'Orchestrated Attempt' To Misuse Gold Export Promotion Scheme: CESTAT Chennai Upholds Customs Act Penalties

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 8 May upheld penalties against exporters, customs brokers and a customs officer in a case involving the alleged export of gold-plated copper jewellery as “22 carat gold jewellery” to fraudulently divert duty-free imported gold under an export promotion scheme.

Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao noted that the customs broker and its personnel facilitated examination of consignments outside the prescribed roster mechanism. The Bench observed:

“Taken as a whole, the present case reveals a carefully orchestrated attempt to misuse a beneficial export promotion scheme intended for genuine exports, resulting in loss to the exchequer and erosion of regulatory trust. Such conduct warrants firm action under the Customs Act, 1962 both to neutralise the economic advantage derived through misuse of the scheme and to deter recurrence of similar fraudulent practices.”

The Directorate of Revenue Intelligence (DRI) intercepted the export consignment declared as “22 CT plain gold jewellery.” Officials examined and subjected the goods to scientific testing, which revealed that copper bangles coated with a thin layer of gold had been exported, with gold content allegedly ranging between 7.5% and 10.35%.

The investigation found that duty-free gold imported under Notification No. 57/2000-Cus. was diverted into the domestic market, while fake jewellery was exported to meet export obligations under the scheme.

The Tribunal held that the mismatch between the declared goods and the goods actually found constituted a “fundamental variance” in the nature of the exported goods. It further held that the evidence established diversion of duty-free gold and conscious facilitation by intermediaries involved in the export process.

Accordingly, the CESTAT upheld confiscation of the export goods, sustained penalties against the exporter, customs broker and certain individuals, and partly modified penalties in respect of some noticees.

Appearance for the Assessee: Mr. A.K. Jayaraj, Advocate (Sl.Nos. 1,2,13), Mr. C. Mohan, Mr. M. Kumaresan, Ms. Dhilshath, Advocates (Sl.No. 3), Mr. A. Ganesh, Advocate (Sl.Nos. 8,11), Mr. Aliakbar Devjani, Advocate (Sl.Nos. 5,12,14), Mr. T. Sankara Kumar, Party in-person (Sl.No. 10)

Appearance for the Respondent: Mr. Anoop Singh, Authorised Representative