mumbai - 400 059 )
4. The Secretary, Ministry of Commerce & )
Industry, having his office at Udyog Bhavan, )
New Delhi - 110 001 )
5. The Development Commissioner )
SEEPZ Special Economic Zone, Ministry of )
Commerce & Industry, Andheri (East), Mumbai )
- 400 096 ) ....Respondents
WITH
WRIT PETITION NO.2053 OF 2009
M/s. M.K. )
is a Parnership Firm registered under the )
provisions of the Partnership Act 1932, having )
its Office and factory at Unit No.103, Building )
No.1, SEZ, SEEPZ, Andheri (E), Mumbai - 400 )
096 ) ....Petitioner
V/s.
1. Union of India )
through the Joint Secretary in the Ministry of )
Law, Justice and Company Affairs, Aayakar )
Bhawan, M.K. Road, Churchgate, Mumbai - )
400 020 )
2. The Commissioner of Customs )
Chhatrapati Shivaji International Airport, )
having its office at Avas Corporate Point, )
Makwana Lane, Behind S.M. Centre, Andheri - )
Kurla Road, Andheri (East), Mumbai - 400 059 )
3. The Assistant Commissioner of Customs )
Air Intelligence Unit having his office at Avas )
Corporate Point, Makwana Lane, Behind S.M. )
Centre, Andheri - Kurla Road, Andheri (East), )
Mumbai - 400 059 )
4. The Secretary, Ministry of Commerce & )
Industry, having his office at Udyog Bhavan, )
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New Delhi - 110 001 )
5. The Development Commissioner )
SEEPZ Special Economic Zone, Ministry of )
Commerce & Industry, Andheri (East), Mumbai )
- 400 096 ) ....Respondents
WITH
NOTICE OF MOTION NO.565 OF 2010
WITH
INTERIM APPLICATION (L) NO.10284 OF 2021
IN
WRIT PETITION NO.2003 OF 2009
WITH
NOTICE OF MOTION NO.569 OF 2010
WITH
INTERIM APPLICATION (L) NO.10307 OF 2021
IN
WRIT PETITION NO.2004 OF 2009
WITH
NOTICE OF MOTION NO.564 OF 2010
WITH
INTERIM APPLICATION (L) NO.10373 OF 2021
IN
WRIT PETITION NO.1945 OF 2009
WITH
NOTICE OF MOTION NO.567 OF 2010
WITH
INTERIM APPLICATION (L) NO.10376 OF 2021
IN
WRIT PETITION NO.1993 OF 2009
WITH
NOTICE OF MOTION NO.568 OF 2010
WITH
INTERIM APPLICATION (L) NO.10281 OF 2021
IN
WRIT PETITION NO.2039 OF 2009
WITH
NOTICE OF MOTION NO.186 OF 2015
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WITH
NOTICE OF MOTION NO.566 OF 2010
WITH
INTERIM APPLICATION (L) NO.10303 OF 2021
IN
WRIT PETITION NO.2053 OF 2009
----
Mr. Vikram Nankani, Senior Advocate a/w. Mr. Prithwiraj Choudhuri,
Mr. Malcolm Siganporia, Mr. Dhiren Durante and Mr. Sahil Namavati i/b.
Lexicon Law Partners for petitioner in Writ Petition No.2003 of 2009.
Mr. Vikram Nankani, Senior Advocate a/w. Mr. Naresh Thacker, Mr. Jitendra
Motwani, Mr. Chirag Shetty, Ms. Shilpi Jain, Mr. Mehul Talera, Mr. Prithwiraj
Choudhuri and Ms. Diva Devarsha i/b. Economic Laws Practice for
petitioner in Writ Petition No.2004 of 2009, Writ Petition No.1945 of 2009,
Writ Petition No.1993 of 2009, Writ Petition No.2039 of 2009 and Writ
Petition No.2053 of 2009.
Mr. Vijay H. Kantharia a/w. Mr. Jitendra B. Mishra and Mr. Dhananjay B.
Deshmukh for Custom Authorities in all petitions.
Mr. Advait M. Sethna a/w. Mr. Ashutosh Misra, Mr. Sandeep Raman and
Mr. Rangan Majumdar i/b. Mr. A.A. Ansari for Union of India and SEEPZ in
all petitions.
----
CORAM : K.R. SHRIRAM & A.S. DOCTOR, JJ.
RESERVED ON : 29th SEPTEMBER 2022
PRONOUNCED ON : 18th NOVEMBER 2022
JUDGMENT (PER K.R. SHRIRAM, J.) :
1 The facts in all the petitions listed are almost identical barring
minor differences. In all the matters, Sections 111(d) and 111(m) and
Section 112(a) and Section 114A of the Customs Act, 1962 have been
invoked and penalty imposed. In some cases, Section 118(a) of the Customs
Act, 1962 has been invoked. Section 118(a) basically deals with confiscation
of package.
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2 The common issue which arises for consideration is whether
petitioners were permitted to import new/unused jewellery for remaking after
melting. If the answer is no then what are the consequences. If the answer is
yet then what will be the further orders. Therefore, for convenience, we are
taking up Writ Petition No.2003 of 2009 as lead petition.
3 Petitioner is engaged in the manufacture and export of gold,
platinum and silver jewellery. Its unit is located within the Santacruz
Electronic Export Processing Zone ('SEEPZ'). SEEPZ is a notified export
processing zone and is covered by the Special Economic Zone Act, 2005 ('SEZ
Act'). Petitioner was granted a Letter of Permission ('LOP') dated 17th March
2000 by the Joint Development Commissioner, SEEPZ ('DC') being a license to
manufacture and export all kind of jewellery - plain as well as studded. Upon
coming into force of the SEZ Act, in terms of the proviso to Section 15(1)
thereof, existing units did not require approval under the SEZ Act.
4 Prior to the amendment to the SEZ Act, imports into the SEZs
were governed by the provisions of the Foreign Trade Policy, 2002 ('FTP')
issued under the Foreign Trade (Development & Regulation) Act, 1992 ('FTDR
Act') and erstwhile Chapter XA of the Customs Act, 1962 ('Customs Act').
The SEZ Act came into force on 10 th February 2006 to provide
for the establishment, development and management of the Special Economic
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Zones for the promotion of exports and for matters connected therewith or
incidental thereto. The Special Economic Zones Rules, 2006 ('SEZ Rules')
were formulated under Section 55 of the SEZ Act and came into force on
10th February 2006. The Government of India issued a notification dated
14th March 2006 declaring SEEPZ shall be deemed to be a port under
Section 7 of the Customs Act and the provisions contained in Chapter XA of
the Customs Act and the SEZ Rules, 2003 and the Special Economic Zones
(Customs Procedure) Regulations, 2003 shall not apply to the Special
Economic Zones. Section 51, 52 and 53 of SEZ Act read as under :
"Section 51 - Act to have Overriding Effect
The provisions of this Act shall have effect notwithstanding
anything inconsistent therewith contained in any other law for the
time being in force or in any instrument having effect by virtue of
any law other than this Act.
Section 52 - Certain Provisions to not apply
(1) The provisions contained in the Chapter XA of the Customs Act,
1962 (52 of 1962) and the Special Economic Zones Rules, 2003
and the Special Economic Zones (Customs Procedure) Regulations,
2003 made thereunder shall not, with effect from such date as the
Central Government by notification appoint, apply to the Special
Economic Zones.
xxxxxxxxxxxxxx
Section 53 -Special Economic Zones to be ports, airports, inland
container depots, land stations, etc., in certain cases.
(1) A Special Economic Zone shall, on and from the appointed day,
be deemed to be a territory outside the customs territory of India
for the purposes of undertaking the authorised operations.
(2) A Special Economic Zone shall, with effect from such date as
the Central Government may notify, be deemed to be a port,
airport, inland container depot, land station and land customs
stations, as the case may be, under section 7 of the Customs Act,
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1962 (52 of 1962):
Provided that for the purposes of this section, the Central
Government may notify different dates for different Special
Economic Zones."
5 It is petitioner's case that it has been importing jewellery for
remaking, which is subsequently melted, and the precious metal derived
therefrom is used for the manufacture of fresh pieces of jewellery. During
the period April 2005 to May 2009, an aggregate of 1160 consignments of
finished unsold jewellery were imported by petitioner. Petitioner states that
it manufactures branded jewellery for international buyers and exports its
entire production. Petitioner states that when some of the jewellery which is
exported remains unsold, for various reasons, the said foreign buyers resell
the said jewellery back to petitioner based on oral / written agreements and
petitioner reimports the said jewellery on an outright purchase basis. The
jewellery so imported is melted and used for remaking of fresh jewellery
with or without additions.
6 However, petitioner is not merely importing finished jewellery
as its only raw material for the manufacturing process and the majority of
its raw material, imports comprise of gold and other precious metals in its
raw form. Petitioner states that only 16.70% of its total imports are
reimported finished jewellery which are repurchased from overseas buyers
and is the subject matter of the present dispute.
