Duty-Free Gold Cannot Be Confiscated If DGFT Later Regularises Supporting Manufacturers: CESTAT Kolkata

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has held that duty-free gold imported under the Advance Authorisation Scheme cannot be confiscated merely because it was sent to job workers who were not initially listed as supporting manufacturers.

The tribunal held that the Directorate General of Foreign Trade (DGFT) had later regularized their inclusion and that there was no evidence the gold had been diverted to unauthorised entities in violation of the Actual User condition.

The tribunal observed, "As it is a fact on record that the above said supporting manufacturers, whose names were not enlisted in the Advance Authorization, were later found to have been entered in the Advance Authorization by the DGFT, in these circumstances, we are of the opinion that not entering the names of these supporting manufacturers in the Advance Authorization before sending the gold to them is only a procedural lapse, which can be cured."

A bench of Judicial Member Ashok Jindal and Technical Member K. Anpazhakan noted that the DGFT had subsequently endorsed those supporting manufacturers in the Advance Authorisation and regularised their inclusion.

The tribunal observed, "It is a fact on record that DGFT had later endorsed these supporting manufacturers also in the Advance Authorization and regularised the same. Therefore, in the facts and circumstances of the case, it cannot be held that the appellants had diverted the said gold to unauthorized entities in violation of the 'Actual User Condition'. Thus, we observe that seizure and subsequent confiscation of the gold sent to the supporting manufacturers, who were approved and regularized by DGFT later, is not warranted."

The case arose after the Directorate of Revenue Intelligence alleged that Noor Jewel Impex had violated the conditions of an Advance Authorisation by sending duty-free imported gold to job workers who had not been endorsed as supporting manufacturers. Customs authorities confiscated about 2.67 lakh grams of gold and excess gold jewelry found in an export consignment.

They also confirmed a customs duty demand, imposed redemption fines, and levied penalties.

The importer argued that the gold had never entered the domestic market and had always been used to manufacture jewellery for export. It said the additional job workers were engaged because of business requirements and were later approved by the DGFT.

It argued that the omission to include them earlier was only a procedural lapse. The importer also submitted that there was no mismatch between the quantity of gold imported and the jewellery exported.

As for the excess jewellery found in the export consignment, the importer contended that the discrepancy resulted from a clerical mistake. It argued there was no intention to evade duty or obtain any undue benefit.

The tribunal accepted these submissions. It found no evidence that the imported gold had been diverted to unauthorised entities or that there was any mismatch between the quantity of gold imported and the jewellery exported.

On the excess jewellery, it observed, "As it is evident from the above that there was no mala fide intent on the part of the appellants for excess export of the gold jewellery weighing 4083.900 grams, which was merely a clerical mistake in their invoice, in these circumstances and in the absence of any mens rea, we hold that the said gold jewellery weighing 4083.900 grams cannot be held liable for confiscation."

The tribunal consequently set aside the confiscation of the gold and jewellery, including the absolute confiscation of 1,796.740 grams of gold. It also quashed the customs duty demand, redemption fines and all penalties.

Further, it directed that the confiscated 1,796.740 grams of gold be released to the importer within one month to enable it to fulfil its export obligations.

For Appellants: Advocate Advocate Aditya Dutta

For Revenue: Tariq Sulaiman, Authorized Representative