Karnataka High Court
The Commissioner Of Customs vs M/S. Sri Exports on 16 October, 2020
Bench: Alok Aradhe, H T Narendra Prasad
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF OCTOBER 2020
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE H.T.NARENDRA PRASAD
C.S.T.A. NO.13/2019
C/W
C.S.T.A. NO.14/2019
C.S.T.A. NO.13/2019
BETWEEN:
THE COMMISSIONER OF CUSTOMS
AIRPORT & AIR CARGO COMPLEX
KEMPEGOWDA INTERNATIONAL
AIRPORT, DEVANAHALLI
BANGALORE-560300.
... APPELLANT
(BY Mr. AMIT DESHPANDE, ADV.,)
AND:
M/S. SRI. EXPORTS
D.NO.1-8-702-32-373 F
NO.A2, 2ND FLOOR, VENKATA
SAI NILAYAM, PADMA COLONY
NALLAKUNTA, HYDERABAD-500044.
... RESPONDENT
(BY Mr. SHIVADASS G, SR. COUNSEL A/W
Mr. RISHAB J, ADV.,)
---
THIS CSTA IS FILED UNDER SECTION 130 OF THE
CUSTOMS ACT, ARISING OUT OF ORDER DAETD 30.4.2019
PASSED IN FINAL ORDER NO.20370/2019 IN APPEAL
2
NO.C/2004/2019 PRAYING TO ALLOW THE APPEAL OF THE
APPELLANT. SET ASIDE THE FINAL ORDER NO.20370/2019
DATED 30.4.2019 PASSED BY THE CESTAT, BANGALORE IN
APPEAL NO.C/20004/2019-SM, VIDE ANNEXURE-A & ETC.,
C.S.T.A. NO.14/2019
BETWEEN:
THE COMMISSIONER OF CUSTOMS
AIRPORT & AIR CARGO COMPLEX
KEMPEGOWDA INTERNATIONAL
AIRPORT, DEVANAHALLI
BANGALORE-560300.
... APPELLANT
(BY Mr. AMIT DESHPANDE, ADV.,)
AND:
M/S. SRI. EXPORTS
D.NO.1-8-702-32-373 F
NO.A2, 2ND FLOOR, VENKATA
SAI NILAYAM, PADMA COLONY
NALLAKUNTA, HYDERABAD-500044.
... RESPONDENT
(BY Mr. SHIVADASS G, SR. COUNSEL A/W
Mr. RISHAB J, ADV.,)
---
THIS CSTA IS FILED UNDER SECTION 130 OF THE
CUSTOMS ACT, ARISING OUT OF ORDER DAETD 30.4.2019
PASSED IN FINAL ORDER NO.20369/2019 PRAYING TO ALLOW
THE APPEAL OF THE APPELLANT. SET ASIDE THE FINAL ORDER
NO.20369/2019 DATED 30.4.2019 PASSED BY THE CESTAT,
BANGALORE IN APPEAL NO.C/20005/2019-SM, VIDE ANNEXURE-A
& ETC.,
THESE CSTAs COMING ON FOR FURTHER HEARING, THIS
DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:
JUDGMENT
These appeals have been filed by the revenue under Section 130 of the Customs Act, 1962 (hereinafter 3 referred to as 'the Act' for short) being aggrieved by the orders dated 30.04.2019 passed by the Customs, Excise and Service Tax Appellate Tribunal, Bangalore (hereinafter referred to as 'the tribunal' for short).
2. Facts leading to filing of these appeals briefly stated are that the respondent in CSTA No.13/2019 had filed bill of entry No.2296535 dated 03.07.2017 for import of 100 No. of gold medallions of 99.99% purity weighing 5 Kgs. worth Rs.1,35,66,558/-, whereas, the respondent in CSTA No.14/2019 filed bill of entry No.3333264 dated 21.09.2017 for import of goods declared as gold granules of 99.99% purity weighing 1 Kg, which was valued at Rs.29,95,524/-. The aforesaid goods were imported from Korea. Admittedly, the respondent is neither nominated bank nor a nominated agency or a holder of star or premium trading house. The Additional Commissioner issued show cause notices dated 17.10.2017 and 10.11.2017 to the respondent on the ground that respondent is neither a nominated bank 4 nor a nominated agency as specified by Directorate General of Foreign Trade (DGFT) or in possession of status of star and premium trading houses and therefore, is not permitted to import the gold and the gold in question has been imported in contravention of the import policy envisaged by DGFT based on regulations promulgated by Reserve Bank of India. Therefore, the respondent was asked to show cause as to why an action to confiscate the goods in question be not taken under Section 111 of the Act and penalty under Section 112 of the Act be not imposed on it. The respondent in its replies submitted that it is an ordinary importer and as per the prevalent foreign trade policy, all the goods were freely importable without any prohibition. The Additional Commissioner of Customs by orders dated 28.03.2018 and 27.04.2018 inter alia held that respondent is neither a nominated agency, nominated bank nor a holder of star or premium trading house and is not covered under any of the categories of 5 specified agencies permitted to import the gold medallions and gold granules and therefore, the goods are imported in violation of para 4.41 of Foreign Trade Policy 2015-2020 and are therefore liable for confiscation under Section 111(d) of the Act. However, an option was extended to redeem the goods on payment of redemption fine of Rs.15,00,000/- and Rs.3,00,000/- respectively and in addition, penalty of Rs.15,00,000/- and Rs.3,00,000/- was imposed under Section 112 of the Act respectively.