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7 In the course of its business, petitioner imported a consignment
of gold and silver jewellery for remaking vide Bill of Entry No.100856 dated
9th February 2009 ('Bill of Entry') declaring the same as 'Gold and Silver
Jewellery Dia Studded 9 and 18 KT Gold and Silver Jewellery (REMAKING
ON OUTRIGHT BASIS)' ('the Consignment') with an assessable value of
Rs.5,36,781/- (Rupees Five Lakhs Thirty Six Thousand Seven Hundred and
Eighty One Only). The Consignment was to be delivered at the SEZ CARGO
as can be seen printed at the top right of the Bill of Entry. A declaration was
also filed with the Bill of Entry which inter alia declared that the goods
covered by the Bill of Entry have been imported on an out-right purchase /
consignment account. In support of these declarations, petitioner had also
enclosed an Invoice cum packaging list No.2009 K-040 dated 2 nd February
2009 issued by M/s. Signet Group, Imperial Palace, 3 Maxwell Road
Borehamwood, London, UK where the description of goods was mentioned
as 'Jewellery supplied for remaking'.
8 The Consignment was intercepted by the Air Intelligence Unit of
the Office of the Commissioner of Customs at Sahar Airport on 11 th February
2009 even before it reached SEEPZ. The Consignment was examined on
16th February 2009 and the same was detained by respondent no.3.
Petitioner's representative one Mr. Dilip Joshi was questioned and his
statements were recorded (under Section 108 of the Customs Act) on
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4th March 2009, 5th March 2009, 18th March 2009, 24th March 2009 and
25th March 2009 ('the statements'). The statements, inter alia, clarified the
purpose of import of the Consignment, i.e., for remaking of jewellery, which
was permitted. It was also explained that the jewellery in the Consignment
was purchased as a raw material wherein they melt the product and used
the recovered material for manufacture of jewellery. Pertinently, the
statements recorded that the goods forming a part of the Consignment were
manufactured in petitioner's unit at the SEZ and the same were exported
earlier by petitioner between 28th April 2008 and 1st November 2008 and
further the designs also pertain to petitioner.
9 Respondent no.3 vide its letter dated 17 th April 2009 ordered
the provisional release of the Consignment on the terms set out therein.
Petitioner did not avail of the provisional release as according to petitioner,
the detention of the Consignment was ab-initio null and void.
10 Respondent no.2 also addressed a letter dated 5th May 2009 to
the DC (incharge of SEEPZ) - which called for 'information urgently'. This
information sought posed questions such as whether the (SEZ) unit has the
approval of the competent authority to import / re-melt and export the
imported finished jewellery. The DC (incharge of the SEEPZ) by his letter
dated 22nd May 2009 addressed to respondent no.2 inter alia clarified and
confirmed that petitioners were eligible to import the goods forming a part
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of the Consignment.
11 Respondent no.3, thereafter issued a Show Cause Notice dated
14th July 2009 calling upon petitioner to show case as to why the
consignment should not be confiscated under Section 111(d) and (m) and
penalty under Section 112 and 114A of the Customs Act be not imposed.
This was followed by an Addendum / Corrigendum dated 21st July 2009 to
the show cause notice issued by Respondent No.3. Another Addendum /
Corrigendum dated 18th August 2009 to the show cause notice was issued
by Respondent No.3 whereby amendments to the show cause notice were
effected and now sought to include Sections 28, 28AB of the Customs Act.
12 Petitioner filed this writ petition on 4th September 2009 inter
alia seeking an order to set aside or quash the show cause notices.
Affidavit/s in reply to the petition were filed by the Deputy DC on
10th February 2010 and 29th April 2010 which inter alia stated that (i) the
provisions of the SEZ Act is a code in itself and has an overriding effect by
virtue of Section 51 of the SEZ Act, (ii) by virtue of Section 53 of the SEZ
Act, a SEZ shall on and from the appointed date be deemed to be a territory
outside the Customs territory of India for the purposes of undertaking the
authorised operations, (iii) placed on record Instruction No.51 dated
25th March 2010 which inter alia records that all SEZ units are required to
file a declaration in Form F while submitting an application for setting up of
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a unit and that the approval committee shall consider the same before
granting approval for issuance of LOA and (iv) finished jewellery imported
by petitioner under Rule 27(1) of SEZ Rules are permitted for import for
carrying out authorised operations, i.e., manufacture of jewellery which has
been specifically permitted by the DC in the Letter of Approval.
13 The DC and the Secretary, Ministry of Finance were added as
respondent no.5 and respondent no.4, respectively, pursuant to leave
granted by this Court on 26th November 2009.
14 Petitioner and the Customs Department entered into an
arrangement and filed minutes of order dated 3 rd May 2010 and an order in
terms of minutes came to be passed on 3 rd May 2010. The same recorded
that petitioner shall participate in the adjudication proceedings without
prejudice to its rights and contentions that respondent nos.2 and 3 have no
jurisdiction to seize and/or adjudicate and petitioner shall be at liberty to
raise all issues including the issue of jurisdiction before respondent no.2.
The Minutes also provided timelines for petitioner to file its reply to the
show cause notice which was to be decided by respondent no.2 within a
period of 4 weeks from the date of receipt of the reply to the show cause
notice. The Consignment was also provisionally released upon execution of
Bond and submitting a Bank Guarantee for 25% of the amount equivalent to
the duty demanded in respect of the seized goods. The said order passed by
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respondent no.2 shall be subject to the outcome of the petition.
15 Petitioner filed its reply dated 13th July 2010 to the show cause
notice and inter alia primarily contended that the unit was governed by the
provisions of the SEZ Act and not the Customs Act and that respondent no.3
had no jurisdiction to even issue the show cause notice.
16 Respondent No.2 vide its order dated 19 th August 2010
("Impugned Order") confirmed the allegations made against petitioner in
the show cause notice thereby imposing:
A. In respect of goods imported vide Bill of Entry No.100856 dated
09.02.2009
(i) A penalty of Rs. 50,000/- and
(ii) Redemption fine of Rs.1,50,000/- and
(iii) Duty of Rs. 61,200/-.
B. In respect to goods imported in the past:
(i) Confiscation of goods cleared in the past alongwith fine of
Rs.80,00,00,000/-
(ii) Recovery of duty of Rs.43,77,44,781/- alongwith applicable
interest
(iii) Penalty of Rs. 43,77,44,781/-.
17 The petition was subsequently amended by way of a chamber
summons and the aforesaid reply to the show cause notice and impugned
order was brought on record and the challenge in the petition was modified
to include a challenge to the impugned order as well.
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18 The short point involved is whether petitioner is permitted to
import new/unused jewellery for remaking after melting the same. As
aforesaid, Customs say "no", while the DC says "yes".
19 At the outset, Mr. Kantharia submitted that Rule has been issued
only on the issue of jurisdiction and petitioner has an alternative remedy to
challenge the order dated 19th August 2010 by filing an appeal. Petitioner
had approached this Court in its writ jurisdiction under Article 226 of the
Constitution of India on the ground that the Customs Department did not
have jurisdiction to investigate, seize and issue show cause notice against
petitioner after coming into force of SEZ Act. In the affidavit in reply dated
25th November 2009, the Customs Department has asserted that the show
cause notice has been correctly issued by exercising its jurisdiction under
the Customs Act in the facts and circumstances of the case. The Customs
Department has further raised preliminary objection that petitioner has
alternate and efficacious remedy of statutory appeal under the provisions of
Customs Act in the event the show cause notice culminates into Order-in-
Original and the same is adverse and against petitioner. This Court has, after
hearing petitioner and respondents, admitted the petition only on the issue
of jurisdiction of the Customs Department under the provisions of the
Customs Act.
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Mr. Kantharia further submitted that the issue of jurisdiction of
customs authorities to issue notice or take penal action under the Customs Act
against unit situated in the Special Economic Zone, came to be considered by
the Gujarat High Court in the matter of Union of India V/s. Oswal Agricomm
Pvt. Ltd.1, wherein the Hon'ble Gujarat High Court, inter alia, held that the
competent authorities under the Customs Act are still empowered to
confiscate any goods under Sections 111 and 112 and impose penalty under
Sections 113 and 114, in appropriate case, even with regard to the units
situated within the Special Economic Zone. The competent authorities are also
empowered to take penal action under any other Central Act, if such violation
is found to have been committed by any or other unit of SEZ including the writ
petitioners with regard to which no notification has been issued either under
sub-section (i) or sub-section (2) of Section 21 or sub-section (1) or sub-
section(2) of Section 22 of the SEZ Act. The show cause notice has now
culminated into Order-in-Original, which was passed on merits and the facts of
the case after giving full opportunity of hearing to petitioner and upon
application of mind on the material on record consisting of various documents
and statements recorded under Section 108 of the Customs Act and the reply
of petitioner to the show cause notice. Petitioner has not alleged violation
of principle of natural justice. Petitioner has not alleged any breach
of fundamental rights, there is no challenge to the virus of the
1. 2011 (268) E.L.T. 21 (Guj.)
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statute. Thus, this Court may not exercise its extra-ordinary Writ Jurisdiction
under Article 226 of the Constitution of India inter alia in view of the
alternate and efficacious remedy of statutory appeal available to petitioner
under the provisions of the Customs Act. Courts have consistently taken the
view that when there is an alternate remedy available, judicial prudence
demands that the Court refrains from exercising its jurisdiction under
constitutional provisions.
