The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the confiscation under section 111 of the Cutoms Act, 1962 as asseessee failed to maintain record of goods received on subcontracting.
M/s Encee International (Appellant No.1), Shri Rajnish Jain (Appellant No.2), M/s Jayashree Jewellers ( Appellant No.3) and Shri Chakshu Sharma (Appellant No.4) respectively, challenging Order-in-Original passed by Commissioner of Customs, Noida. Based on some intelligence, on 29.08.2018, Officers of Noida Special Economic Zone Customs visited factory premise of Appellant No.1 which is a partnership concern and Appellant No.2 is a partner in Appellant No.1. During the visit, three workers namely Shri Nandan Bera, Shri Sujit Kumar Bera and Shri Subhash Chandra Pal were present in the factory and 5 machines used for making jewellery were found. The Officers found that the factory was operational.
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The Appellant No.3 claiming ownership of the detained gold alloy, submitted that they imported 27,000 grams of pure gold under B/E No.1006893 dated 28.08.2018 out of which 2,470 grams of gold alloy of 22 karat was sent to Appellant No.1 under Challan No.2018/069 dated 28.08.2018 for manufacturing jewellery on job work basis. Even though the ownership of the goods was claimed by the Appellant No.3 and all the other Appellants have also confirmed that the seized gold alloy belonged to Appellant No.3, the Respondents conspicuously failed to issue Show Cause Notice to the Appellant No.3.
The SCN was issued by the Commissioner of Customs Noida, directing Appellant No.1 to explain as to why the gold detained under Panchnama dated 29.08.2018 should not be confiscated absolutely under section 111 (o) and as to why the penalty should not be imposed under section 112 (a) & (b) and 114AA of the Act. Appellant No.2 and 4 were asked to give reasons as to why penalty should not be imposed under section 112 (a) and 114AA of the Act.
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The Appellant No.1, 2 and 4 submitted their replies to the SCN and attended personal hearing on 09/05/2019. Appellant’s case before the Adjudicating Authority was that the gold was legally imported into the NSEZ by the Appellant No.3. Appellant No.3 after converting the pure gold to gold alloy, sent the same to different units in the same NSEZ for manufacturing jewellery on job work basis. Appellant No.3 sent 2470 grams of gold alloy to Appellant No.1 for manufacturing the jewellery as per Rule 41 and 42 of the Special Economic Zone Rules, 2006.
The NSEZ officers on the instructions of the Adjudicating Authority, issued notice to Appellant No.3 directing Appellant No.3 to submit copies of stock register as on 29.08.2018 and record of movement of goods as per proviso of Rule 35 of the SEZ Rules, 2006. The Appellants as their preliminary ground challenged the Jurisdiction of the Customs Officers to investigate and adjudicate the matters pertaining to SEZ.
Read More: Confiscation u/s 111 Of Customs Act not Invokable In Absence of Misdeclaration of Value: CESTAT
It was the Appellants case that under SEZ it was Developmental Commissioner who has the jurisdiction to investigate and adjudicate the issues under dispute and not the Customs officers. The Adjudicating Authority on 09/07/2019 passed the impugned order holding that the Commissioner of Customs have jurisdiction over Noida SEZ in view of Circular No.11/2017 dated 31.03.2017 issued by CBEC. The Adjudicating Authority further held that in view of Notification in F.NO. C/1/1/2009 SEZ, in respect of notified offences, jurisdictional Commissioner of Customs have powers to carry out investigation, inspection, search or seizure in SEZ with prior intimation to the Development Commissioner.
The Appellants have contended that the above allegations ought to be investigated and adjudicated by the Development Commissioner of SEZ and same is beyond the jurisdiction of the Customs Officers whereas, the learned DR relied upon Circular No.11/2017-Cus dated 31/03/2017 and Notification No.C.1/1/2009-SEZ dated 05/08/2016 to establish that the Customs Officers have jurisdiction to investigate, issue SCN and adjudicate the issues under consideration.
A single bench of P. K. Choudhary observed that Circular No.11/2017 dated 31/03/2017 was issued by CBEC in order to clarify amendments made in SEZ Rules, 2006 by way of inserting a new Rule 47 (5) vide Notification No. GSR 772 (E) dated 05/08/2016 which stated that the functional operations like Refund, Demand, Adjudication, Review and Appeals are to be made by the Jurisdictional Customs and Central Excise authorities in accordance with the relevant provisions contained in the Customs Act, Central Excise Act & Finance Act.
Rule 47 is placed under Chapter-V of the SEZ Rules, 2006. Chapter-V of SEZ Rules, 2006 lays down conditions subject to which goods may be removed from a SEZ to the Domestic Tariff Area . Rule 47 deals with sales in the DTA. As per Section 53 of the SEZ Act, 2005 SEZ is deemed to be an area outside the Customs Territory of India. Therefore, any sale of goods from SEZ to DTA is considered as an import and has to be done as per Rule 48.
The Adjudicating Authority in order to establish that the jurisdictional Customs Officers have jurisdiction in the instant matter to investigate and seize the goods, relied upon Notification No. C.1/1/2009 SEZ dated 05/08/2018 issued by Dept of Commerce. The above Notification notify act and/or commission made punishable under Customs Act, Central Excise Act and Finance Act as offense for the purpose of SEZ Act in terms of Section 21 of the SEZ Act, 2005. Above notification notified Section 111 of the Act as one of the notified offence under SEZ Act, 2005.
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The Adjudicating Authority in order to establish jurisdiction of Customs Officers in the instant matter has invoked Section 111 (o) of the Customs Act, 1962 . The Adjudicating Authority records that illegal possession of seized goods without any valid documents by Appellant No.1 and not having valid LOA makes the subject goods liable for absolute confiscation under Section 111(O) of the Act.
Further, as per Rule 42 (4) of the SEZ Rules, 2006 unit may sub-contract a part of production or production process in another unit within the same SEZ if the movement of goods has been recorded under serially numbered challans and the record of movement has been maintained. In the present matter, Appellant No.3 is maintaining records of movement of goods sub-contracting under serially numbered vouchers and have also maintained job work register showing inward and outward movement of goods. Therefore, as far as Appellant No.3 is concerned, it has maintained complete record as per the requirement of the law.
It has been found that Appellant No.1 not only failed to maintain any record of the goods received on subcontracting but also did not have valid LOA. It is apparent from the record that neither the Appellant No.3 nor its partner Appellant No.4 had any knowledge about the fact that the Appellant No.1 did not have valid LOA.
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