Custom, Excise & Service Tax Tribunal
Tasha Gold Pvt Ltd vs Principal Commissioner Of Customs-New ... on 5 December, 2023
CUSTOMS EXCISE & SERVICE TAX APPLELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
COURT No. III
Customs Appeal No. 55422 of 2023
(Arising out of Order-in-Original No. CUS-APR-ASS-2702-2023-GR-3/4/6-O/o Pr COMMR-
CUS-ACC(I) DELHI/10817 dated 03.08.2023)
TASHA GOLD PVT LTD
Plot No. N-19, Site-V
Kasna Industrial Area, Appellant
Greater Noida,
Gautam Buddha Nagar
Uttar Pradesh-201310
Vs.
PRINCIPAL COMMISSIONER OF CUSTOMS, NEW
DELHI, ACC (IMPORT)
Air Cargo Complex Respondent
Import, New Customs
House, Near Igi Airport,
New Delhi-110037
APPEARANCE:
Shri Arjun Raghuvendra, Shri Jayant Kumar & Shri Soham Bandopadhyay,
Advocates, for the Appellant
Shri. Nagendra Yadav Authorized Representative for the Respondent
CORAM:
HON'BLE MR.SOMESH ARORA, MEMBER (JUDICIAL)
HON'BLE MS.HEMAMBIKA R.PRIYA, MEMBER (TECHNICAL)
FINAL ORDER NO. A/51595/2023
DATE OF HEARING: 26.10.2023
DATE OF DECISION: 05.12.2023
PER:SOMESH ARORA
The Appellant has filed the present appeal against the letter/order
dated the 03.08.2023 addressed by the Respondent, wherein the Principal
Commissioner of Customs rejected the request for provisional release of the
impugned goods imported under B/E No. 3625730 dated 06.12.2022 under
Section 110A of the Customs Act, 1962 ("the Act")
2. In the impugned letter/order, the Respondent has mentioned that the
provisional release of the impugned goods has been rejected, because-
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a. The imported goods fall under category of 'prohibited goods' of the
Act, since the gold content of the imported goods is "found to be above
95% and the license issued by DGFT to the Appellant was for import of
Gold Dore Bars (having gold content not exceeding 95%).
b. CBIC Circular no. 35/2017 Customs dated 16.08.2017 in the
guidelines for provisional release of seized goods pending adjudication
under Section 110 A of the Act has prescribed that provisional release of
the goods prohibited under the Customs Act, 1962 or any other Act for
the time being in force shall not be allowed.
Aggrieved by the above rejection of provisional release the Appellant
however is challenging the impugned letter/order before uson the following
grounds-
A. Impugned goods are not prohibited goods-
3. "Prohibited Goods" are defined in Section 2(33) of the Customs Act,
1962 as meaning "any goods the import or export of which is subject to any
prohibition under this Act or any other law for the time being in force but
does not include any such goods in respect of which the conditions subject to
which the goods are permitted to be imported or exported have been
complied with." The Gold Dore bars which are imported by the appellant are
therefore not 'prohibited goods' in accordance with the said definition.
4. Foreign Trade Policy (FTP) states that imports are free except when
regulated by way restriction as laid down in ITC (HS). Gold Dore bars have
conditions imposed and therefore fall under the category of restricted
goods'. The appellant-company being a refinery was issued import license
(with actual user condition) by the DGFT for import of Gold Dore Bars. Gold
dore bars are imported under ITC (HS) for 7108 12 00, for which the only
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condition imposed is that Gold Dore is subject to actual user conditions by
refineries. The said condition has been complied with by the Appellant.
5. The dispute in the present case is regarding the alleged non-
compliance with Notification No. 12/2012-Cus., dated 17.03.2012. This
notification was superseded in the year 2017 by Notification 50/2017-
Customs dated 30.06.2017. Further, the notification whose benefit has been
claimed by the Appellant is Notification No 96/2008-Cus dated 13.08.2008
and all required conditions under that notification are fulfilled by the
Appellant. The Appellant has not claimed the benefit of Notification no.
50/2017- Cus dated 30.06.2017.
6. However, for the sake of abundant clarity, the compliance of
conditions under Notification no. 50/2017-Cus dated 30.06.2017 are also
discussed. Sl. No. 354 of Notification 50/2017-Cus. dated 30.06.2017, on
GDB having gold content not exceeding 95% requires conditions No. 9 and
40 to be fulfilled, the compliance regarding the same are as follows:
Condition No. Condition Compliance
9. The importer follows the procedure The procedure is followed by
set out in the Customs (Import of the importer. Also therefore is
Goods at Concessional Rate of Duty no allegation in the impugned
Rules, 2017) order that any procedure as
prescribed in any of these
Rules have not been followed
by the Appellant.
40. (a) The goods are directly shipped from Thos condition is satisfied in
the country in which they were respect of 26 out of 27 gold
produced and each bar has a weight dore bars imported by the
of 5 KG. or above; Appellant. One bar weighing
4.240 kg has been shipped by
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the exporter erroneously and
the foreign exporter has
accepted that such import was
their mistake. A copy of the
email from the foreign exporter
M/s. equinox in this regard is
placed on record.
40. (b) The goods are imported in Condition is satisfied as the
accordance with the packing list import was as per the packing
issued by the mining company by list and the same was also
whom they were produced; provided to the customs
authorities who have not
pointed out any discrepancy.
Further the condition does not
state that the packing list
issued by the mining company
has to be submitted at time of
import.
A copy of the packing list is
placed on record.
40 ( c) The importer produces before the Condition is satisfied as assay
Deputy Commissioner of Customs or certificate furnished by mining
the Assistant Commissioner of company makes it apparent
Customs, as the case may be, an that the goods conform to the
assay certificate issued by the mining conditions of import license
company or the laboratory attached being of up to 95% purity.
to it, giving detailed precious metal Copy of the Assay Certificate
content in the Dore bar provided by the miner is placed
on record.
The gold Dore bars are imported by The Appellant has imported the
40 (d) the actual user for the purpose of said gold dore bars for the
refining and manufacture of standard purpose of refining and
gold bars of purity 99.5% and above; manufacture of standard gold
bars of purity 99.5%. Hence,
the said condition stands
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fulfilled.
40 (e) The silver Dore bars are imported by
the actual user for the purpose of
Not Applicable
refining and manufacture of silver
bars of purity 99.9% and above.