Mr. Kantharia concluded, on the issue of alternate remedy that in
view of the settled position in law as laid down by the plethora of judgments
of the Hon'ble Supreme Court of India and other High Court on the issue of
alternate and efficacious remedy of statutory appeal, the petition deserves to
be disposed inter alia with directions to petitioner to pursue the alternate and
efficacious remedy of statutory appeal following due process of law.
Mr. Kantharia relied upon various judgments in support of this submission.
20 At this stage of final hearing, we are not inclined to
relegate petitioner to pursue the alternate remedy in as much as it is settled
law that availability of an alternate remedy does not prohibit the High Court
from entertaining a writ petition. The High Court may entertain a
writ petition notwithstanding the availability of an alternate remedy
particularly, where the writ petition seeks enforcement of any of the
Fundamental Rights or where there has been a violation of the principle of
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natural justice or where the order or proceedings are wholly without
jurisdiction or the vires of an Act is under challenge. ( Radha Krishan
Industries V/s. State of Himachal Pradesh and Ors.2).
As held by the Apex Court in Union of India V/s. Tarachand
Gupta3, the phrase "jurisdiction" is of a wide import and will not only
include questions of its existence or lack thereof, but will also include issues
on whether the authority has acted within the contours of its jurisdiction or
has acted in an improper manner in excess of its jurisdiction.
In the case at hand, the issue is whether respondents have
properly exercised jurisdiction and whether the provisions of the Customs
Act as stated in the show cause notice are applicable in the facts of the
present case. Moreover, there are divergent views taken by two Government
of India authorities, viz., Development Commissioner under SEZ Act and the
Customs Authorities. We have to, therefore, validate which of the conflicting
views is correct, that is, whether the view of the DC, respondent no.5, that
import of new/unused jewellery for remaking by petitioner was permissible
under the SEZ Act and the Rules or whether the provisions of the Customs
Act under which the impugned order has been passed. Moreover, over
13 years have passed since filing of the petition and if after 13 years
petitioner is directed to exhaust any alternate remedy, it would cause grave
injustice to petitioner. Further, there are no disputed question of facts.
2. (2021) 6 SCC 771
3. (1971) 1 SCC 486
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21 Now let us consider Section 111(d) and 111(m), Section
112(a), Section 114A and Section 28 of the Customs Act, which read as
under :
SECTION 111. Confiscation of improperly imported goods, etc.
- The following goods brought from a place outside India shall
be liable to confiscation :-
(d) any goods which are imported or attempted to be imported
or are brought within the Indian customs waters for the purpose
of being imported, contrary to any prohibition imposed by or
under this Act or any other law for the time being in force;
(m) any goods which do not correspond in respect of value or in
any other particular] with the entry made under this Act or in
the case of baggage with the declaration made under section 77
2[in respect thereof or in the case of goods under transhipment,
with the declaration for transhipment referred to in the proviso
to sub-section (1) of section 54;
SECTION 112. Penalty for improper importation of goods, etc.
--Any person,--
(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 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 1[2[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.
SECTION 28. Notice for payment of duties, interest, etc.--
(1) When any duty has not been levied or has been short-levied
or erroneously refunded, or when any interest payable has not
been paid, part paid or erroneously refunded, the proper officer
may,--
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(a) in the case of any import made by any individual for his
personal use or by Government or by any educational, research
or charitable institution or hospital, within one year;
(b) in any other case, within six months, from the relevant date,
serve notice on the person chargeable with the duty or interest
which has not been levied or charged or which has been so
short-levied or part paid or to whom the refund has erroneously
been made, requiring him to show cause why he should not pay
the amount specified in the notice: Provided that where any
duty has not been levied or has been short-levied or the interest
has not been charged or has been part paid or the duty or
interest has been erroneously refunded by reason of collusion or
any wilful mis-statement or suppression of facts by the importer
or the exporter or the agent or employee of the importer or
exporter, the provisions of this sub-section shall have effect as if
for the words "one year" and "six months", the words "five
years" were substituted: [***] Explanation.--Where the service
of the notice is stayed by an order of a court, the period of such
stay shall be excluded in computing the aforesaid period of one
year or six months or five years, as the case may be. [(1A) When
any duty has not been levied or has been short-levied or the
interest has not been charged or has been part paid or the duty
or interest has been erroneously refunded by reason of collusion
or any wilful misstatement or suppression of facts by the
importer or the exporter or the agent or employee of the
importer or exporter, to whom a notice is served under the
proviso to sub-section (1) by the proper officer, may pay duty in
full or in part as may be accepted by him, and the interest
payable thereon under section 28AB and penalty equal to
twenty-five per cent. of the duty specified in the notice or the
duty so accepted by such person within thirty days of the receipt
of the notice.]
(2) The proper officer, after considering the representation, if
any, made by the person on whom notice is served under sub-
section (1), shall determine the amount of duty or interest due
from such person (not being in excess of the amount specified in
the notice) and thereupon such person shall pay the amount so
determined: [Provided that if such person has paid the duty in
full together with interest and penalty under sub-section (1A),
the proceedings in respect of such person and other persons to
whom notice is served under sub-section (1) shall, without
prejudice to the provisions of sections 135, 135A and 140, be
deemed to be conclusive as to the matters stated therein:
Provided further that, if such person has paid duty in part,
interest and penalty under sub-section (1A), the proper officer
shall determine the amount of duty or interest not being in
excess of the amount partly due from such person.] [(2A)
Where any notice has been served on a person under sub-section
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(1), the proper officer,--
(i) In case any duty has not been levied or has been short-levied,
or the interest has not been paid or has been part paid or the
duty or interest has been erroneously refunded by reason of
collusion or any wilful mis-statement or suppression of facts,
where it is possible to do so, shall determine the amount of such
duty or the interest, within a period of one year; and
(ii) In any other case, where it is possible to do so, shall
determine the amount of duty which has not been levied or has
been short-levied or erroneously refunded or the interest
payable which has not been paid, part paid or erroneously
refunded, within a period of six months, from the date of service
of the notice on the person under sub-section (1).
(2B) Where any duty has not been levied or has been short-
levied or erroneously refunded, or any interest payable has not
been paid, part paid or erroneously refunded, the person,
chargeable with the duty or the interest, may pay the amount of
duty or interest before service of notice on him under sub-
section (1) in respect of the duty or the interest, as the case may
be, and inform the proper officer of such payment in writing,
who, on receipt of such information, shall not serve any notice
under sub-section (1) in respect of the duty or the interest so
paid: Provided that the proper officer may determine the
amount of short-payment of duty or interest, if any, which in his
opinion has not been paid by such person and, then, the proper
officer shall proceed to recover such amount in the manner
specified in this section, and the period of "one year" or "six
months" as the case may be, referred to in sub-section (1) shall
be counted from the date of receipt of such information of
payment. Explanation 1.--Nothing contained in this sub-section
shall apply in a case where the duty was not levied or was not
paid or the interest was not paid or was part paid or the duty or
interest was erroneously refunded by reason of collusion or any
wilful mis-statement or suppression of facts by the importer or
the exporter or the agent or employee of the importer or
exporter. Explanation 2.--For the removal of doubts, it is hereby
declared that the interest under section 28AB shall be payable
on the amount paid by the person under this sub-section and
also on the amount of short-payment of duty, if any, as may be
determined by the proper officer, but for this sub-section.
(2C) The provisions of sub-section (2B) shall not apply to any
case where the duty or the interest had become payable or
ought to have been paid before the date on which the Finance
Bill, 2001 receives the assent of the President*.]
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(3) For the purposes of sub-section (1), the expression "relevant
date" means,--
(a) in case where duty is not levied, or interest is not charged,
the date on which the proper officer makes an order for the
clearance of the goods;
(b) in a case where duty is provisionally assessed under section
18, the date of adjustment of duty after the final assessment
thereof;
(c) in a case where duty or interest has been erroneously
refunded, date of refund;
(d) in any other case, the date of payment of duty or interest.]
Mr. Nankani's submissions :
22 Under Section 111 of the Customs Act goods which are liable
for confiscation are those which have been imported or attempted to be
imported contrary to any prohibition under the Customs Act or any other
law for the time being in force. In connection therewith it lists out various
scenarios how the goods could be improperly imported. Section 11 of the
Customs Act provides for power of the Central Government to prohibit
importation or exportation of goods. The prohibitions under the Customs
Act are imposed by way of notifications issued under Section 11 of the
Customs Act. There is no notification or prohibition issued under Section 11
of the Customs Act prohibiting the import of finished jewellery into a SEZ
for the purpose of remaking. This has not been controverted.
22.1 The DC of SEZ, viz., respondent no.5, has even filed an affidavit
stating that petitioner did nothing wrong and there was no bar in petitioner
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importing finished jewellery as raw material because even finished jewellery
will have to be melted and remade into fresh jewellery. Consequently, there
can be no confiscation under Section 111(d) of the Customs Act.
22.2 Rule 2(r) and Rule 27(1), (2), (10), Rule 28 (1), (2), (5) and
29 (5), (7) of SEZ Rules and Section 5 of FTDR Act were also relied upon.