3. Thereupon, the respondent filed an appeal before the Commissioner of Income Tax (Appeals) who by an orders dated 12.10.2018 inter alia held that the respondent is not a bank nominated by the Reserve Bank of India and is also not a nominated public sector undertaking. It is also not nominated for star export house from gold and jewelry sector and nominated five star export house from any sector and any other entity is not permitted to import the gold. It was further held 6 that the name of the respondent does not trigger in the list of nominated agencies in para 4.41 of Foreign Trade Policy 2015-2020 and therefore, the respondent is not permitted to import the goods. In the result, the order passed by the Additional Commissioner of customs was upheld. The respondent thereupon filed an appeal before the tribunal. The tribunal by orders dated 30.04.2019 inter alia held that the goods imported by the respondent viz., the gold medallions and gold granules which has been imported by the respondent from Korea were freely importable and there was no restriction. It was further held that master direction issued by Reserve Bank of India applies only to nominated banks and nominated agencies as notified by DGFT and since, the respondent has imported gold on consignment basis, therefore, conditions laid down by Reserve Bank of India are not applicable to the respondent. In the result, the orders passed by the Commissioner (Appeals) dated 12.10.2018 were quashed and the custom authorities 7 were directed to clear the goods free of duty. In the result, the appeals preferred by the respondent were allowed. In the aforesaid factual background, the revenue is in appeal before us.
4. Learned counsel for the appellant submitted that the order passed by the tribunal is erroneous and the tribunal ought to have appreciated that under Para 2.01 of the Foreign Trade Policy 2015-2020, import and export are free subject to regulation. While inviting our attention to para 2.04, it is submitted that DGFT is authorized for formulating rules, procedure and amendments to be followed by an exporter or importer or by any licensing / regional authority or by any other authority for the purposes of implementing the provision for Foreign Trade (Development and Regulation) Act, 1992. It is also submitted that the correct classification of the goods is under CTH 7118900 and therefore, the import of gold is restricted and is subject to regulations framed by Reserve Bank of India. It is also urged that 8 intention of the legislature is not permit import of gold except by a nominated agency. It is also contended that the tribunal erred in holding that Reserve Bank of India has no role or power to control the import of the gold. In this connection, reference has been made to Section 17(11) and Section 40 of the Reserve Bank of India Act, 1934. It is also pointed out that Reserve Bank of India is the agency of Central Government. It is also argued that finding recorded by the tribunal that Reserve Bank of India is changing the policy is perverse and customs tariff classification are found in classification No.7114900. Our attention has also been invited to paragraph 4 of Notification dated 06.09.2017 issued by Ministry of Commerce and Industry. Lastly it is contended that the issue involved in this appeal is squarely covered by decision of Bombay High Court in 'RIDDHISIDDHI BULLIONS LIMITED AND ORS. VS. UNION OF INDA AND ORS.', W.P.NO.10001 OF 2014 DATED 23.12.2015 9
5. On the other hand, learned counsel for the respondent submitted that amendments to Foreign Trade Policy is within exclusive domain of Central Government under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 and DGFT cannot amend the Foreign Trade Policy by way of Circulars. It is also argued that gold medallions and gold granules were imported on 03.07.2017 and 21.09.2017 and were freely importable and only subsequently, restriction was imposed by way of amendment on 24.08.2019 and 18.12.2019 respectively. It is also submitted that gold medallions imported by the respondent are classified under DTH 71141910 and the same is not subject to regulations issued by Reserve Bank of India. It is also submitted that Reserve Bank of India through its Circulars merely regulates the mode of payment and the same cannot be considered to be imposing restriction on import of gold. It is further submitted that neither DGFT, Reserve Bank of India or 10 Customs Department can consider the goods restricted unless DGFT issues Notification under Section 3 of the Foreign Trade (Development and Regulation) Act, 1992. In support of aforesaid submissions, reliance has been placed on decision of the Supreme Court in 'ATUL COMMODITIES PVT. LTD. VS. COMMISSIONER OF CUSTOMS, COCHIN', (2009) 235 E.L.T. 385 (SC) and decision of High Court of Delhi in 'KHANDWALA ENTERPRISE PRIVATE LIMITED VS. UNION OF INDIA AND ORS.', WP(C) 9225/2019 DATED 14.11.2019.
