Custom, Excise & Service Tax Tribunal
M/S Meenakshi International vs Cc (I&G), New Delhi on 16 November, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R. K. Puram, New Delhi, Court No. 1 Date of hearing: 31.10.2016 Date of Pronouncement: 16.11.2016 Customs Appeal No. 175 of 2011 (Arising out of order in appeal No. CC(A)/Cus/Exp/260/2010/5667 dated 02.02.2011 passed by the Commissioner of Customs (Appeals), New Delhi) M/s Meenakshi International Appellant Vs. CC (I&G), New Delhi Respondent
Appearance:
Sh. J. M. Sharma, Consultant for the appellant Sh. K. Poddar, AR for the Respondent Coram:
Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. Ashok K. Arya, Member (Technical) Final Order No. 55037/ 2016 Per: Ashok K. Arya:
1. The appellant is in appeal against the order dated 02.02.2011 whereunder duty of Rs. 3,35,795/- alongwith interest on 2294.840 gms on duty free jewellery import and penalty of Rs. 50,000/- have been confirmed.
2. Appellant has been represented by Sh. J.M. Sharma, ld. Consultant and Revenue has been represented by Sh. K. Poddar, ld. AR.
3. Appellant is functioning from Noida Special Economic Zone since the year 2004. Matter pertains to the period of year 2009. The appellant mentions that they import gold and export manufactured gold jewellery and are a net foreign exchange earner under SEZ scheme. They exported gold jewellery (earrings) weighing 2229.800 gm. alongwith other jewellery; however said earrings were rejected by the foreign buyer due to polishing defect; and returned jewellery weighing 2294.840 gms.
3.1 The defective jewellery weighing 2294.840 gms., imported by the appellant vide Bill of Entry No. 2062 dated 22.04.2009 was exchanged with well polished jewellery weighing 2294.840 gms., which was seized by Customs on 26.04.2009.
3.2 The departments case is that the appellant removed duty free imported gold jewellery 2294.840 gm. valued at Rs. 29,44,823/- involving custom duty of Rs. 3,35,795/- without payment of custom duty in a clandestine manner. Therefore, the duty and interest is recoverable from the appellant under Section 28 read with Section 28AB of Customs Act, 1962 read with Section of SEZ Act, 2005 and Rule 34 of Special Economic Zone, 2006.
4. The appellant mainly submits that:
(i) SEZ is considered a foreign territory for the purpose of trade operations, duties and tariffs; and Section 53(1) of SEZ Act, 2005 provide that a Special Economic Zone shall be deemed to be a territory outside the Customs Territory of India.
(ii) The work relating to SEZ is now governed by the provisions of the Special Economic Zones Act, 2005 and Special Economic Zones Rules, 2006 (hereinafter referred to as SEZ laws). The said SEZ laws do not confer jurisdiction on the Addl. Commissioner of Customs (Air Cargo Exports) to adjudicate matter arising out of activities within the SEZ.
(iii) That duty free import/ procurement of all goods by SEZ unit is permitted as per the provisions contained in Section 26 of the SEZ Act, 2005 and not under Customs and Central Excise Laws. The dispute regarding utilisation of goods imported by availing exemption under provisions of SEZ Act or rules can only be adjudicated as per the provisions of SEZ laws.
(iv) The procedure regarding search and seizure contained in Section 22 read with Section 21 of SEZ Act, 2005 were not observed. Government of India MC&I (DC) vide Notification S. No. 77(F) dated 13.01.2010 has authorised jurisdictional Development Commissioner to be the Enforcement Officer in respect of notified offences committed in a SEZ.
(v) Section 51 of SEZ Act, 2005 containing overriding provision provide that the provisions of SEZ shall have effect not withstanding anything inconsistent, contained in any other law. The said overriding provision clearly provides that investigations, search and seizure and recovery of duties shall be carried out under the SEZ Act, 2005 and Rules made thereunder and not under the provisions of Customs Act, 1962.
(vi) Mere invocation of inapplicable provisions of law in the SCN which were disputed by the appellant in reply dated 05.12.2009 to SCN dated 15.10.2009 will not give jurisdiction to the adjudicating authority to adjudicate disputes arising in the SEZ governed strictly by the SEZ Act, 2005 and Rules made thereunder.
4.1. Appellant relies on the following case laws in support:
(i) Morgan Tectronics Ltd. vs. CC, New Delhi 2005 (316) ELT 276 (Tri. Del.)
(ii) Bharat J. Gandhi vs. Union of India 2010 (257) ELT 168 (Guj.)
5. The ld. AR reiterates the findings given by lower revenue authorities.
6. After considering the facts of the case and the submissions of both sides, we find that during the relevant period, the customs did not have necessary jurisdiction within the territory of Special Economic Zone. Honble Gujarat High Court in Bharat J. Gandhi vs. Union of India 2010 (257) ELT 168 (Guj.) and Morgan Tectronics Ltd. vs. CC, New Delhi 2005 (316) ELT 276 (Tri. Del.) make the matter clear. CESTAT, Delhi in the case of Morgan Tectronics (supra) has inter-alia in para 8 of its decision observed as under:
8. Moreover, in terms of the Section 53(1) of the SEZ Act, 2005, the SEZ is deemed to be territory outside the Customs Territory of India, and the goods imported were meant for the unit in SEZ Noida. In our view, the Commissioner of Customs, Air Cargo, New Customs House, New Delhi and no jurisdiction to confiscate these goods and impose penalty on the appellant and it is only the Joint/ Dy. Commissioner/ Asstt. Commissioner of Customs, in Noida SEZ Unit, who had the jurisdiction to take necessary action. For this reason also, the impugned orders are not sustainable.
6.1 Honble Gujarat High Court in the case of Bharat J. Gandhi (supra) has inter-alia observed in its para 6 and 7 as under:
6. ... after SEZ Act, 2005 coming into force wherein specific authorities are provided. The Court is of the opinion that the Customs authorities seems to have been rendered functus officio so far as the matter pertaining to the conduct of a unit situated in SEZ is concerned.
7. In view of the decision of the Honble the Apex Court in the matter of Whirpool Corporation vs. Registrar of Trade Marks, Mumbai (supra) until the authority issuing show cause notice is able to satisfy the Court about its locus standi and its jurisdiction, authority cannot be allowed to usurp the power to issue show cause notice. Otherwise, the entire object and purpose of establishment of Special Economic Zone will stand frustrated.
7. Considering the observations of Honble Gujarat High Court and CESTAT quoted above, we find that customs did not have jurisdiction within Special Economic Zone established under SEZ scheme by the Ministry of Commerce, Government of India and present proceedings initiated by the customs were beyond jurisdiction. Therefore, impugned order is without proper authority of law and is hereby set-aside. Appeal is allowed with consequential relief to the appellant.
(Pronounced on 16.11.2016).
(Justice (Dr.) Satish Chandra)
President
(Ashok K. Arya)
Member (Technical)
Pant