22.3 The SEZ Rules also provides that manufacture means and
includes remaking of jewellery and under Rule 27(2) it is only the DC who
can decide whether any goods or services as required by a unit or developer
are for authorised operations or not. The DC has clarified by his letter dated
22nd May 2009 addressed to the Commissioner of Customs, Sahar Airport
that petitioner, in short, did nothing wrong. Though in the affidavit dated
10th February 2010 of the DC, respondent no.5, it was brought to the notice
and attention of respondent no.2 and in the reply to the show cause notice
it also referred to the Circular / Instruction dated 7 th September 2009,
respondent no.2 totally ignored the affidavit of DC and has not even
considered the same in his order.
22.4 As regards Section 111(m) of the Customs Act is concerned, it
would apply only to goods improperly imported that is to say any goods
which do not correspond in respect of value or in any other particular with
the declaration made under section 77 of the Customs Act, in respect
thereof. For invoking Section 111(m) of the Customs Act, the declaration
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made in an entry under the Customs Act, which is the Bill of Entry filed
under Section 46 of the Customs Act, must fail to correspond, in value or
any other particular, to the goods actually imported by petitioner. It deals
with intentional mis-declaration and mis-match between what has been
declared in the Bill of Entry and what has actually been imported by the
importer. In the present case, there is no mis-declaration whatsoever and,
therefore, the question of Section 111(m) of the Customs Act being invoked
does not arise.
22.5 Respondent no.2 has proceeded on an erroneous interpretation
and construction of Section 111(m) of the Customs Act and has invoked the
said sub-section on the ground that (a) petitioner has filed Bill of Entry and
imported goods which does not find mention as raw materials in the LOP
issued by the DC and (b) petitioner ought to have filed a declaration in
terms of Rule 29(7) of the SEZ Rules for reimporting goods which were
earlier exported by it. If petitioner had not complied with the requirements
of the LOP issued by respondent no.5 - DC, respondent no.5 would have
taken action under the provisions of SEZ Act and SEZ Rules framed
thereunder. Not even a notice has been issued to petitioner for alleged
violation of LOP Rules and on the contrary, DC has filed an affidavit stating
that petitioner did nothing wrong.
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22.6 As regards the alleged violation of Rule 29(7) of the SEZ Rules,
there is not even a reference thereto in the show cause notice. The show
cause notice must contain all allegations for a party to effectively deal with
it and respondents cannot be permitted to improve upon the show cause
notice or the impugned order by way of filing an affidavit in Court. This
entire issue was raised for the first time in the affidavit dated 25 th November
2009. Consequently, the charge under Section 111 of the Customs Act has to
fail.
22.7 As regards Section 28 of the Customs Act, respondent no.2 has
invoked Section 28 by way of a Corrigendum to the show cause notice
without even dealing with as to how violations, if any, of provisions of SEZ
Act or SEZ Rules, disturbs the blanket exemption available to petitioner in
terms of Section 26 of the SEZ Act. The customs duty under Section 28 of
the Customs Act can only be imposed on imports into SEZ if the exemption
under Section 26 of the SEZ is withdrawn and since both the show cause
notice and the impugned order are totally silent on any such withdrawal of
exemption, question of levying any duty under Section 28 of the Customs
Act could not arise.
22.8 As regards Section 114A of the Customs Act, there was no
proposal in the show cause notice to impose penalty under Section 114A of
the Customs Act and respondent no.2 cannot, in the impugned order,
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traverse beyond the show cause notice as held by the various judgments of
the various Courts.
23 Mr. Kantharia, in reply, submitted as under :
(a) this petition was filed by petitioner inter-alia challenging
the show cause notice dated 14th July 2009. According to petitioner, who are
engaged in manufacture and export of gold, platinum and silver jewellery,
both for plain and studded jewelries and for which purpose, petitioners have
the unit located within the SEEPZ, which has been notified as Export
Processing Zone and presently covered by the SEZ Act. Petitioner has sought
to challenge the action on the part of the Customs Department in
investigating, seizing and issuing show cause notice as being ex-facie
without jurisdiction and without authority of law after the coming into force
of the SEZ Act.
(b) The Customs Department resisted the writ petition and has
filed an affidavit in reply dated 25th November 2009.
(c) By an order dated 3rd May 2010, the aforesaid writ petition
was admitted specifically on the issue of jurisdiction. However, the
provisional release of the goods was allowed with specific directions to
petitioner that they shall not dispute the identity of the seized jewellery and
that the Department may continue with the adjudication of show cause
notice, but shall not to give effect to the Adjudication Order during the
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pendency of the writ petition.
(d) The Customs Department has correctly exercised
jurisdiction and the powers under the provisions of the Customs Act, 1962.
Petitioner has not submitted a full self-declaration, while filing Bills of Entry
inter-alia whether the jewellery being imported is "New or Old" or "out of
fashion/trend" or scrap jewellery or manufactured and exported by it or
re-import of self-exported jewellery because of payment issues suffered by
petitioner. The declaration in the import invoice and the bill of entry is silent
on these aspects. Further, as brought out in the investigations, petitioner, by
its admittance, resorted to route the goods through remaking with full
awareness that the self-exported jewellery attracted the provisions of Rule
29(7) to hoodwink the Customs and committed gross willful violations of
the SEZ provisions read with Section 46(4) of the Customs Act and Rule 11
of Foreign Trade (Regulation) Rules, 1993.
(e) Petitioner imported their self-exported jewellery for
remaking, allegedly under outright purchase basis. However, there is no self-
declaration at the time of import that the jewellery being imported was
earlier exported by them. New jewellery, which is neither damaged nor
defective, is not covered under Rule 29(7) of the SEZ Rule, 2006. Petitioners
have re-imported their earlier exported jewellery, which should have been
declared and imported as per the provisions of Rule 29(7) of the SEZ Rules.
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That the case of mis-declaration was prima facie made out against
petitioner.
(f) Further Section 46 of the Customs Act, 1962 deals with the
clearance of imported goods and section 46(1) stipulates the procedure to
be followed for clearance of imported goods, which reads "The importer of
any goods, other than goods intended for transit or transshipment, shall
make entry thereof by presenting to the proper officer a bill of entry for
home consumption or warehousing in the prescribed form". Section 46(4)
reads "the importer while presenting a bill of entry shall, at the foot thereof,
make and subscribe to a declaration as to the truth of the contents of such
bill of entry and shall, in support of such declaration, produce to the proper
officer the invoice, if any, relating to the imported goods. Further, as per
Rule 11 of Foreign Trade (Regulation) Rules, 1993, "on the importation into,
or exportation out of, any customs ports of any goods, whether liable to
duty or not, the owner of such goods shall in the Bill or the Shipping Bill or
any other documents prescribed under the Customs Act, state the value,
quantity and description of such goods to the best of his knowledge and
belief and in case of exportation of the goods as stated in those documents,
state such goods are in accordance with the terms of the export contract
entered into with the buyer or consignee in pursuance of which the good are
being exported and shall subscribe a declaration of the truth of such
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statement at the foot of such Bill of Entry or Shipping Bill or any other
document.
(g) Even in the past, from April, 2005 to March, 2009, as per
the data submitted by petitioner, it is indicated that they had imported 1160
consignments of finished jewellery. The total assessable value of these
consignments is Rs.274,43,07,664/- and the exemption from Customs duty
availed under the provisions of SEZ Rules, is to the tune of
Rs.43,77,44,781/-. Since petitioner was not entitled for any exemption from
customs duties on these consignments under SEZ Rules, a duty amount of
Rs.43,77,44,781/- alongwith an interest as applicable is recoverable from
petitioner in terms of provisions of proviso to Section 28 and Section 28(A)
(B) respectively, of the Customs Act, read with Rule 25 and Rule 34 of the
SEZ Rules. That the 1160 consignments of finished jewellery, imported by
petitioner during 1st April, 2005 to 6th March 2009, and the consignment
under seizure, were/are imported in violation of the provisions of para 4A
21 of the Foreign Trade Policy in vogue at the relevant time. These goods,
therefore, were liable to confiscation under the provisions of Section 111(d)
and (m) of the Customs Act and for the acts of omission and commission,
petitioner is also liable to penal action under Section 112(a) of Customs Act.
(h) Petitioner has violated Section 28 of the Customs Act.
Moreover, Instruction No.6 dated 3rd August 2006 issued by the Ministry of
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Commerce, categorically mentions that the provisions of Sections 20, 21,
and 22 of the SEZ Act are not operationalized. Hence, so long as these
sections are not operationalized, different agencies and officers, as
empowered under the relevant legislations before enactment of the SEZ Act
will continue to operate till such time these provisions of the SEZ Act take
effect. Respondent Custom authority has therefore rightly exercised its
powers under the Customs Act.
(i) The Customs Department has recorded the statements of
one Dilip Bhogilal Joshi, Vice President of petitioner and Mr. Sudhir Padave,
Officer of petitioner under Section 108 of the Customs Act. During
investigation, the consignment imported vide Bill of Entry No.100856 dated
9th February 2009 was examined in the presence of independent panchas
and Shri Suhas R. Suvarna, the unit representative and Panchnama dated
16th February 2009 was drawn. Petitioner has also submitted various
invoices and other documents to the investigating agency. Petitioner has also
submitted the copy of the Bond-cum-LUT and copy of application for setting
up a SEZ unit alongwith annexure for raw material, capital goods and
manufacturing process and details of all the past remaking consignment
submitted by the unit.