7. Out of the 27 gold dore bars, there is one gold dore bar of less than 5 kg
weight. The import of this gold bore is a genuine error by the foreign
exporter as evidenced by their email attached. The said gold bar was
declared to the proper officer at the time of import as weighing 4.240 kg and
there is no misdeclaration at any point in time.
7.1 In this context, it was submitted that in the course of business, such
errors may happen and the Customs Act, 1962 is conscious of the possibility
of such errors occurring. Section 26A of the Act provides for refund of import
duty on such goods and the legislative intent is very clear in this regard. The
relevant extract of the said section is as follows-
"Section 264. Refund of import duty in certain cases. -
(1) Where on the importation of any goods capable of being
easily identified as such imported goods, any duty has been
paid on clearance of such goods for home consumption, such
duty shall be refunded to the person by whom or on whose
behalf it was paid, if- (a) the goods are found to be defective
or otherwise not in conformity with the specifications agreed
upon between the importer and the supplier of goods:
Provided that the goods have not been worked, repaired or
used after importation except where such use was
indispensable to discover the defects or non-conformity with
the specifications;
Provided that the period of thirty days may, on sufficient
cause being shown, be extended by the Principal
Commissioner of Customs or Commissioner of Customs for a
period not exceeding three months: Provided further that
nothing contained in this section shall apply to the goods
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regarding which an offence appears to have been committed
under this Act or any other law for the time being in force."
(emphasis supplied)
7.2 As can be seen, the legislature in its wisdom has foreseen a scenario
where there can be imported goods which are "not in conformity with the
specifications agreed upon between the importer and the supplier of goods"
and allows for refund of duty paid on such goods.
7.3 Therefore, in accordance with section 26A, the Appellant is also entitled
to the refund of import duty paid on the import of this 4.240 kg gold bore
which is not accordance to the agreed specifications between the Appellant
and the foreign supplier.
7.4 It was submitted that such goods can, be exported in accordance with
Rule 10 of Customs (Import of Goods at Concessional Rate of Duty or for
Specified End Use) Rules, 2022 (hereafter SEU Rules) notified by Notification
No. 74/2022 Customs ( N .T.) dated 09.09.2022. This rule provides for re-
export or clearance of defective goods. The relevant extract of the said rule
is as follows-
10. Re-export or clearance of unutilised or defective goods. -
(1) The importer who has availed the benefit of a notification
shall use the goods imported in accordance with the conditions
mentioned in the concerned notification within the period and
with respect to unutilised or defective goods, so imported, the
importer shall have an option to either re-export or clear the
same for home consumption, within the said period, namely (i)
within the period specified in the notification; (ii) within six
months from the date of import, where the time period is not
specified in the notification: Provided that, the said period of
six months can be further extended by the jurisdictional
Commissioner for a period not exceeding three months, if
sufficient reason is shown that the causes for not conforming
to the time period were beyond the importer's control.
(2) Any re-export of the unutilised or defective goods referred
to in sub rule (1) shall be recorded by the importer in the
monthly statement by providing the details of necessary
export documents: Provided that the value of such goods for
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re-export shall not be less than the value of the said goods at
the time of import.
(3) The importer who intends to clear unutilised or defective
goods for home consumption shall have an option of voluntary
payment of applicable duty along with interest on the common
portal and the particulars of such clearance and the duty
payment shall be recorded by the importer in the monthly
statement.
Therefore, the defective gold dore bar which has not met
the may be a specifications will be returned to the
exporter. One bar weighing 4.240 kg is a case of genuine
mistake and is not at
case of misuse of the import license or any mala fide
object nor disregard for the statute.
8. Further, the impugned order in holding the goods as "prohibited goods"
has referred to and relied upon a test report dated 27.01.2023. However,
the Appellant has never been provided with a copy of such test report dated
27.01.2023 with regard to the goods imported vide Bill of Entry No. 3625730
dated 06.12.2022. This amounts to a violation of the principles of natural
justice.
8.1 The impugned order has been passed without providing the relied upon
document - the test report dated 27.01.2023-and an opportunity of fair
hearing to the Appellant. It is a settled principle that an order passed
without following natural justice is bad in law and must be set aside on that
ground alone.
8.2 Appellant places reliance on the judgment of Hon'ble High Court of Delhi
in Ganesh Sawant v. Commissioner of Customs (Appeals), (2023) 8 Centax
218 (Del.) in which it is held that even where the statute does not explicitly
provide for issuance of notice or provision of opportunity of hearing, the
revenue authorities are required to grant the same to ensure that natural
justice is done. The failure to adhere to these well-established legal
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prerequisites renders the impugned order bad in law and should therefore be
set aside on this count alone.
9. On the question of the impugned goods failing to adhere to the prescribed
gold content, the Appellant submitted that there are three test reports which
show that the impugned goods comply with the gold content requirement.
9.1 The test/assay report dated 01.12.2022 provided by the mining
company indicates the gold content for all the 27 bars part of the impugned
consignment. It shows that gold content in the bars range from 92.8% to
94.8%, thereby adhering to the requirement prescribed in the law.
9.2 Further, at the port of import, the proper officer drew samples and sent
it to the CRCL laboratory for testing. The CRCL lab report dated 24.02.2023
indicates that the gold content is 94.70%. This again confirms that the gold
bars in the consignment are adhering to the requirement prescribed in the
law.
9.3 Lastly, DRI drew three samples and sent them to the CRCL laboratory
for testing. The CRCL lab reports for these samples dated 18.01.2023
indicate that the gold content is marginally above 95% i.e., 95.10%,
95.26% and 95.17%.
9.4 With regard to the last test report, the Appellant had addressed an RTI
application dated the 17.08.2023 to the seeking the information with respect
to Method of testing of gold percentage in gold dore bars employed by CRCL,
CRCL/SOP-13 method of testing percentage of gold in gold dore bars, Margin
of error in CRCL/SOP-13 method of testing. CRCL has responded to the
inquiries of the Appellant vide response dated 18.09.2023 as follows-
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a. Method of testing of gold percentage in gold dore bars employed by
CRCL- Indian Standard 1418:2009 and CRCL/SOP-13.
b. CRCL/SOP-13 method of testing percentage of gold in gold dore
bars- Gravimetric Method, c. Margin of error in CRCL/SOP-13 method
of testing- Permissible Error=+/-0.25%.
