By TIOL News Service

MUMBAI, AUG 03, 2016: THE Commissioner of Customs (Appeals) upheld the order of Additional Commissioner (dated 25.02.2013) confiscating 11 pieces of diamond studded gold jewellery valued at Rs.4,99,257/- u/s 111(j) and (o) of Customs Act, 1962, with option to redeem them on payment of fine of Rs.1,00,000/-, besides imposing a penalty of Rs.4,50,000/- on the importer company and personal penalties u/s 112(a) on two other persons.

Consequent upon recovery of gold pieces from Shri Abhishek Pareek who was found to be carrying them without valid documents while exiting from SEEPZ-Special Economic Zone, Andheri, proceedings were initiated under the Customs Act, 1962. The said person had a daily entry pass for M/s Charisma Jewellery, a unit with SEEPZ-SEZ and a permanent entry pass issued as employee of M/s Diastar Jewellery Pvt Ltd . He produced a sale invoice issued by a unit situated outside SEZ which is a group company of M/s Charisma Jewellery (appellant). Consequent upon valuation, the goods were seized as being attempted to be smuggled into domestic tariff area from SEEPZ-SEZ, in exercise of powers under Customs Act, 1962 read with SEZ Rules, 2006.

And the proceedings resulted in the orders as mentioned at the outset.

Aggrieved by the order, the appellant is before the CESTAT and submitted that the gold jewellery belonged to the Domestic Tariff Area unit which has been entrusted to Shri Abhishek Pareek for marketing and which, he, in breach of procedure governing Special Economic Zones took into the SEEPZ Special Economic Zone; that evidence of ownership by M/s Starlet Jewel Pvt Ltd. had been presented to the adjudicating authority who chose to disregard the same; that documents related to manufacture by the special economic zone unit, M/s Charisma Jewellery Pvt Ltd. had been furnished as evidence that the seized goods had no connection with the unit in SEEPZ Special Economic Zone and that the Director cannot be held vicariously responsible for technical breaches by employees.

The appellant also placed on record a SCN dated 21 st May 2012 for the said violation issued by Development Commissioner, SEEPZ Special Economic Zone.

The AR justified the order passed by the original adjudicating authority as upheld by the Commissioner(A).

The Single Member Bench in a detailed order,in his inimitable style, inter alia mentioned thus -

++ It is interesting to note that the elaborate order-in-original fails to mention the details of show cause notice that preceded the adjudication by the Additional Commissioner of Customs, CSI Airport, Mumbai.

++ It would appear that these proceedings were commenced and concluded without issue of show-cause notice as prescribed in section 124 of Customs Act, 1962 as a precursor to adjudication.

++ It would appear that the adjudicating authority was coy about notifying the authority under which he proposed to take action.

++ If the claims of the appellants are indeed true, and no efforts made to ascertain the truth thereof, proceedings under the Customs Act, 1962 are contrary to law; the seized goods would be a manufactured product and hence beyond the scope of application of customs laws and the raw material would have been licitly cleared on payment of duty. By neglecting to verify the claims supported by documentation, the lower authorities have failed to perform a fundamental task implicit in the adjudication process. That, by itself, vitiates the proceedings.

++ The appellant-company operates as a functional unit in a Special Economic Zone; its approval, imports and procurement utilization thereof and removal for export or domestic consumption is also statutorily established. Likewise, the exemptions and charging of duty are also unambiguously part and parcel of the Special Economic Zones Act, 2005.

++ Section 51(1) specifies that 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.

++ It is unambiguously clear that a proceeding under the Customs Act, 1962 in relation to a unit or developer in a Special Economic Zone will fail owing to lack of jurisdiction. More so, when section 53 (1) states - A Special Economic Zone shall, on and from the appointed day, be deemed to be territory outside the customs territory of India for the purposes of undertaking the authorized operations.

++ Clearly the appellants cannot be subject to two jurisdictions, one of them must prevail and it is in that context that this Tribunal must first ascertain if the proceedings thus far have the sanctity of law backed them.

++ Authorized operations under the Special Economic Zones Act, 2005 are the activities permitted to a Developer by the Board of Approval or those permitted to units by the Approval Committee. For units, the activities revolve around the manufacture of goods or rendering of service. As the manufactures of gold products are authorized operations of the appellant-unit, section 53 would exclude the jurisdiction of the Customs Act, 1962.

++ Jurisdiction is not merely territorial but also has to be in the context of the scope of the statute which is sought to be invoked. Section 111 and 112 can, undoubtedly, be invoked where laws other than Customs Act, 1962 have been contravened but only in relation to imports.

++ Notwithstanding the deemed status of being outside the Customs territory, zones are very much within the territory of India and the bringing out of goods from a zone fails to meet the definition of ‘import' under Customs Act, 1962 and consequently fails the test of invoking the provisions of section 111 and 112.

++ Even if the goods are subject to duty, section 12 of Customs Act, 1962 is not applicable owing to the definition of ‘import'; the charging section is section 26 of Special Economic Zones Act, 2005 which is outside the scope of invoking by the original authority.

++ Recourse to penal provisions without clear understanding of legalities is the surest mode of reverting to arbitrariness and lawlessness that preceded the dawn of civilization.

++ There are adequate safeguards in that Act (Special Economic Zones Act, 2005) without the need to indulge in misadventure under the Customs Act, 1962 that does not extend to special economic zones. There are also provisions for action in the event of illicit removal by units. The notice issued by the Development Commissioner of SEEPZ Special Economic Zone is testimony to it; proceedings thereon will suffice to safeguard the economic integrity of the nation.

Holding that the proceedings against the appellants are without jurisdiction, the confiscation and penalties were set aside and the Appeal was allowed.

(See 2016-TIOL-1963-CESTAT-MUM)