(j) The Order-in-Original dated 19th August 2010 is passed after
giving full opportunity of hearing to petitioner and following the principle of
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natural justice. The Adjudicating Authority has considered the entire
material on record and after application of mind passed the Adjudication
Order. The said Order is well reasoned speaking order and is sustainable on
the facts and circumstances of the case.
(k) The Adjudicating Authority has given finding of fact, inter
alia, that at the time of submitting their application for setting up unit in
SEZ, petitioner has not declared new / finished jewellery as part of raw
material and the same also does not find mention in the list of raw material
required by the unit by way of import procurement, in the Bond-cum-Legal
Undertaking entered into by the unit with SEZ administration, in terms of
Rule 22(1)(i).
(l) The Adjudicating Authority has given categorical findings of
the facts that the goods involved in the instant case were neither covered
under the list of required raw materials nor was their utilization method
mentioned and declared under the manufacturing process by the notice, in
their application for approval under the SEZ Scheme. The scope of the
Letter of Approval granted by the Competent Authority in terms of Section
14 of the SEZ Act read with Rule 19 of SEZ Rules in pursuance of
petitioner's Application thereof, cannot be enlarged to include the process of
operations and the list of goods and raw materials, which were not
mentioned or intimated in their application. The goods in the instant case
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were brand new jewellery in show-room condition with respective bar codes
and tags affixed on it. The assessment of import and domestic procurement
was on the basis of self-declaration.
(m) The Adjudicating Authority has given categorical findings
of facts that the unit's declaration in the Bill of Entry was not true and
lacked full particulars. The unit had also not declared the true nature of the
goods in the Bill of Entry or the invoice as to whether, the jewellery being
imported, was new or old or self-exported or scrap jewellery. This is also
evident from the statement of the Manager EXIM, of the unit, who had
deposed that the consignment imported vide Bill of Entry No.100856 dated
9th February 2009, was imported as scrap jewellery. However, no such
particulars found mentioned in the Bill of Entry or the corresponding
Invoice. On the contrary, on physical examination of the subject
consignment, it was found to contain brand new jewellery in show room
condition, complete with tags and bar codes.
(n) Thus in terms of the provisions of the Section 46 of the
Customs Act an importer is under obligation to declare the true and correct
description and value in the Bill of Entry. This obligation is strict and
absolute. Under the circumstances, it was incumbent upon petitioner to
ensure that no omission takes place. Therefore, petitioner has violated the
provisions of the SEZ Act as well as the Rules and the provisions of para
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4A21 of the Foreign Trade Policy, in as much as the jewellery imported by
petitioner for re-making was not for the purpose of "Authorized Operation"
as defined under section 2(c) of the SEZ Act and the same were not properly
declared in the Bill of Entry.
(o) There is categorical finding of fact that no tenable
explanation was also forthcoming from the unit, as to why all such details of
the subject goods were not mentioned in the Bill of Entry. Upon application
of mind on the findings on the facts of the case the Adjudicating Authority
has held that to invoke the provisions of Section 111 (m) of the Customs
Act, mens rea is not an essential ingredient, because this clause does not
even require intentional non-disclosure; simple mismatch or non-
correspondence is sufficient. In Pine Chemicals Suppliers V/s. Collector of
Customs4, it was held that as the case of mis-declaration of description and
value of imported goods, the question of mens rea was not relevant for
liability to confiscation and that penalty was possible under Sections 111(m)
and 112 of Customs Act. Thus the Adjudicating Authority has correctly held
the subject goods liable for confiscation under Section 111 (d) and (m) of
the Customs Act.
(p) The Adjudicating Authority has given finding of facts inter
alia that in the present case petitioner has filed the Bill of Entry alongwith
the declaration certifying the correctness of the declared descriptions of the
4. 1993(67) E.L.T. 25 : 1993 Supp (2) Supreme Court Cases 124
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goods and this declaration has not turned out to be true. It is well settled
legal position now that filing of the true and correct declaration under the
Customs Act is an absolute and strict civil obligation and if such declaration
turns out to be not correct, then the penalty in the form of civil liability has
to be imposed on the importer irrespective of the fact whether mens rea or
knowledge or malafide exists or not. In terms of Section 112 (a) of the
Customs Act, the importer shall be liable to penal action for the acts of
omission and commission which had rendered the goods liable to
confiscation. Under the circumstances, the Adjudicating Authority has
correctly held that the unit was liable to penal action under Section 112 (a)
of the Customs Act.
(q) The Adjudication authority has arrived at findings of facts
from the records submitted by the unit during investigation, that they had
imported 1160 consignments of finished jewellery during the period April,
2005 to March, 2009. The total assessable value of these consignments was
Rs.276,43,07,644/- and the exemption from the Customs duty availed
under the provisions of SEZ Rules, is to the tune of Rs.43,77,44,781/-. The
unit claimed the subject goods to be scrap jewellery used as part of raw
material for the manufacture of jewellery. That claim is devoid of merit. The
unit by their own submissions and admittance has accepted that they never
declared in any of the documents, including the import documents, filed for
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the clearance of these consignments, that the said consignments of jewellery
were the same which were earlier exported by them, or whether the
jewellery in question was new or old / used or out of fashion. The unit has,
therefore, by such acts of suppression, availed the benefit of the Customs
duty exemptions on the goods which were otherwise not permissible to
them under the given circumstances. Their claim, that the unit was audited
by the Department at least once during the last seven years is not
substantiated with verifiable documentary evidence as to date, period and
details of such claimed audit. Hence, no merit in their claim. In view of the
findings above, that invoking the extended period under proviso in Section
28(1), is fully justified and well within the scope of the law.
(r) In the facts and circumstances of the case, the Adjudicating
Authority has correctly held that petitioner's unit was not entitled to any
exemption from Customs duties on subject consignments under the
provisions of the SEZ Rules and, therefore, duty amount of
Rs.43,77,44,781/- was recoverable from petitioner in terms of proviso to
Section 28, alongwith interest as applicable under Section 28 AB of the
Customs Act read with Rules 25 and 34 of the SEZ rules. In view of the
above, petitioner had wrongfully availed exemption of Customs Duties by
wilful suppression of facts and misdeclaration of the subject goods, imported
during the period, from April 2005 to March, 2009. Therefore, petitioner
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has been correctly held liable to penal action under Section 114A of the
Customs Act.
24 Mr. Sethna reiterated the contents of the affidavit filed by
respondent no.5.
25 Having heard Mr. Nankani, Mr. Kantharia and Mr. Sethna and
having considered the pleadings, records and proceedings, our views are as
under :
26 It would also be useful, before we proceed further, to reproduce
Rule 2(r), Rule 27(1), (2), (10), Rule 28 (1), (2), (5) and 29 (5), (7) of SEZ
Rules and Section 5 of FTDR Act, which read as under :
Rule 2.(r) "Import Trade Control (Harmonized System)
Classifications of Export and Import Items" means the items
notified from time to time by the Central Government under
section 5 of the Foreign Trade (Development and Regulation)
Act, 1992 (22 of 1992);
xxxxxxxxxxxxxx
Rule 27. Import and Procurement -- (1) A Unit or Developer
may import or procure from the Domestic Tariff Area without
payment of duty, taxes or cess or procure from Domestic Tariff
Area after availing export entitlements or procure from other
Units in the same or other Special Economic Zone or from Export
Oriented Unit or Software Technology.
Park unit or Electronic Hardware Technology Park unit or Bio-
echnology Park unit, all types of goods, including capital goods
(new or second hand), raw materials, semi-finished goods,
(including semi-finished Jewellery) component, consumables,
spares goods and materials for making capital goods required for
authorized operations except prohibited items under the Import
Trade Control (Harmonized System) Classifications of Export
and Import Items :
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(2) In case of any doubt as to whether any goods or services are
required by a Unit or Developer for authorized operations or
not, it shall be decided by the Development Commissioner.
xxxxxxxxxxxxxx
(10) The assessment of imports and domestic procurement by a
Developer or a Unit, shall be on the basis of self-declaration and
shall not be subjected to routine examination except in case of
procurement from the Domestic Tariff Area under the claim of
export entitlements :
Provided that where based on a prior intelligence the
examination becomes necessary the same shall be carried out by
the Authorised Officer(s) after obtaining written permission
from the Development Commissioner or the Specified Officer.
xxxxxxxxxxxxxx
Rule 28. (1) A Unit or Developer may import goods directly into
the Special Economic Zone or through any other --
xxxxxxxxxxxxxx
(2) Goods imported through ports or airports, land customs
stations, or inland container depots shall be allowed to be
transferred in full cargo load or less than container load cargo
by direct transfer from such port or airport or inland container
depot or land customs station to the Special Economic Zone.
xxxxxxxxxxxxxx
(5) The goods imported by the Unit or Developer shall be
allowed to be transferred from the port or airport to the Special
Economic Zone without examination by the Customs Authorities
at the port or airport, as the case may be :
PROVIDED that the goods may be examined with the prior
permission of the Assistant or Deputy Commissioner of Customs
in writing in case there is specific adverse information or
intelligence.