9.5 It must be noted that the method employed for testing in this case the
Gravimetric method which is not the prescribed standard method for test as
prescribed. Notwithstanding the same, the gold content according to this
report is marginally above 95% i.c., 95.10%, 95.26% and 95.17% and
these are within the permissible limits and thus cannot be held as prohibited
goods.
10. This was not the first time that the Appellant had been importing gold
Dore bars from LDCs. There have been 103 consignments imported
previously from 20.11.2018 to 09.12.2022 before the impugned
consignments. Each of these consignments were cleared by the proper
officer for home consumption without holding any of them as prohibited.
10.1 It was submitted that Gold Dore Bars are not under self-assessment or
the Risk management system (RMS). Each consignment of gold bar is
provisionally assessed by the proper officer and samples were drawn and
tested by CRC for gold content. Without such testing and assessment, there
was no clearance for home consumption.
10.2 On all the previous 103 consignments, the same procedure was carried
out and each of them was found to be compliant with law. 33 out of the said
103 consignments were also subjected to first check. None of the 103
consignments were at any point held as prohibited. Therefore, the impugned
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order contradicts the assessment of previous consignments by the
department and such reversal in stand by the revenue without any material
change in facts is bad in law.
B. Notwithstanding the above, the reliance on CBIC Circular No 35/2017
to deny provisional release is violative of Section 110 A and therefore cannot
be relied upon as held in multiple judicial precedents.
11. Para 3.2 of the impugned order records that as per CBIC Circular No.
35/2017-Cus dated 16.08.2017, it has been prescribed that provisional
release of goods prohibited under Customs Act, 1962 or any other law for
the time being in force shall not be allowed.
12. Relevant para of Circular No. 35/2017 reproduced below for reference:
Circular 35/2017 - Guidelines for provisional release of seized
imported goods pending adjudication under Section 110A of the
Customs Act, 1962- Reg.
para. 2. While provisional release of seized imported goods under Section
110A of the Customs Act, 1962 may normally be considered by the
competent adjudicating authority upon request made by the owner of the
seized goods, provisional release shall not be allowed in the following cases-
i. Goods prohibited under the Customs Act, 1962 or any other act for
the time being in force;
ii. Goods that do not fulfill the statutory compliance requirements/
obligations in terms of any Act, Rule, Regulation or any other law for
the time being in force;
iii. Goods specified in or notified under Section 123 of the Customs
Act, 1962;
iv. Where the competent authority, for reasons to be recorded in
writing believes that the provisional release may not be in the public
interest.
13. The Appellant relied on the judgment of the Hon'ble High Court of
Delhi in Additional Director General (Adjudication) v. Its My Name Pvt. Ltd.,
2021 (375) E.L.T. 545 (Del.) wherein it was held that Para 2 of Circular No
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35/2017 is contrary to the parent statute - Section 110A of the Customs Act
and is void.
14. The Appellant placed reliance on the judgement of the Hon'ble High
Court of Bombay in Sidharth Vijay Shah v. Union of India, 2021 (375) E.LT.
53 (Bom.) in which it was held that no limitation was imposed in Section
110A that goods categorized as prohibited goods under Section 2(33) cannot
be subjected to provisional release under Section 110A. It was also held that
even filing of appeal before Hon'ble CESTAT cannot be a bar on order of
provisional release.
15. It was submitted that adherence to the said Circular No. 35/2017
cannot be made to refuse provisional release of goods. Section 110A of the
Customs Act provides that seized goods can be released and does not make
any difference between prohibited and non-prohibited goods. The
interpretation of Section 110A the Hon'ble Delhi High Court in Its My Name
(supra) is reproduced below:
"48. Clearly, provisional release may be allowed, under Section 110A
of the Act, of "any goods, documents or things seized". The Court, as
the interpreter of the legislation, cannot profess to greater wisdom
than the legislator. Where the Legislature has not thought it
appropriate to limit, in any manner, the nature of goods, documents
or things which may be provisionally released, under Section 110A, in
our view, it is no part of the function of a Court to read, into the said
statutory provision, any artificial limitation, not to be found therein."
(Emphasis supplied)
16. The Hon'ble High Court also opined that Section 110A the Customs Act
does not distinguish between prohibited and non-prohibited goods and such
distinction is found in Section 125 of Customs Act but even therein
prohibited goods may be released on payment of redemption fine. The
Appellant humbly states that it is entitled to provisional release of goods and
more so when it has paid duty although it was not statutorily due. The
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impugned order denying provisional release is without legal basis/ and is
liable to be set aside.
C. Goods can be categorised as "prohibited" only after adjudication-
17. Categorization of goods is a subject to adjudication and in regard to
the fact of the present case, the customs authorities entertain such a view at
the time of seizure does not make the goods prohibited goods. For seizure,
the officer must have reason to believe that goods are liable for
confiscation and in the instant case, it has been stated that goods are
prohibited. However, it is submitted that such belief or act of seizure does
not establish that the goods are prohibited goods.
18. The High Court of Madras in Al Qahir International v. Commissioner of
Customs, Tuticorin, 2021 (378) EL.T. 784 (Mad.) has held that the question
of goods being prohibited is a matter of adjudication and since both importer
and customs authorities prior to adjudication have their own grounds for
opposite views, the balance of convenience was in favour of the assessee-
importer and goods could not be termed as prohibited goods till such time
adjudication was completed.
19. The appellant thus submitted that the impugned gold is not prohibited
goods in as much as all documents to examine description, purity etc., have
been submitted and purity is below 95% as per report dated 27.02.2023
even as per testing conducted by the department.
D. Appellant has satisfied the conditions of applicable Notification
No. 96/2008-Cus.-
20. The appellant had claimed the benefit of preferential tariff scheme
under Notification No. 96/2008-Cus., dated 13.08.2008 and the subject
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goods fall under tariff item 7108 1200 which are 'restricted goods' as per ITC
(HS) Import Policy.
21. It is submitted by the appellant that the only condition as per ITC (HS)
Import Policy is that Gold Dore bars can be imported against import license
with Actual User (AU) condition. The Appellant-company being a refinery has
been issued license by DGFT and is permitted to import the Gold Dore Bars
with Actual User Condition.