6. We have considered the submissions made by learned counsel for the parties and have perused the record. The Foreign Trade (Development and Regulation) Act, 1992 is an Act to provide for development and regulation of foreign trade by facilitating imports into, and augmenting exports from, India and for matters connected therewith or incidental thereto. Section 3 of the Act deals with Powers of the 11 Central Government to make provisions relating to imports and exports. Section 3(2) empowers the Central Government to make a provision for prohibiting, restricting or otherwise regulating, in all cases or in a specific class of clauses and subject to such exceptions, if any, as may be made by or under the order the import or export of goods or services of technology, by an order published in the official gazette. Section 3(4) of the Act provides that without prejudice to contained in any other law, rules, regulation, notification or order, no permit or licence shall be necessary for import or export of goods nor any goods shall be prohibited for import or export except, as may be required under this Act, or Rules, or orders made thereunder. Section 5 of the Act provides that Central Government may from time to time formulate and announce by notification in the official gazette, the Foreign Trade Policy and may also amend the same. Thus, the Foreign Trade Policy which has been issued by the Central Government in exercise 12 of powers under Section 5 of the Act has the statutory force.
7. Para 2.01 of the Policy provides that exports and imports shall be free except when regulated by way of prohibition, restriction, or exclusive trading through State Trading Enterprises has laid down in Indian Trade Classification (harmonized system) of exports and imports. Para 2.017 empowers the DGFT to impose restrictions on export and import through a notification for the purposes mentioned in the said para. Para 4.41 of the scheme deals with nominated agencies. Thus, from perusal of the provisions of Foreign Trade (Development and Regulation) Act, 1992 and the Foreign Trade Policy, it is evident that amendments to the Foreign Trade Policy can be made by the Central Government under Section 5 of the Act or by DGFT by issuing a Notification under para 2.07 of the Foreign Trade Policy. The change in categorization from free to restricted can be made in respect of import of goods, 13 only by an amendment and the same cannot be done by DGFT by issuing a Circular.
8. Now we may advert to the facts of the case. In the instant case, admittedly, the gold medallions and gold granules were imported on 03.07.2017. Thereafter the DGFT by Notification dated 25.08.2017 has restricted the import of gold from South Korea. The relevant extract of Notification dated 25.08.2017 reads as under:
In exercise of powers conferred by Section 3(2) of the FT (D&R) Act, 1992 as amended from time to time, read with paragraph 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020, the Central Government hereby inserts Policy Condition No.4 under chapter 71 of the ITC (HS)2017, Schedule I (Import Policy) to read as under:
"Imports from South Korea of articles of jewellery and parts thereof, of precious metal or of metal clad with 14 precious metal under Exim Code: 7113;
articles of goldsmiths' or silversmiths'
wares and parts thereof, of precious
metal or of metal clad with precious
metal under Exim Code 7114 ; other
articles or precious metal or of metal clad with precious metal under Exim Code 7115;
and coins under Exim code 7118 are
Restricted."
9. Thus on the date, the gold medallions were imported i.e., 03.07.2017 there was no restriction and the restriction was imposed by the Central Government vide Notification dated 25.08.2017 subsequently, which has been quoted supra. In other words, there was no restriction with regard to import of gold medallion on the date the same was imported by the respondent.
10. Similarly, the gold granules were imported on 21.09.2017 and thereafter DGFT issued a Notification dated 18.12.2019 by which import policy was amended and gold in any form was allowed only to be imported 15 through nominated agencies as notified by the Reserve Bank of India in case of Banks and for other agencies by the DGFT. Thus, it is evident that on the date when the gold granules were imported i.e., on 21.09.2017, there was no restriction on its import and the restriction was imposed subsequently on 18.12.2019 by the DGFT by way of Notification. Thus, when gold medallions and gold granules were imported, they were freely importable and the same was brought under the restricted category subsequently.