xxxxxxxxxxxxxx
Rule 29 (5) The units may import goods including precious
goods namely gold or silver or platinum or gem and jewellery as
personal baggage through an authorized passenger subject to
the following procedure, namely :--
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(i) the authorized passenger bringing the precious goods shall
declare the goods with the customs authorities at the airport in
the arrival hall in the declaration form as specified by
Commissioner of Customs in charge of the airport alongwith a
duly acknowledged copy of intimation submitted to the
authorized officer;
(ii) the authorized passenger shall hand over the goods duly
packed indicating name and address of the consignee Unit and
accompanied by invoice and packing list to the customs
authorities at the airport for detention in the warehouse under a
detention receipt;
(iii) the customs officer of the airport shall detain the goods and
issue detention receipt;
(iv) the Unit shall file Bill of Entry in quintuplicate alongwith a
copy of invoice, packing list and declaration with the authorized
officer and the detention receipt number issued by the customs
officer at the airport shall be treated as Import General Manifest
and item number;
(v) after assessment of Bill of Entry, original Bill of Entry shall
be retained by the authorized officer and the remaining copies
shall be handed over to the authorized representative of the
Unit for presenting at the airport detention counter where goods
shall be allowed clearance after receiving the original detention
receipt alongwith the authorization from the Unit, by making
entries in the warehouse register and detention receipt register;
(vi) after release, the goods shall either be moved to the Unit
under the Customs escort or shall be delivered to the Custodian
or authorized representative of the Unit after sealing;
(vii) the goods shall be allowed to be taken to the Unit after
verification of marks and number of packages by the Authorized
Officer at the gate of entry of the Special Economic Zone.
xxxxxxxxxxxxxx
(7) A Unit may import the goods exported by it which are either
found to be defective or damaged by the overseas buyer or have
not been taken delivery of by the overseas buyer or when the
payment is not forthcoming from the buyer as per agreed
schedule after having taken delivery of goods or when buyers
return goods due to change of fashion and other market factors
by following the procedure under sub-rule (2) and subject to the
following conditions, namely :--
(i) the identity of the goods is established at the time of re-
import; and
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(ii) the goods are re-imported within the warranty period or the
validity of the maintenance contract or a period of one year
from the date of export, whichever is later.
xxxxxxxxxxxxxx
Section 5. Foreign Trade Policy. The Central Government may,
from time to time, formulate and announce, by notification in
the Official Gazette, the foreign trade policy and may also, in like
manner, amend that policy: Provided that the Central
Government may direct that, in respect of the Special Economic
Zones, the foreign trade policy shall apply to the goods, services
and technology with such exceptions, modifications and
adaptations, as may be specified by it by notification in the
Official Gazette.
I. Section 111(d) of the Customs Act :
27 In terms of Rule 27(1) of the SEZ Rules, a SEZ unit is entitled to
import without payment of customs duty all goods which are required for its
authorised operations except goods which have been specifically prohibited
under the "Import Trade Control (Harmonized System) Classifications of
Export and Import Items" which phrase has been defined to mean "the items
notified from time to time by the Central Government under section 5 of the
Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992)".
Therefore, only those goods which are prohibited under a notification issued
under Section 5 of the FTDR Act will be construed as being "prohibited" for
the purpose of the SEZ Act. Respondents have been unable to show any such
notification issued under Section 5 of the FTDR which prohibits import of
finished jewellery. Therefore, the jewellery importer by petitioner without
payment of customs duty was a permissible import in terms of Rule 27(1) of
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the SEZ Rules.
Further, there is no prohibition under the SEZ Act or the Rules
for import of jewellery into SEZ. In terms of Rule 29 (5) of the SEZ Rules,
the units may import "goods" including precious goods, viz., gold or silver or
platinum or gem & jewellery as personal baggage through an authorized
passenger subject to the prescribed procedures mentioned thereunder.
It is clear from Rule 29(5) of the Rules that the term 'Goods'
includes jewellery and hence qualifies for import for authorized activity of
manufacture of jewellery under Rules 27 (1) of the SEZ Rules.
28 The definition of raw material under Rule 2 (u) of the SEZ
Rules, also means any material or goods which are required for the
manufacturing process (including catalysts for initial charge), packing
material, whether they have actually been previously manufactured or are
processed or are still in a raw or natural state. In view of Rule 2 (u) of the
SEZ Rules, read with Rule 27 (1) of the SEZ Rules, there is no restriction on
the import of jewellery for authorized operations as even previously
manufactured items, viz., finished jewellery earlier exported in the present
case, can be imported into a SEZ as "raw material". The definition of 'raw
material' as per Rule 2 (u) of the SEZ Rules is reproduced hereunder:
(a) basic materials which are needed for the manufacture of
goods, but which are still in a raw, natural, unrefined or
unmanufactured state, and
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(b) any materials or goods which are required for the
manufacturing process (including catalysts for initial charge),
packing material, whether they have actually been previously
manufactured or are processed or are still in a raw or natural
state.
Further, this position has also been clarified by the Ministry of
Commerce vide its Instruction No.37 dated 7th September, 2009, the relevant
extract of which is reproduced hereunder :
2. In view of the provisions contained in Section 2 (r) of SEZ
Act, 2005 read with Rule 27(1) of SEZ Rules, it is clarified that
import of jewellery and its remaking is an authorised
manufacturing activity by an SEZ unit holding letter of approval
for manufacturing of jewellery. Further import would include re-
import of exported jewellery.
In view of the above, import of finished jewellery for the
purpose of remaking in a SEZ is a permitted / authorised operation and
there is no prohibition whatsoever on such an activity. In this connection the
definition of "manufacture" as contained in Section 2(r) of the SEZ Act is
important. The same is reproduced below:
(r) "manufacture" means to make, produce, fabricate, assemble,
process or bring into existence, by hand or by machine, a new
product having a distinctive name, character or use and shall
include processes such as refrigeration, cutting, polishing,
blending, repair, remaking, re-engineering and includes
agriculture, aquaculture, animal husbandry, floriculture,
horticulture, pisciculture, poultry, sericulture, viticulture and
mining.
(emphasis supplied)
29 Further, in view of what is stated in Rule 27 of the SEZ Rules, it
is patently clear that only the DC (respondent no.5) can decide whether any
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goods or services as required by a unit or developer are for authorised
operations or not. This position has also been clarified by the DC
(respondent no.5) vide letter dated 22 nd May, 2009 addressed to the
Commissioner of Customs, Sahar Airport. However, respondent no.2, even
though being fully aware of this position, has failed to consider the said
letter while adjudicating the case and passing the impugned order.
Additionally, the same position has been reiterated by the DC
(respondent no.5) in the affidavit dated 10th February, 2010 filed in this
petition, the relevant extract of which is reproduced hereunder :
"I further say and submit that the provisions of Rule 18 and 19
of the SEZ Rules, 2006 regarding issue of LOA and the formal
annexed as Form-G for such a letter do not envisage any
specification of the process to be undertaken to manufacture the
authorized items or provide service activities as authorized
operations by the SEZ unit. The LOA issued to the units,
therefore, cannot be restricted to any one or more of the
activities covered under the definition of manufacture as given
in Section 2(r) of the SEZ Act, 2005, which reads as under :
"Manufacture" means to make, produce, fabricate, assemble,
process or bring into existence, by hand or by machine, a new
product having a distinctive name, character or use and shall
include processes such as refrigeration, cutting, polishing,
blending, repair, remaking, re-engineering and includes
agriculture, aquaculture, animal husbandry, floriculture,
horticulture, pisciculture, poultry, sericulture, viticulture and
mining".
I therefore say and submit that in terms of Sec.2 (r) of the SEZ
Act, 2005, manufacture among other things, mean repair, re-
making, re-engineering, etc.
9. I say that the definition of manufacture given in the SEZ Act,
2005 prevails over other definitions given in any other statue
and the same shall have no relevance in interpreting the terms
defined and the meaning given in the SEZ Act, 2005. The
definition of manufacture given in the SEZ Act shall prevail over
other definitions of manufacture given in other enactments. I
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say that by virtue of Sec. 9 (3) of the Act, the power to decide as
to whether a particular activity constitutes "Manufacture" is
vested in the Board of Approval constituted under Sec. 8 (1) of
the Act and its decision shall be binding on all Ministries and
Departments of the Central Government.
10. I say and submit that the SEZ Act and Rules do not envisage
that the LOA issued has to be specific for anyone or more of the
processes mentioned in the said definition of manufacture. LOA
is for authorised operations for manufacture / providing of
service. It is for the unit to decide what technology or process
they opt to achieve the manufacture of the items authorized. I
say and submit that the Department of Commerce, Ministry of
Commerce & Industry vide Instruction No.37 dated 07.09.2009
has clarified as follows" -
"Reference has been received in this department seeking
clarification on whether re-melt, re-make and export of
imported finished jewellery is an authorized activity in SEZ.