22. Notification No. 96/2008-Cus. Provides for preferential tariff scheme
for imports from 'Lesser Developed Countries' (LDC). The subject goods are
imported from Republic of Rwanda which falls under the category of LDC.
One of the conditions of Notification 96/2008 is that the importer should
satisfy that the subject goods in respect of which exemption is claimed are
from a country listed in the Schedule of the said Notification.
23. The said condition mentioned in the first proviso to Notification No.
96/2008 is reproduced below for reference:
When imported into India from a country listed in the Schedule to this
Notification:
"Provided that the importer proves to the satisfaction of the Assistant
Commissioner of Customs or Deputy Commissioner of Customs, as
the case may be, that the goods in respect of which the exemption
under this notification is claimed are of the origin of the country listed
in the schedule to this notification, in accordance with provisions of
the rules of origin, published in the notification of the government of
India in the Ministry of Finance (Department of Revenue), No.
100/2008-Cus (N.T.), dated 13th August 2008."
24. The Appellant has submitted the 'Certificate of Origin' (COO) which
was issued and certified by Rwanda Chamber of Commerce, Industry and
Agriculture for claiming exemption under Notification 96/2008 and therefore,
eligible for benefit under the said Notification. It is pertinent to note that
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there is no specific condition in ITC (HS) that for import of Gold Dore Bars,
conditions under Notification No. 50/2017 have to be fulfilled. The appellant
has not claimed exemption benefit under Notification No. 50/2017-Cus and
therefore, they are not required to fulfil conditions prescribed in Notification
No. 50/2017-Cus.
25. On the question of choosing a beneficial notification, it is submitted
that an importer is free to choose the notification which is more beneficial to
him. In case of Share Medical Care V. Union of India, 2007 (209) ELT 321
(S.C), Hon'ble Supreme Court held that if applicant is entitled to benefit
under two different notifications or under two different heads, he can claim
the one which is more beneficial and it is duty of authorities to grant such
benefits if applicant is entitled to such benefit.
(Emphasis supplied)
E. Seizure of the entire consignment is not valid-
26. Section 110 of Customs Act stipulates that "any goods are liable to
confiscation under this Act". That is only such goods which are confiscable
which are improperly imported on account of infractions listed in Section 111
of the Customs Act. Goods which are not tainted by the same and those
which have been properly imported cannot be seized. It is submitted that
the continued seizure and detention of the entire consignment is without
sanction of law.
27. The Appellant drew attention to Innovation, Secunderabad and
Another v. Central Board of Excise and Customs and Another, 1984 (15)
E.LT. 91 (A.P.) wherein in the context of confiscation of various goods, the
goods were segregated into three categories with specific violation -
smuggling (restricted goods), non- maintenance of records and a third
category for which no specific violation was mentioned. The department
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contended that the third category of goods are also liable for confiscation
since in respect of other goods, the facts and conduct of the importer
rendered them liable for confiscation. However, the Hon'ble High Court held
that confiscation of the third category of goods was bad since it was on the
basis of a presumption drawn from the facts relating to other category of
goods. It is submitted that the entire consignment of 27 gold dore bars
cannot be detained because one article was found to be not of prescribed
weight.
F. Collection of customs duty on prohibited goods is without
authority of law-Amount paid liable to be refunded- Submitted
28. The Appellant submitted that customs duty is payable on goods
imported into India and as per Section 2(23) import, with its grammatical
variations and cognate expressions, means bringing into India from a place
outside India.
29. Section 12 of the Customs Act defines dutiable goods and states that
duties of customs shall be levied at such rates as may be specified under
Customs Tariff Act, 1975 on goods imported into India.
30. It was submitted that for collection of customs duty, activity of import
should be completed. The Hon'ble Supreme Court in Garden Silk Mills Ltd v.
Union of India, 1999 (113) E.LT. 358 (S.C.) has held that import of goods
into India would commence when the same cross into the territorial waters
but continues and is completed when the goods become part of the mass of
goods within the country; the taxable event being reached at the time when
the goods reach the customs barriers and the bill of entry for home
consumption is filed.
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31. The Appellant also wishes to place reliance on the interpretation of the
word "import" as pronounced by the Hon'ble Supreme Court in Mangalore
Refinery & Petrochemicals Ltd. v. C.C., Mangalore, 2015 (323) E.L.T. 433
(S.C.) wherein it was held that act of import which triggers levy of customs
duty is complete only after the goods are cleared for home consumption or
warehoused as the case may be.
32. The goods have been seized by the DRI and they having declared the
goods to be prohibited in nature (and hence cannot be imported), customs
duty cannot be on the same.
33. The amount of Rs. 15,20,96,571/- (Rupees Fifteen Crores Twenty
Lakhs Ninety-Six Thousand Five Hundred and Seventy-One only) is already
paid vide TR Challan 4336 dated 20.12.2023 under major head "customs
duty" cannot be appropriated by the revenue authorities since the collection
of such duty is without authority of law and the same is liable to refunded
with applicable interest.
G. Denial of provisional release of goods even though duty has been
paid, is not sustainable-
34. Since the subject goods were needed immediately due to business
urgency, as per the instructions of DRI, duties were paid without claiming
exemption under Notification No. 96/2008 under protest vide TR-6 Challan
No. 4336 dated 21.12.2022 seeking release of goods. It is reiterated that
the Appellant is eligible for claiming exemption under Notification No.
96/2008-Cus., having imported gold dore bars from the Republic of Rwanda
which is listed as an LDC and the documents for claiming the exemption
such as Certificate of Origin are in order. The appellant had earlier imported
gold from other LDCs and had availed the exemption. The payment of duty
17 | P a g e C/55422/2023-DB
was made under instructions from DRI and not voluntarily by accepting
liability.
35. However, even though the duty (as directed by the department) has
been paid, the goods were detained under a panchnama and a detention
memo was issued on the same day. The panchnama and the detention
memo, has no material evidence mentioned based on which it is alleged that
the Appellant has misused exemption notification.
36. It is submitted that the gold dore bars imported by the Appellant are
not prohibited goods rather they are 'restricted' under ITC (HS) which can be
imported by refineries like the appellant in this case. Therefore, the subject
goods can be provisionally released as they are not prohibited under the
Customs Act.
