The Allahabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that seized gold cannot be absolutely confiscated for mere invalid Letter of Authority (LOA).
There existed the difference of opinion of the two members namely P. K. Choudhary (Judicial Member) and Sanjiv Srivastava (Technical Member) on the issues recorded in terms of two separate orders passed by two Members of the original Division Bench has been placed before Third Member namely S. S. Garg (Judicial Member).
The issue raised was whether the Commissioner of Customs, Noida is having jurisdiction to adjudicate the case related to invalid LOA.
Background
On the basis of some intelligence, on 29.08.2018, Officers of Noida Special Economic Zone, Customs visited the factory premise of Appellant which is a partnership concern. During the visit, three workers were present in the factory and 5 machines used for making jewellery were found. The Officers found that the factory was operational.
On being demanded, Sujit Kumar Bera produced all the gold available in the factory. Total quantity of gold was found to be 2417 grams. All three workers found present in the factory were unable to produce any documentary evidence in respect of stock of gold and consequently, gold was detained under Section 110 of the Customs Act, 1962.
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The Adjudicating Authority accepted the findings recorded in the SCN holding that the Appellant did not have valid LOA and the seized gold was transferred to Appellant without any valid documents and the Voucher No.69/2018 was an after-thought and an attempt to cover up unauthorized possession of seized goods.
The Adjudicating Authority chose to dismiss the voucher as it was the only voucher issued in the name of Appellant. Rest of the vouchers were issued in the name of their sister concerns. The Adjudicating Authority passed the impugned order directing absolute confiscation of goods u/s 111 (o) of the Customs Act, 1962.
Issue Raised
The issue raised was whether the invalid LOA and non-maintenance of records by Appellant falls under the jurisdiction of the Development Commissioner/Special Officer and action may be taken against Appellant under SEZ Act and Rules according to the law.
Whether the invocation of Section 111 (o) absolutely confiscating the seized gold and imposing penalties on the Appellants under Sections 112 (a), (b) and 114 AA is not tenable and is liable to be set aside.
Judicial Member’s Opinion
The Judicial Member opined that 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 Notification notified 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.
The notification notified Section 111 of the Act as one of the notified offence under SEZ Act, 2005. The Adjudicating Authority in order to establish jurisdiction of Customs Officers in the 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 and not having valid LOA makes the subject goods liable for absolute confiscation under Section 111(O) of the Act.
Section 111 deals with the goods improperly brought from a place outside India and sub section (o) deals with the goods exempted from any duty and prohibition, subject to any condition and that condition is not observed. Though SEZ is deemed as a territory outside the customs authority but in the present matter issues are non-validity of the LOA and possession of goods without any proper documentation by Appellant.
It is not the case of the Department that the goods were bought into SEZ illegally or attempts were made to remove the goods from SEZ to DTA.
The Adjudicating Authority failed to record any finding as to how Section 111 (o) of the Act can be invoked in the instant case particularly, when Appellant No.3 has placed on record documents establishing gold were brought into SEZ legally and gold alloy was sent to Appellant for job work.
The matter pertaining to invalid LOA falls squarely under the domain of Development Commissioner. And the issue of sub-contracting goods on job work from one unit to another in the same SEZ cannot be equated with bringing the goods from outside India into Indian Territory. In view, of the same it can be said that Section 111(o) of the Act was wrongly invoked.
Consequently, reliance placed by the Adjudicating Authority on Notification No.C.1/1/2009 SEZ dated 05/08/2018 in order to establish jurisdiction of Customs Officers to investigate and seize goods in the instant matter was not as per the law.
Technical Member’s Opinion
The technical member opined that the entire investigations and proceedings were initiated and conducted by NSEZ Customs which is very much part of the office of Development Commissioner.
The entire proceedings have been initiated and drawn by the “Office of Development Commissioner (Customs Wing). Power to adjudicate these notices have been conferred as per Rule 47 of the SEZ Rules, 2006 on the jurisdictional Commissioner of Customs.
Third Member’s Opinion
The third member, S. S. Garg (Judicial Member) while upholding the view of the judicial member held that the matter was pertaining to manufacturing activity by SEZ unit within SEZ unit without valid LOA which falls within the jurisdiction of Development Commissioner, NSEZ and is not a contravention under the Customs Act, 1962 which can be adjudicated by the Commissioner of Customs, Noida.
Case Details
Case Title: M/s Encee International NSEZ Versus Commissioner of Customs
Case No.: Customs Appeal No.70692 of 2019
Date: 09 January, 2025
Counsel For Appellant: Devesh Tripathi
Counsel For Respondent: A. K. Choudhary