2. In view of the provisions contained in Section 2(r) of SEZ Act,
2005 read with Rule 27 (1) of SEZ Rules 27(1) of SEZ Rules, it
is clarified that import of jewellery and its remaking is an
authorized manufacturing activity by an SEZ unit holding letter
of approval for manufacturing of jewellery. Further import
would include re-import of exported jewellery."
xxxxxxxxxxxxxx
12. I say and submit that in terms of Rule 29 (5) of the SEZ
Rules, 2006, the units may import goods including precious
goods, viz. gold or silver or platinum or gem & jewellery as
personal baggage through an authorized passenger subject to
following the prescribed procedures mentioned thereunder. I say
and submit that it is clear from this Rule that the term 'Goods'
includes jewellery and hence qualifies for import for authorized
activity of manufacture of jewellery under Rules 27 (1) of the
SEZ Rules, 2006. I further say and submit that the definition of
raw material under Rule 2 (u) of the SEZ Rules, 2006 also means
any material or goods which are required for the manufacturing
process (including catalysts for initial charge), packing material,
whether they have actually been previously manufactured or are
processed or are still in a raw or natural state. I state that in view
of Rule 2 (u) of the SEZ Rules, 2006 read with Rule 27 (1) of the
SEZ Rules, there is no restriction on the import of jewellery for
authorized operations.
13. I further say and submit that in the clarification given by the
Board for Approval in the case of M/s. Yash Jewellery Pvt. Ltd.,
the Board had clarified that repair can be considered as covered
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under manufacture in terms of Section 2(r) of the SEZ Act, 2005
and import for repair of finished products manufactured
elsewhere is allowed in the SEZ Act, 2005 and Rules. Thus, it is
evidence from the clarification given that repairs can be
considered as covered under manufacture, irrespective of where
the items have been manufactured and the second part of the
clarification makes it very clear that repairs even for finished
products manufactured elsewhere is permitted under SEZ Act,
2005 and Rules and thereby giving a wider connotation to the
meaning of the "Repair" under definition of manufacture in the
SEZ Act, 2005.
xxxxxxxxxxxxxx
16. I further say and submit that Para 4(A.21) of the Foreign
Trade Policy is not applicable to SEZ units, as Chapter VII of the
Foreign Trade Policy very clearly states that the Policy relating to
the Special Economic Zone is covered by SEZ Act, 2005 and the
Rules framed thereunder.
17. I say and submit that the finished jewellery imported by the
Petitioners under Rule 27 (1) of the SEZ Rules are permitted for
import for carrying out the authorized operation, i.e.
Manufacture of Jewellery, which has been specifically permitted
by the DC in the Letter of Approval issued to the unit."
(emphasis supplied)
30 This affidavit of DC, respondent no.5 before this Court was
brought to the notice and attention of respondent no.2 through the reply
dated 13th July 2010 to the show cause notice filed by petitioner, which also
referred to the Circular / Instruction dated 7 th September 2009. However,
respondent no.2 has completely ignored the DC's affidavit as well as the
Circular while passing an absolutely contrary and diametrically opposite
finding in the impugned order. Such a finding recorded by respondent no.2
without considering any of the submissions made by petitioner and relevant
documents available on record is in violation of the principles of natural
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justice and consequently liable to be set aside.
31 Further, the allegation raised in the show cause notice as well as
the finding recorded in the impugned order for invoking Section 111(d) of
the Customs Act is the alleged violation of paragraph 4.A21 of the extant
Foreign Trade Policy (FTP) prevalent at that point in time. The said
paragraph 4.A21 has been referred to in the show cause notice at paragraph
14(a) to state that FTP allows import of raw material only in the form of
metal scrap / used jewellery. Accordingly, it has been alleged that since
petitioner has reimported unused finished jewellery, they have imported the
goods in violation of the said paragraph 4.A21 of the FTP.
At the outset, we have to note, paragraph 4.A21 of the FTP
governs general import policy of jewellery for the purpose of import in the
whole of India. However, for the purpose of the imports into SEZ, provisions
of the FTP are not applicable to the facts of the present case, as Chapter VII
of the extant FTP which was prevalent at that point in time clearly states
that provisions of the FTP are not applicable to the imports into SEZ, which
fact has also been accepted by the DC (respondent no.5) in affidavit dated
10th February 2010.
32 In our view, accordingly Section 111(d) of the Customs Act has
been incorrectly invoked in the facts of these petitions.
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II. Section 111(m) of the Customs Act :
33 Section 111 (m) of the Customs Act provides :
"SECTION 111. Confiscation of improperly imported goods, etc.
- The following goods brought from a place outside India shall be
liable to confiscation:-
(m) [any goods which do not correspond in respect of value or in
any other particular) with the entry made under this Act or in
the case of baggage with the declaration made under section 77
[in respect thereof, or in the case of goods under transhipment,
with the declaration for transhipment referred to in the proviso
to sub-section (1) of section 54];
Respondent no.2 has completely failed to appreciate the true
intent and purport of Section 111(m) of the Customs Act while invoking the
same. For invoking Section 111(m) of the Customs Act, the declaration
made in an entry under the Customs Act, which is the Bill of Entry filed
under Section 46 of the Customs Act, must fail to correspond, in value or
any other particular, to the goods actually imported by petitioner.
Accordingly, in our view, Section 111(m) deals with intentional mis-
declaration and mis-match between what has been declared on the Bill of
Entry and what has actually been imported by the importer.
In the facts of the present case, there is absolutely no mis-
declaration between the description and / or value declared in the Bill of
Entry and the goods actually imported by petitioner, both being diamond
studded gold and silver jewellery. Accordingly, question of invoking Section
111(m) of the Customs Act does not arise at all in the present case. It is also
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noteworthy that there is no such requirement under the SEZ Act.
34 Respondent no.2 on an erroneous interpretation and
construction of Section 111(m) of the Customs Act, has invoked the said
sub-section on the following two grounds :
(a) That petitioner has filed Bill of Entry and imported goods
which does not find mention as raw materials in the LOP issued by the DC.
(b) Petitioner ought to have filed a declaration in terms of Rule
29(7) of the SEZ Rules for reimporting goods which were earlier exported
by it.
None of the above-mentioned allegations/ findings are
permissible grounds for invoking Section 111(m) of the Customs Act. None
of the above grounds are even sustainable on its own merits for reasons
stated below :
A. Raw materials not mentioned in LOP :
(a) The LOP has been issued under Form-G by the DC after
considering all the relevant information furnished by petitioner regarding its
manufacturing process of remaking imported finished jewellery;
(b) Further, Form-G does not have any place to indicate the raw
materials to be used by the SEZ manufacturer. Accordingly, non-mentioning
of raw materials in Form-G is not on account of any act or omission or
failure of petitioner;
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(c) This fact has also been noted specifically by the DC both in
letter dated 22nd May, 2009 as well its Affidavit dated 10 th February 2010
thereby supporting petitioner's stance;
(d) If the LOP has been issued on account of any alleged
suppression or mis-declaration by petitioner at the time of making the
application for obtaining the SEZ License, it is the DC who is competent to
take action on it and cancel the SEZ license of petitioner, which has not been
done till date. The Customs officers cannot sit in judgment over a
permission / license issued by a competent authority under another statute,
as has been held by the Hon'ble Supreme Court in the case of Titan Medical
Systems Pvt. Ltd. v. Collector of Customs, New Delhi 5 where paragraph 12
reads as under :
12. As regards the contention that the appellants were not
entitled to the benefit of the exemption notification as they had
misrepresented to the licensing authority, it was fairly admitted
that there was no requirement, for issuance of a licence, that an
applicant set out the quantity or value of the indigenous
components which would be used in the manufacture.
Undoubtedly, while applying for a licence, the appellants set out
the components they would use and their value. However, the
value was only an estimate. It is not the respondents' case that
the components were not used. The only case is that the value
which had been indicated in the application was very large
whereas what was actually spent was a paltry amount. To be
noted that the licensing Authority having taken no steps to
cancel the licence. The licensing authority have not claimed that
there was any misrepresentation. Once an advance licence was
issued and not questioned by the licensing authority, the customs
authorities cannot refuse exemption on an allegation that there
was misrepresentation. If there was any misrepresentation, it
was for the licensing authority to take steps in that behalf.
5. 2003 (151) E.L.T. 254 (S.C.)
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B. Alleged Violation of Rule 29(7) of the SEZ Rules :
(a) At the outset, there is no allegation in the SCN and / or no
finding in the impugned order with respect to any alleged violation of Rule
29(7) of SEZ Rules. This entire issue was raised for the first time in the
affidavit dated 25th November 2009 filed by respondent no.2 before this
Court. It is settled law that a show cause notice is sacrosanct and all
allegations must find mention therein for an assessee to effectively deal with
it and respondents cannot be permitted to improve upon the show cause
notice or the impugned order by way of filing an affidavit in the Court;
(b) In any event the ingredients of Rule 29(7) of the SEZ Rules
are not applicable to the facts of the present case. The imports in question
do not correspond to any of the four (4) scenarios mentioned in Rule 29(7)
of the SEZ Rules. Accordingly, it cannot be said in any manner that
petitioner has not followed the due procedure under Rule 29(7) of the SEZ
Rules as petitioner was in law never required to do so;
(c) Also, it is an undisputed fact that Rule 29(7)(b) of the SEZ
Rules is not an issue in question in the present case, as it has been clearly
stated in the statements and also noted in the show cause notice the goods
detained in February 2009 were imported within a period of 1 year prior to
the date of import;
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(d) Further, in so far as the identification of the goods is
concerned, respondent no.2 himself has admitted in the show cause notice
that "However, it could not be ascertained as to when the Jewellery was
exported, whether the same piece was exported and whether it was
exported within the past one year as required under the provisions of Rule
29(7) of the SEZ Rules". When respondent no.2 has himself admitted that
the period of earlier export and co-relation to present import cannot be
ascertained, it is absolutely unjustified and arbitrary to hold that petitioner
ought to have followed the procedure under Rule 29(7) of the SEZ Rules;
(e) Violation, if any, of non-adherence to procedure of Rule
29(7) of SEZ Rules, is only a procedural violation under the SEZ Rules for
which appropriate action may be taken by the DC, and cannot be said to be
a violation material for the purpose of invoking the provisions of Section
111(m) of the Customs Act. It was also in the course of arguments sought to
be contended that petitioner would benefit from such acts. Apart from the
fact that there is no embargo of any nature whatsoever on the import of the
Consignment and that no benefit whatsoever has accrued to petitioner,
petitioner submitted that it has exported 100% of its production and that
was not contested.