37. It is further submitted by the Appellant that he has the right to get the
goods released under the provisions of Section 110A of the Customs Act,
1962. Section 110(1A) provides the certain goods being perishable or
hazardous nature of any goods, on account of depreciation in the value of
the goods with the passage of time, constraints of storage space for the
goods or any other relevant considerations, may be directed to be disposed
of by the Central Government.
38. It is submitted by the Appellant that as per the above provisions it is
evident that the goods may be released by taking a bond with such security
as may be required. Further, In the present case, the appellant has
deposited the duty as required and hence, provisional release of the goods
may be granted.
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H. The entire proceeding is arbitrary on multiple counts and is
therefore bad in law.
39. The test report on which the impugned order is relied on is dated
27.01.2023. However, the Appellant has neither been provided with a copy
of such test report dated 27.01.2023 nor has the Appellant been heard in
the matter. This approach is grossly arbitrary and amounts to a violation of
the principles of natural justice.
40. The 103 consignments previously imported were never held as
prohibited. The impugned order contradicts the assessment of all these
previous 103 consignments of the department and such reversal in stand by
the revenue without any material change is entirely arbitrary.
41. The Appellant was forced to pay the entire customs duty on the
impugned shipment for clearance of import but then the import was never
cleared but seized. This whole process of demanding duty on an import
which was not liable to duty and then seizing the consignment after the
deposit was made reeks of arbitrariness.
42. The reliance on a test report dated 27.01.2023 when there are three
other test reports including the source Assay certificate provided by the
mining company and the CRCL test reports which clearly show the gold
content is within limit is arbitrary.
Appellants also inter alia, took various grounds on the point of natural
justice
Case of the Department
43. The Appellant had filed BE No. 3625730 dated 06.12.2022 for
clearance of goods i.e. Gold Dore Bars (having gold content not exceeding
19 | P a g e C/55422/2023-DB
95%)." They classified the goods under CTH 71081200 and claimed the
benefit of notification No. 96/2008 and notification No. 50/2017 . The
Department has seized the goods on reasonable belief that the Appellant has
misused the benefit of S.No. 354 of notification No. 50/2017-Cus dated
30.06.2017 and Country of Origin benefit notification No. 96/2008-Cus dated
13.08.2008. Thereafter, the inventory of the goods was prepared on
23.01.2023 before the Commissioner (Appeals). The Appellant requested for
provisional release of the goods and filed W.P. (C) No. 1137/2023 before the
Hon'ble Delhi High Court. The DRI produced 3 Test Reports dated
18.01.2023 before the High Court wherein the gold content was shown
above 95%. The Hon'ble High Court has disposed of the W.P. (C) No.
1137/2023 vide order dated 06.07.2023 with a direction to the
Commissionerate to expeditiously dispose of the application, if any of the
Appellant for provisional release. The Pr. Commissioner, through the
Assistant Commissioner vide letter dated 03.08.2023 conveyed for rejection
of the provisional release request. Aggrieved, the Appellant filed appeal No.
C / 50422 / 2023 before this Hon'ble Tribunal.
44. Department on the other hand submitted that the appellant has
violated the following conditions of Notification No. 50/2017-Cust dated
30.06.2017.
(a) With the import of Gold Dore Bar weighing less than 5 Kg.
Condition No-40 (a) of the Notification No-50/2017-Cus stands
violated.
(b) Condition 40 (b) of the Notification specifies that the goods are
imported in accordance with packing list issued by the company. But
while filing the Bill of Entry appellant has not submitted the packing
list of the Miner. It is the statutory requirement while importing Gold
20 | P a g e C/55422/2023-DB
Dore Bars that it should be in accordance with the packing list issued
by Mining and it was not left to the discretion of the supplier. The
packing list nowhere mentioned the Sr.No. of Box in which this 4.240
KG of Gold Dore Bar was placed.
(c) Assay Certificate seems to be not genuine.
45. Since the genuineness of the Assay Certificate appears to be doubtful
and fake the representative samples were drawn and sent to CRCL for
verification of the content mentioned in Assay Report. Thus, on the basis of
reasonable belief for mis-use of Notification No- 50/2017-Cus dated
30.06.2017 and Notification No-96/2008-Cus dated 13.08.2008, the goods
were detained under Detention Memo dated 23.12.2022.
46. Further, as has been submitted supra, the appellant also needs to
refer to the condition sheet of the License DGFT License No-0111003380
dated 23.03.2022 issued by the DGFT for the import of Gold Dore Bars
otherwise which import of Gold Dore Bar is a prohibited item. Import of Gold
Dore Bars can only be permitted when an importer has valid DGFT Import
License with actual user conditions and follows Notification No- 12/2012 Cus
dated 17.03.2012 as a mandatory condition (Later Notification No - 50/2017
dated 30.06.2017 has been issued in supersession of the notification of the
Government of India in the Ministry of Finance (Department of Revenue),
No. 12/2012 -Customs, dated the 17th March, 2012).
47. Representative samples were drawn by the officers of Respondent on
23.12.2022 in presence of authorised representative of the appellant and the
Customs Officer. Further CRCL vide report dated 27.01.2023[with regard to
purity content of Gold Dore Bar] has reported the content of Gold beyond
95% (above 95% ). The appellant imported all the 27 Gold Dore Bars vide
single Bill of Entry as one consignment. And since separate Bills of Entry
21 | P a g e C/55422/2023-DB
were not filed independently in respect of each bar. Therefore the whole
consignment was found liable for confiscation in the event of fake Assay
Report.
48. The Appellant has presented only the small part of the Hon'ble High
Court Order in the matter of Its My Name Private Limited (cited supra).
Hon'ble High Court of Delhi has made the following observations which
requires attention:-
"12. Undisputedly, the Import Policy alludes to Gold Dore bars being
permitted for import against an "import license with Actual User [AU]
condition". As was noticed hereinabove, the import permission which
was granted to the petitioner specifically alluded to the notification of
2012. The permission which was granted to the petitioner mandatorily
required it to comply with the conditions imposed in that notification.
We are also of the firm opinion that once that notification came to be
superseded by the 2017 notification [and which was the notification
which held the field at the time when the import was effected] the
petitioner was bound to comply with the conditions relating to weight
and purity as stipulated therein.