11. It is not the case of the respondent that it is a nominated agency. It is pertinent to mention here that the Circulars issued by the Reserve Bank of India apply where the gold is imported by nominated banks as notified by Reserve Bank of India and nominated agencies as notified by DGFT. The gold medallions as well as the gold granules fall under CTH 71141910 and 710811300 respectively. It is pertinent to mention here that the Circulars issued by the Reserve Bank of India 16 apply in case the Banks nominated by it import the gold. At this stage, it is pertinent to refer to the relevant extract of communication dated 18.06.2019 sent by State Bank of India to the office of Principal Commissioner of Customs, regarding regulations of Reserve Bank of India for import of gold policy, which reads as under:
Custom's query Central Office's reply
a) Whether RBI can Regulation of
regulate import / export of imports/exports of any
goods in general and more item (including import of
particularly, the import of gold granules) is in the
gold granules. If yes, domain of Ministry of
inform the modalities of Commerce / DGFT and is
regulations. governed by the Export-
Import Policy / Foreign
Trade Policy as prevalent
during relevant points in
time. Attention is drawn to
relevant paras of Foreign
Trade Policy 2015-20
(notably para 2.07, para
2.08 and para 4.37)
12. Thus, the Reserve Bank of India itself has clarified that regulation of import / export of any item including importing of gold granules is in the domain of 17 Ministry of Commerce / DGFT and is governed by Export-Import Policy / Foreign Trade Policy as prevalent at the relevant point of time.
13. So far as the contention of the learned counsel for the revenue that the issue involved in these appeals is squarely covered by a decision of Bombay High Court in case of Riddhisiddhi Bullions Limited and Ors. supra is concerned, suffice it to say that the petitioner in the aforesaid case claimed to be recognized as premier trading house by Government of India and had challenged the validity of the Circulars dated 22.07.2013, 14.08.2013 and 21.05.2014 issued by Reserve Bank of India. Therefore, the aforesaid decision has no application in the obtaining factual matrix of the case.18
In view of preceding analysis, we do not find any merit in the appeals, the same fail and are hereby dismissed.
Sd/-
JUDGE Sd/-
JUDGE ss 19 AAJ/HTNPJ: CSTA No.13/2019 14.12.2020 c/w CSTA No.14/2019 ORDER ON I.A.NO.2/2020 IN CSTA NO.13/2019 Mr.Amit Deshpande, learned counsel for the revenue. Mr.Rishab J., learned counsel for the assessee. Heard on I.A.No.2/2020.
Learned counsel for the respondent submits that there are typographical errors in paragraphs 3 and 11 of the judgment dated 16.10.2020.
In view of the aforesaid submission, in the second line of paragraph 3 of the aforesaid judgment, the words 'Commissioner of Income Tax (Appeals)' shall be read as Commissioner of Customs (Appeals)', in the first line of paragraph 3 at Page 6 the word 'trigger' shall be read as 'figure' and in the fifteen line of paragraph 3 at Page 6 the word 'has' shall be read as 'has not'. Further, in paragraph 11 of the judgment at page 16 in the fourth line, the words 'State Bank of India' shall be read as 'Reserve Bank of India'.20
Accordingly, I.A.No.2/2020 is allowed. This order shall be read in conjunction with the judgment dated 16.10.2020 passed by this Court in CSTA No.13/2019. ORDER ON I.A.NO.2/2020 IN CSTA NO.14/2019 Mr.Amit Deshpande, learned counsel for the revenue. Mr.Rishab J., learned counsel for the assessee. Heard on I.A.No.2/2020.
Learned counsel for the respondent submits that in the judgment dated 16.10.2020 there are typographical errors in paragraphs 3 and 11.
In view of the aforesaid submission, in the second line of paragraph 3 of the aforesaid judgment, the words 'Commissioner of Income Tax (Appeals)' shall be read as Commissioner of Customs (Appeals)', in the first line of paragraph 3 at Page 6 the word 'trigger' shall be read as 'figure' and in the fifteen line of paragraph 3 at Page 6 the word 'has' shall be read as 'has not'. Further, in paragraph 11 of the judgment at page 16 in the fourth line, the words 'State Bank of India' shall be read as 'Reserve Bank of India'.21
Accordingly, I.A.No.2/2020 is allowed. This order shall be read in conjunction with the judgment dated 16.10.2020 passed by this Court in CSTA No.13/2019.
Sd/-
JUDGE Sd/-
JUDGE RV