35 In view of the above, respondent no.2 has completely erred in
invoking Section 111(m) of the Customs Act.
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III. Section 28 of the Customs Act :
36 Apart from making sweeping and bald statements both in the
show cause notice as well as in the impugned order, respondent no.2 has not
dealt with the issue of demanding customs duty under Section 28 of the
Customs Act at all. Respondent no.2 has arbitrarily invoked Section 28 that
too by way of a Corrigendum to the show cause notice, without even
dealing with as to how violations, if any, of provisions of SEZ Act or SEZ
Rules, disturbs the blanket exemption available to petitioner in terms of
Section 26 of the SEZ Act, the relevant extract of which is reproduced
hereunder :
(1) Subject to the provisions of sub-section (2), every Developer
and the entrepreneur shall be entitled to the following
exemptions, drawbacks and concessions, namely :--
(a) exemption from any duty of customs, under the Customs
Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of
1975) or any other law for the time being in force, on goods
imported into, or services provided in, a Special Economic Zone
or a Unit, to carry on the authorised operations by the
Developer or entrepreneur.
37 Customs duty under Section 28 of the Customs Act can only be
imposed on imports into SEZ if the exemption under Section 26 of the SEZ
is withdrawn. However, since there is not a whisper in either the show cause
notice or impugned order of such withdrawal of exemption, duty under
Section 28 of the Customs Act, cannot be demanded from petitioner.
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38 During the course of the hearing, Mr. Kantharia argued that
exemption from payment of Customs Duty will not be available since
petitioner has violated / breached the conditions of the LOP issued by the
DC. Firstly, no such allegation has ever been raised in the adjudication
proceedings. Further, and in any event, in case the conditions of the LOP
had been breached, until and unless the SEZ permission was cancelled and
the area was delicensed by the DC, it cannot be said that the customs duty
exemption will not be available to petitioner.
39 In this connection, Sections 15 and 16 of the SEZ Act, the
relevant extract of which is reproduced hereunder, would be relevant :
Section 15- Setting up of Unit
(1) Any person, who intends to set up a Unit for carrying on the
authorised operations in a Special Economic Zone, may submit a
proposal to the Development Commissioner concerned in such
form and manner containing such particulars as may be
prescribed:
Provided that an existing Unit shall be deemed to have been set
up in accordance with the provisions of this Act and such Units
shall not require approval under this Act.
(2) On receipt of the proposal under sub-section (1), the
Development Commissioner shall submit the same to the
Approval Committee for its approval.
(3) The Approval Committee may, either approve the proposal
without modification, or approve the proposal with
modifications subject to such terms and conditions as it may
deem fit to impose, or reject the proposal in accordance with the
provisions of sub-section (8):
xxxxxxxxxxxxxx
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Section 16 - Cancellation of letter of approval to entrepreneur.
(1) The Approval Committee may, at any time, if it has any
reason or cause to believe that the entrepreneur has persistently
contravened any of the terms and conditions or its obligations
subject to which the letter of approval was granted to the
entrepreneur, cancel the letter of approval:
Provided that no such letter of approval shall be cancelled
unless the entrepreneur has been afforded a reasonable
opportunity of being heard.
(2) Where the letter of approval has been cancelled under sub-
section (1), the Unit shall not, from the date of such
cancellation, be entitled to any exemption, concession, benefit
or deduction available to it, being a Unit, under this Act.
(3) Without prejudice to the provisions of this Act, the
entrepreneur whose letter of approval has been cancelled under
sub-section (1), shall remit, the exemption, concession,
drawback and any other benefit availed by him in respect of the
capital goods, finished goods lying in stock and unutilised raw
materials relatable to his Unit, in such manner as may be
prescribed."
A proposed unit submits application for a SEZ LOP under
Section 15(1) of the SEZ Act. The said application after due consideration
by the Approval Committee alongwith the DC is either rejected or processed
under Section 15(3) of the SEZ Act. Once the Unit's application is accepted
and the LOP is issued, the Unit attains a SEZ Unit status and is thereafter
entitled to all the exemptions provided under Section 26 of the SEZ Act
including but not limited to the exemption from payment of duties of
customs.
Subsequently, if the Approval Committee has reasons to believe
that an SEZ Unit has persistently violated any provisions of the SEZ Act,
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then after giving due opportunity of being heard can cancel the SEZ
registration of the said Unit under Section 16(1) of SEZ Act. On such
cancellation, the following two consequences arise :
(i) The exemptions under Section 26 of the SEZ Act stand
withdrawn. However, such withdrawal of exemption is from the date of
cancellation of registration and does not relate back to the date on which
the license was granted.
(ii) The Unit has to remit the exemption, concession, drawback
and any other benefit availed by him in respect of the capital goods, finished
goods lying in stock and unutilised raw materials relatable to his Unit.
40 In facts of the present case, petitioner's SEZ license has not
been cancelled under Section 16(1) till date, let alone during the impugned
period. Accordingly, petitioner has rightly and legally continued to avail of
the customs duty exemption under Section 26 of the SEZ at all points in
time. Further, and in any event, even if the SEZ registration of petitioner is
cancelled, then petitioner is only liable to remit the duty concessions which
have been availed with respect to capital goods and unused raw material /
unsold finished stock only. Even at the highest, there is no question
whatsoever of going back 5 years and demanding Customs Duty on all
imports made in the past.
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IV. Section 114A of the Customs Act :
41 The show cause notice did not even propose to impose penalty
under Section 114A of the Customs Act. However, despite the same respondent
no.2 has imposed penalty under Section 114A of the Customs Act in the
impugned order. It is settled law that the impugned order cannot traverse beyond
the show cause notice as has been held in the following decisions of the Hon'ble
Supreme Court of India :
(a) Commissioner of Central Excise V/s. Gas Authority of India 6.
Paragraphs 9 and 10 of the said judgment read as under :
9. If the case of the Department itself in the show-cause notice was
that lean gas is a by-product, then we fail to understand as to the
basis for denying the benefit of MODVAT credit to the assessee during
the relevant period (October 1998 to January 1999) under Rule 57-D.
As repeatedly held by this Court, show-cause notice is the foundation
of the demand under the Central Excise Act and if the show-cause
notice in the present case itself proceeds on the basis that the product
in question is a by-product and not a final product, them, in that
event, we need not answer the larger question of law framed
hereinabove.
10. On this short point, we are in agreement with the view expressed
by the Tribunal that nowhere in the show-cause notice it has been
alleged by the Department that lean gas is a final product. Ultimately,
an assessee is required to reply to the show-cause notice and if the
allegation proceeds on the basis that lean gas is a by-product, then
there is no question of the assessee disputing that statement made in
the show-cause notice.
(b) Commissioner of Customs V/s. Toyo Engineering 7. Paragraph 16
of the said judgment reads as under :
16. Learned counsel for the Revenue tried to raise some of the
submissions which were not allowed to be raised by the Tribunal
6. (2008) 232 ELT 7 SC
7. (2006) 7 SCC 592
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before us, as well. We agree with the Tribunal that the revenue could
not be allowed to raise these submissions for the first time in the
second appeal before the Tribunal. Neither adjudicating authority
nor the appellate authority had denied the facility of the project
import to the respondent on any of these grounds. These grounds
did not find mention in the show cause notice as well. The
Department cannot be travel beyond the show cause notice. Even in
the grounds of appeals these points have not been taken.
42 Accordingly, on this count itself, the imposition of penalty under
section 114A of the Customs Act ought to be set aside.
CONCLUSION :
43 In view of the above, we hereby quash and set aside the impugned
notices dated 14th July 2009 read with the addendums dated 21 st July 2009 and
addendum/corrigendum dated 18th August 2009 to the impugned notice, as well
as the impugned orders dated 18th August 2010/19th August 2010 in all petitions.
44 We also discharge petitioner from its obligation to renew the Bank
Guarantee as furnished for provisional release at the time of admission of
petitions. The Bank Guarantees be cancelled and returned to petitioners within
eight weeks from the date this judgment is uploaded. Where consignments have
not been released, such parties may apply for release. The application shall be
granted within eight weeks.
45 All petitions disposed. No order as to costs. All interim applications
also accordingly stand disposed.
(A.S. DOCTOR, J.) (K.R. SHRIRAM, J.)
Gauri Gaekwad