13. It is also not the case of the petitioner that it had, at any time,
approached the respondents to seek amendment of the conditions
which stood added to the import permission. In view of the aforesaid,
it would be impermissible for the petitioner to now contend that the
notifications of 2012 and 2017 would not be applicable. In view of the
aforesaid, we find ourselves unable to sustain the submission of the
petitioner being entitled to import Gold Dore bars solely on the basis of
the notification of 2008."
49. Thus Hon'ble High Court of Delhi has clearly stated that the appellant
has to comply with the conditions as mentioned under Notification No-
50/2017-Customs dated 30.06.2017 as amended, since the appellant has
violated the condition 40 of the notification, the goods are liable for
confiscation.
50. It is submitted that as per DGFT Policy issued vide Notification No-
49/2015-20 dated 05.01.2022, import of Gold Dore Bars is restricted and
the same can be understood as under:
22 | P a g e C/55422/2023-DB
ITC(HS) Item Policy Existing Policy Revised Policy
Code Description Condition
71081200 Other Restricted Import is Import allowed
Unwrought allowed only through
forms through nominated
nominated agencies notified
agencies as RBI (in case of
notified by RBI Banks), DGFT
(in case of (for other
banks) and agencies) and
DGFT (for other IFSCA (for
agencies). qualified
jewelers
Gold Dore can International
be imported by Bullion
refineries Exchange)
against a license
with AU Gold Dore can
condition be imported by
refineries
against an
import license
with AU
condition.
51. From the above policy condition it is clear that except Gold Dore
import of other items falling under CTH 71081200 is allowed only through
nominated agencies as notified by RBI &DGFT (for other agencies) and
IFSCA. In so far as import of Gold Dore Bar is concerned the same is not
allowed even through RBI and DGFT (for other agencies) and IFSCA. The
same is only permitted for refineries only against an import License with
Actual User Condition.
50.1 However, firstly it has been seen from the application filed by the
appellant before DGFT that appellant has itself applied for import of Gold
Dore Bars under CTH 71082000, whereas Appellant is importing Gold Dore
Bars under CTH 71081200. It is to further bring to notice that the Appellant
has been importing Gold Dore Bars since 2019 and that the CTH earlier
applied was under CTH 71081200.
23 | P a g e C/55422/2023-DB
50.2 Secondly the Gold Dore Bars which the appellant has imported vide Bill
of Entry No-3625730 dated 06.12.2022 is having Gold Content above 95%
which does not come under the scope of Import Policy and the License so
issued to the appellant.
51. That, the contents of paragraph under reference are false, frivolous and
mis leading and in response to the same it is submitted that the appellant
has been issued import License with import condition to follow Notification
No-12/2012-Cus dated 17.03.2012 as a mandatory condition (Later
Notification No-50/2017 dated 30.06.2017 has been issued in supersession
of the notification of the Government of India in the Ministry of Finance
(Department of Revenue), No. 12/2012 -Customs, dated the 17th March,
2012.In view of the above it is submitted that once the mandatory
conditions of the import license are not met..
52. The goods in question are restricted in nature subject to conditions of
the Import license, without which the goods are not allowed to be imported.
Whereas Section Z(33) of the Customs Act, 1962 defines the Prohibited
goods, the same is reproduced below:-
"...Prohibited goods means any goods the import or export of
which is subject to any prohibition under this act or any other law
for the time being in force but does not includes such goods in
respect of which the conditions subject to which the goods are
permitted to be imported or exported have been complied with..".
52.1 Therefore, all goods where in which non-observance of any of the
conditions subject to import has not complied with falls under the category
of prohibited goods as per Customs Act 1962. The case laws mentioned at
S.. 1 to 4 of the Revenue's Case Compilation also supports Revenue's view
24 | P a g e C/55422/2023-DB
that if there is any violation of the condition of the gold imported, the gold
becomes prohibited and should not be released.
53. The subject goods are beyond the prescribed boundaries of import
license issued to the petitioner. And are thus do not subject for provisional
release under Section 110A of the Customs Act, 1962.
54. That, the contents of paragraph under reference are false, frivolous
and mis leading and in response to the same it is submitted that the Hon'ble
High Court of Delhi in their Order dated 06.07.2023 at Para 13
clearly specify that
"the Import Policy alludes to Gold Dore bars being permitted for
import against an "import license with Actual User [AU]
condition". As was noticed hereinabove, the import permission
which was granted to the petitioner specifically alluded to the
notification of 2012. The permission which was granted to the
petitioner mandatorily required it to comply with the conditions
imposed in that notification. We are also of the firm opinion that
once that notification came to be superseded by the 2017
notification..."
Further at para 14 Hon'ble High Court observed that "...we find
ourselves unable to sustain the submission of the petitioner being
entitled to import Gold Dore bars solely on the basis of the
notification of 2008.."
55. Therefore, all goods where in which non-observance of any of the
conditions subject to import has not complied with falls under the category
of prohibited goods as per Customs Act 1962.
55.1 The subject goods are beyond the prescribed boundaries of import
license issued to the Appellant and are thus do not subject for provisional
release under Section 110A of the Customs Act, 1962 in view of guidelines
prescribed under the judgments of Hon'ble Madras High Court and Hon'ble
25 | P a g e C/55422/2023-DB
Delhi High Court prescribed in the CBIC Circular-35/2017-Cus dated
16.08.2017.
Further, the department vide further submission dated 06.11.2023 indicated
that date of report as got clarified by them was actually 18.01.2023 only
and not 27.01.2023 as has inadvertently gone on record in impugned order.
So department sets at rest the controversy that report dated 27.01.2023
was not supplied to the appellants
56. A part from above, during course of hearing, appellants additionally
submitted and relied on the decision of M/s. TATA CHEMICAL LTD. VS. C.C.
