Case: Commnr. Of Customs, Mumbai Vs. M/S. M. Ambalal &amp; Co

1. This appeal is by the Revenue against the Order passed by the Customs, Excise and Gold (Control) Appellate Tribunal, West Zonal Branch at Mumbai [hereinafter referred to asin Appeal No. C/138/03 Mum dated 23.6.2003. By the impugned order, the Tribunal has allowed the appeal filed by the respondent and has set aside the original order passed by the adjudicating authority, wherein it had directed the respondent to pay a sum of ‘2,20,50,125/- (Rupees Two Crores Twenty Lakhs Fifty Thousand One Hundred & Twenty Five only) by way of duty under the provisions of The Customs Act, 1962 (hereinafter referred to as,) for release of the goods seized from the possession of the respondent.2. The factual matrix in brief is as follows:In a search and seizure in the office premises of the respondent-firm conducted by the officers of Customs Department, on the basis of specific information, a large quantity of rough diamonds was recovered. The partner of the respondent-firm, Shri Maganbhai Patel was neither able to offer any satisfactory explanation nor produce any documents in relation to the import of the said diamonds, and the diamonds were seized by the officers in the reasonable belief that they are liable for confiscation under the provisions of the Act. After investigation, a show cause notice was issued to the respondent and others wherein confiscation of the seized diamonds was proposed. After adjudication, the adjudicating authority passed an order confiscating the seized diamonds under Section 111(d) of the Act. However, an option was given to the respondent to redeem the seized goods on payment of redemption fine. The respondent was also asked to pay the appropriate duty on the said confiscated diamonds which were allowed to be released on payment of redemption fine. In addition, penalty was also imposed on the respondent under Section 112 of the Act. Being aggrieved by the aforesaid order, the respondent had preferred an appeal before the Tribunal. The Tribunal, by its order dated 29.12.1995, disposed of the appeal and confirmed the redemption fine of Rs.60,00,000/- (Rupees Sixty Lakhs only) and the penalty of Rs. 25,00,000/- (Rupees Twenty Five Lakhs only) on the respondent herein. The respondent thereafter filed a Writ Petition before the Bombay High Court and the same was withdrawn to avail the benefit under Kar Vivad Samadhan Scheme, 1998 (in short,. Pursuant to the order passed under the KVS Scheme by the designated authority, the respondent was directed to pay an amount of Rs. 42,50,000/- (Rupees Forty Two Lakhs and Fifty Thousand only) towards redemption fine and penalty and the designated authority also gave liberty to the respondent to redeem the goods on payment of duty at the appropriate rate. The respondent thereafter requested the appellants for release of diamonds by placing reliance on the Notification No. 247/76-Cus dated 2.8.1976. This request was turned down by the department and the respondent was informed that the seized diamonds would be released only after payment of duty in the light of the order (original) dated 3.12.1992. Respondent thereafter preferred a Writ Petition No. 1976 of 2000 before the Bombay High Court. The said Writ Petition was dismissed by the High Court, wherein it was specifically observedthe petitioner imported diamonds of foreign origin without a validThis order was questioned before this Court in S.L.P.(C) No. 1495 of 2000. This Court, by its order dated 06.09.2002, while dismissing the Special Leave Petition, directed the Additional Collector of Customs (Preventive), Mumbai or other appropriate Assessing Officer to decide the amount of duty payable under the Customs Act in respect of seized goods. The Commissioner of Customsvide order in Original No. CCP/KPM/ADJN/M&P/27/2002, quantified the duty payable by the respondent for an amount of Rs. 2,20,50,125/- (Rupees Two Crores Twenty Lakhs Fifty Thousand One Hundred and Twenty Five only) before redemption of the confiscated diamonds. Being aggrieved by the same, the respondent herein filed appeal before the Tribunal and the Tribunal, by its order dated 23.06.2003, allowed the appeal and held that the exemption would be available to the goods imported by the respondent in the light of the Notification No. 247/76-Cus dated 2.8.1976. It is this order which is the subject matter in this appeal filed by the Revenue under Section 130E(b) of the Act.

Reasoning: 14. In order to understand the true meaning of the term ‘importedin the exemption Notification, the entire scheme of the Act requires to be taken note of. As noted above, ‘importedfor the purpose of this Act is explained by a conjoint reading of Section 2(25), Section 11, Section 111 and Section 112. Reading these sections together, it can be found that one of the primary purposes for prohibition of import referred to the latter is the prevention of smuggling [See Section 11(2)(c)]. Further, in the light of the objects of the Act and the basic skeletal framework that has been enumerated above, it is clear that one of the principal functions of the Act is to curb the ills of smuggling on the economy. In the light of these findings, it would be antithetic to consider that ‘smuggledcould be read within the definition of ‘importedfor the purpose of the Act. In the same light, it would be contrary to the purpose of exemption Notifications to accord the benefit meant for imported goods on smuggled goods.15. The Tribunal has relied on the decision of this Court in the case of Associated Cement Companies v. Commissioner of Customs, I (2001) SLT 763=2001 (128) ELT 21 (SC), to extend the benefit of the exemption Notification on thedespite the fact that the goods that were in question were not smuggled goods. In the case of Associated Cement Companies Ltd. (supra), the question that fell for consideration was whether customs duty was leviable on technical material supplied in the form of drawings, manuals and computer disc. etc. The further question was that if customs duty was leviable, how it was to be valued. While answering the issue, this Court has observed that Section 12 of the Act provides that the duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act. When the Customs Tariff Act itself provides that the import of drawings and designs under Heading No. 49.06 isit must follow that these drawings and designs, though goods were not chargeable to duty. In our considered view, this decision would not assist the respondent herein. In the present case, as we have already Stated that the Notification exempts certain articles when imported into India from payment of duty under the Act. The import must be valid and in accordance with the provisions of the Act. In the present case, it is the finding of the Bombay High Court that thehad imported diamonds of foreign origin without a valid licence and that finding has become final. Therefore, we agree with the learned Senior Counsel Sri R.P. Bhatt on this aspect. The Tribunal, in our view, erred in holding that the situation was covered by the case of Associated Cements Company (supra.) decided by this Court.