The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that gold cannot be confiscated solely on the ground of an invalid Letter of Approval (LOA).
In a case where two members of the Tribunal—P.K. Choudhary (Judicial Member) and Sanjiv Srivastava (Technical Member)—held differing views, the matter was referred to a third member, S.S. Garg (Judicial Member), for a final decision.
Officials from the Noida Special Economic Zone (NSEZ) Customs had visited the factory premises of the assessee, a partnership firm, and found the facility operational. When asked to provide supporting documentation, an individual named Sujit Kumar Bera produced all the gold stored on site, totaling 2,417 grams.
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However, none of the three workers present could show valid paperwork for this stock. Consequently, the gold was detained under Section 110 of the Customs Act, 1962.
Upon further investigation, the Adjudicating Authority concluded that the assessee did not have a valid LOA and that the seized gold was transferred without legitimate documentation—alleging that the single voucher in the assessee’s name was an afterthought. The rest of the vouchers were in the name of its sister concerns, and the Authority ultimately ordered absolute confiscation under Section 111(o) of the Customs Act, imposing penalties under Sections 112(a), (b), and 114AA.
Disagreeing with the Adjudicating Authority, the assessee appealed before the Tribunal. One of the key issues raised was whether the Customs Officers had jurisdiction to investigate and adjudicate, or if such matters fell exclusively under the domain of the SEZ Act and its Rules.
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The Judicial Member believed that any concerns regarding an invalid LOA and incomplete record-keeping were matters to be addressed by the Development Commissioner or Special Officer in accordance with SEZ Act provisions. Consequently, invoking Section 111(o) of the Customs Act to confiscate the gold and levy penalties on the assessee was deemed unsustainable. The Judicial Member therefore set aside the Adjudicating Authority’s order.
By contrast, the Technical Member contended that the investigation and subsequent proceedings were conducted by NSEZ Customs, which operates under the office of the Development Commissioner. Therefore, according to the Technical Member, Customs Authorities did possess the jurisdiction to proceed against the assessee. He dismissed the appeals, upholding the confiscation.
The Third Member, examining Rule 47 of the SEZ Rules, 2006, observed that this provision applies to the removal of goods from an SEZ to the Domestic Tariff Area (DTA). Since there was no actual or attempted transfer of gold from the SEZ to the DTA, Rule 47 was irrelevant. Instead, the case revolved around unauthorized manufacturing within an SEZ unit due to the absence of a valid LOA—an issue squarely under the purview of the Development Commissioner rather than Customs.
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Agreeing with the Judicial Member, the Third Member concluded that actions under the Customs Act were not warranted for these particular circumstances.
With the Third Member concurring with the Judicial Member’s stance, the Tribunal allowed the assessee’s appeal. In doing so, it clarified that gold cannot be seized and absolutely confiscated under the Customs Act merely due to an invalid LOA, as jurisdiction for such issues rests with the SEZ authorities, not with Customs.
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