(P), JAMNAGAR as reported in 2015-TIOL-S.C.-CUS. to emphasize that once
a Chemical analysis report is submitted by the party, department if it desires
to have another report, then the Proper Officer has to give recorded reasons
to subject imported goods to another chemical test. They placed reliance on
para 14 of the decision of the Apex Court to buttress their argument and to
state that there is nothing to show that the Proper Officer had exercised
option of recording its reasoning. And to contrary, the Proper Officer when it
dids second testing had found the goods in order as per description given by
them and only then had allowed the clearance. Appellants further stated that
in the same decision lays down in para 17 that even the testing of sampling
is required to be done in accordance with the procedure laid down by ISI or
BIS and any deviation will make such testing liable to be rejected. Further
advocate relied on the decision of Saurashtra Chemicals Division of Nirma
Ltd Vs. C.C.-Jamnagar (prev), in which following the decision of Apex Court
in the matter of TATA CHEMICAL Ltd., cited (supra), Ahmedabad Bench had
rejected the BSI/ISI report, as the sample were not drawn as per prescribed
procedure of BIS. It was their contention that in this case also there is a
requirement of BIS in relation to IS No. IS 1418 : 2009 that determination
of Gold, in Gold Bullion, Gold Alloy and Gold Jewelry has to be done
according to cupellation (Fire Assay Method) and the same not having been
26 | P a g e C/55422/2023-DB
done by the DRI according to that method, the report in any case is liable to
be rejected or cannot be preferred over the first report in the matter
submitted by them in relation to all the 27 samples which was based on
Fire Assay Method as distinguished from the report of DRI which was based
on random checking of three samples which was on the basis of SOP-13.
They also stated that the random test report of three bars being relied upon
by DRI, out of 27 Gold Bars only indicated purity of 95.10, 95.26, 95.17
which was exceeding requirement of 95% only by miniscule percentage and
that too albeit when done by wrong methodology. They also seek to rely on
the following RTI report obtained by them from office of CRCL as reproduced
below:-
27 | P a g e C/55422/2023-DB
56.1 It was therefore, their submission that even seizure needs to be
vacated and all benefits as was being permitted to them for their earlier
imports at least 103 consignments from year 2018 to 2020, which were
cleared by the Customs earlier should be allowed to them without any
hinder by Customs department/DRI and the whole seizure is vacatable as
even the percentage is in accordance with tolerance limit permitted as
above of ±/.25 as indicated by the CRCL as per above RTI response and
also it is clear from the response of RTI that CRCL while following SOP-13
for testing percentage of gold in Gold Dore Bars has Followed Gravimetric
Method and not a "Fire Assay Method" as is prescribed under Indian
Standard 1418-2009. Therefore, report based on which seizure has been
made is rejectable.
57. We have considered the rival submissions and various materials
including case law as put forth by both sides. At this stage, we have to only
decide about previsional release under Section 110A of the Customs Act,
1962 and various conditions for the same on merits of the matter, as well as
sustainability of the seizure made in the light of materials which have come
on record, the matter can be appropriately decided by adjudicating authority
when it is eventually decides the matter when results of whole investigations
by way of final show cause notice is placed before it. At this stage, we are
mainly concerned that till the time investigation gets over and matter gets
adjudicated, interests of both parties do not suffer and balance is
maintained. We find that in instant case, three samples were subjected to
test at various stages. Firstly, as per the requirement of the impugned
notification before importing the goods from source country from the Lab of
mining company which is placed at page 49 of the paper book. Secondly, we
find that at the running page 56 of the paper book, Customs had drawn a
sample and obtained report while granting discharge of the cargo on
24.02.2023 which found the purity to be 94.70 which was conformity with
28 | P a g e C/55422/2023-DB
the report of mining which company is available at running page 49 and
which is reproduced below:- (To be termed as 1st report)
29 | P a g e C/55422/2023-DB
Report drawn by port Customs was as follows (To be termed as 2nd report)
57.1 We also find that last report of the CRCL obtained by DRI which is a
running page 21 ( to be termed as 3rd report) indicates slightly higher
30 | P a g e C/55422/2023-DB
percentages in three samples than the prescribed 95% but largely within the
tolerance limits of ±/.25 indicated by the CRCL itself and its reply of RTI.
Further, the report based on which seizure has been made has subjected
sample to a test other then Fire Assay Method as is prescribed by BIS. While
noting above material, we will not like to comment about maintainability or
otherwise of the seizure. at this stage, as there is always a possibility that
investigating agency during the process of investigation may chance upon
and collect any further evidence strengthening their case on legal and for
factual basis. However, we find that out of 27 Gold Bars admittedly 1 bar
below was 5kg i.e. of 4.240 kg which is claimed to be erroneously imported
due to error on the part of exporter by the appellants and the same in any
case shall not be allowed to be imported under the conditions of Notification
No. 50/2015-Cus dated 30.06.2017 or Notification No. 96/2008-Cus.
Further, we also find that the appellants had initially claimed benefit of
Notification No. 96/2008-Cus dated 13.08.2008 based on the country of
origin being of Republic of Rwanda. However, on the behest of Investigating
Agency and under protest to get release of consignment, they paid duty
under protest on TR-6 challan No. 446 dated 21.12.2022. However, the
goods were not released to them detention was converted into seizure. We
find that the differential duty which was paid on the goods which were to be
released but eventually not released was to the extent of 15.20 Crores
(approx) which is with the department available for any appropriation, if so
needed. We, further find that the another Gold Bar 4.240 which cannot be
subjected to claim of exemption at present. The fate of the same whether
being eligible for re-export are not has to be decided by the adjudicating
authority, at the time of adjudication, the same will have a value exceeding
Rs. 2.5 crores. We find that availability of this amount of security exceeding
Rs. 17.5 crores along with execution of bond of full value of the goods
should suffice to safeguard the interest of revenue. While attempting to
31 | P a g e C/55422/2023-DB
balance both the rival interests, we have been guided by the following facts
and propositions-
1. Appellant is an established importer and a person in this business
having validly imported 103 consignments from the Year 2018 till the
date of impugned consignment. This being 104th consignment and
cannot be termed as a "fly by night" operator and that at the moment
consignment test report regarding the purity which has been chosen
to be relied upon by the department has deviation within tolerance
limits and also the difference is so miniscule that by preponderance
of probability propensity to do smuggling cannot be inferred, prima
facie, on the part of appellants. We also find that huge working capital
of the appellant is standing bloked because of the present litigation in
terms of duty discharged and gold held by the department. Further,
we find that M/s. NEYVELILIGNITE CORPORATION LIMITED VS. UNION
OF INDIA in the matter reported in 2009 (242) ELT 487 (Mad.), it was
held in para 31-32 that goods which are exempted from duty subject
to conditions cannot become prohibited if one or more of the
conditions of exemption notification are violated, they only become
dutiable. Again we prima facie find that Section 110A which deals with
provisional release of seized goods does not place any fetter by
distinguishing between prohibited, restricted or dutiable goods. Even if
under Section 125 in relation to gold under Section 123 for violation,
'the gold becomes become absolute confiscatable, it is clear it cannot
be in relation to dutiable gold which becomes eligible to higher duty on
claim of exemption being refused as upheld in cited decision (supra) of
M/s. NEYVELILIGNITE CORPORATION LIMITED. Further, we find that
para 2 of CBEC Circular No. 35/2017-Cus issued by CBEC relating to
guidelines for provisional release of seized imported goods pending
adjudication has been struck down as being against the statute vide
para 51 of the decision in the matter of ADDITIONAL DIRECT GENERAL
32 | P a g e C/55422/2023-DB
ADJUDICATION vs. ITS MY NAME PVT. LTD. as reported in 2021 (375)
ELT 545 (Delhi). Paras 72-73 & 51 the decision of the jurisdiction High
court are relevant in this regard and the same are reproduced below:-
"51.The Learned ASG also placed pointed reliance on Circular No.
35/2020-Cus. supra, issued by the C.B.E. & C., para 2 of which
absolutely proscribes provisional release of "goods prohibited under the
Customs Act, 1962 or any other Act for the time being in force", "goods
that do not fulfil the statutory compliance requirements/obligations in
terms of any Act, Rule, Regulation or any other law for the time being
in force; and "goods specified in or notified under Section 123 of the
Customs Act, 1962". Mr. Ganesh relied on Agya Import Ltd. (supra),
which holds that para 2 of the said Circular was merely in the nature of
a "general guideline", and did not incorporate any mandate. We, having
perused para 2 of Circular No. 35/2017-Cus. supra, vis-a-vis Section
110A of the Act, are not inclined to be so magnanimous. According to
us, para 2 of Circular No. 35/2017-Cus. is clearly contrary to Section
110A and is, consequently, void and unenforceable at law. It is not
permissible for the C.B.E. & C., by executive fiat, to incorporate
limitations, on provisional release of seized goods, which find no place
in the parent statutory provision, i.e. Section 110A of the Act.
Executive instructions may, it is trite, supplement the statute, where
such supplementation is needed, but can never supplant the statutory
provision. [Lok Prahari v. State of U.P., (2016) 8 SCC 389, which
digests several earlier decisions]. By excluding, altogether, certain
categories of goods, from the facility of provisional release, para 2 of
Circular No. 35/2017-Cus. supra clearly violates Section 110A,
whereunder all goods, documents and things, are eligible for provisional
release. Goods, which are eligible for provisional release under Section
110A of the Act, cannot be rendered ineligible for provisional release by
virtue of the Circular. (Be it noted, here, that we refer to the "eligibility"
of the goods for provisional release, as distinct from the "entitlement"
thereof, which has to be determined by the adjudicating authority in
exercise of the discretion conferred on her, or him, by Section 110A.)
Para 2 of Circular No. 35/2017-Cus., therefore, effectively seeks to
supplant Section 110A, to that extent, and has, therefore, to be
regarded as void and unenforceable at law."
.............................................
.............................................
"72. Insofar as the quantity of 25400.06 grams of gold jewellery, covered by the registered, apprised, dated and signed Bill of Entry, dated 20th April, 2019, is concerned, therefore, the decision, of the Learned Tribunal, to allow provisional clearance, cannot be said to be perverse, so as to give rise to any substantial question of law, as would warrant interference, in appeal, by us. We may repeat, in this context, that the decision, as to whether the gold jewellery ought, or ought not, to have been provisionally released, was entirely discretionary. The facts before the Learned Tribunal, which are also before us, cannot be said to be such as would render the exercise of discretion, by the Learned Tribunal, in favour of provisional release of the 25400.06 grams of gold jewellery, perverse. Absent such perversity, no case, in our view, can be said to exist, as would justify our interference, with the exercise of discretion by the Learned Tribunal, in exercise of our jurisdiction under Section 130 of the Act. 33 | P a g e C/55422/2023-DB
73.We may hasten to add, here, that our view, in this regard, does not discountenance, in any manner, the allegation, of the DRI, that the entire quantity of 51172.4 grams of gold jewellery was, in fact, being smuggled into India, or that it was, consequently, liable to confiscation. That is a matter to be decided in adjudication. Provisional release of the gold jewellery does not, in any manner, inhibit the adjudicating authority from holding that the jewellery was, in fact, liable to confiscation, or passing appropriate orders in that regard. It is precisely for this reason that, at the time of provisional release, the importer is required to furnish a bond, covering the full value of the imported goods, along with security, in accordance with law. Allowing provisional release of the seized gold jewellery does not, therefore, interfere, in any manner, with due adjudication of the show cause notice, or with the jurisdiction, of the adjudicating authority, to hold the gold jewellery liable to confiscation. The mere fact that imported goods, consequent on adjudication may, possibly, be held to be liable to confiscation at a later stage, cannot be a ground to refuse provisional release. Else, Section 110A of the Act would, in our view, be largely rendered nugatory and otiose."
Ruling being of jurisdictional High Court on validity of Circular as well as on scope of powers under Section 110A is binding on us and is worthy of following in substance.
58. Therefore, We are of the view that goods even if there is any remote possibility of being found prohibited or restricted at the time of adjudication is there, cannot be subjected to non release in terms of Section 110A. In view of foregoing, we allow the provisional release of 26 Gold Dore weighing 5 kg plus more, subject to the following conditions:-
1. That the duty paid at the time of seeking release of goods of Rs.
15.20 crores approximately, even if voluntarily paid or paid under protest shall not be sought for refund by the appellants and shall remain available to the department till culmination of adjudication.
2. One Gold Dore Bar weighing 4.24 kg will remain available with the department as security and shall not be released including release for re-export if sought by the party till adjudication is over. Apart from above security the party shall furnish a bond binding itself to pay equivalent of full value of consignment plus 20% in lieu of penalty thereon, to the department.
34 | P a g e C/55422/2023-DB
3. That the provisional release by the department, shall be done within two weeks of compliance and documentation of formalities as per para (1) and (2) above, by the appellant.
59. Accordingly, appeal is disposed of.
(Order pronounced in the open court on 05.12.2023) (SOMESH ARORA) MEMBER (JUDICIAL) (HEMAMBIKA R.PRIYA) MEMBER (TECHNICAL) Prachi