Commissioner Of Customs, Mumbai vs M.M.K. Jewellers & Another

2. The respondent M/s M.M.K. Jewellers is a unit in Santacruz Electronics Export Processing Zone, engaged in the manufacturing of plain/studded/unstudded gold jewellery for export from directly imported gold or from the gold procured from MMTC in terms of Notification No. 196/87-Cus dated 5.5.1987 which was further amended by Notification No. 155/92-Cus dated 30.3.1992 and Notification No. 177/94-Cus dated 21.10.1994. The said notification, inter alia, permitted graded percentage of gold wastage or loss depending on the value addition achieved, on the jewellery of the description specified therein, and provided that scrap, dust or sweepings may be forwarded to the Government Mint by the importer for conversion into standard gold bars and returned to the said zone in accordance with the procedure specified by the Commissioner of Customs in this regard. Amongst other conditions, the said notification required that the importer shall maintain a proper account of import, consumption and utilization of the goods and of exports made by him. Public Notice No.2/1988 dated 28.7.1988 issued by the Commissioner of Customs, Airport in terms of the abovesaid notification required the units in SEEPZ to maintain registers as per proforma annexed thereto.

3. On 11.11.1995, acting on information that the Gem & Jewellery Units in SEEPZ have been misusing the facility by showing excess manufacturing wastage or loss than permissible under the above mentioned notification, causing shortage in physical stock, claiming it to be lying in the form of dust, the Officers of the Mumbai Customs Preventive Commissionerate visited the premises of the said unit and verified the records from the period of inception of the unit and took the physical stock of gold followed by detailed investigations which resulted in the detection of a shortage of 6410.885 grams of gold, valued at Rs.28,72,076.48. The respondent unit was found to have not been maintaining the Wastage Account Register prescribed vide Public Notice No. 2/88 dated 28.7.1988.

4. During the investigation, the respondent unit claimed that the excess manufacturing wastage/loss took place in the production of jewellery and the same was available in the form of dust/slurry and the gold was recoverable by refining the same and the claim of loss made at the time of export was approximation.

7. No further loss is permitted on the repairs of the imported products as the claim of loss is admitted at the time of an initial export of the products.

8. From the above, it appears that the respondent has failed to maintain the Wastage Account Register for the purpose of monitoring the actual manufacturing wastage or loss but claimed the maximum wastage/loss of claim as mentioned above was made farce and thus they violated the conditions of the aforesaid notification and Public Notice No. 2/88 of 28.7.1988.

9. It also appears that the respondent has failed to export/account for 6410.885 grams of gold valued at Rs.28,72,076.48 claiming it to be lying in dust and claiming protection under sub-proviso to condition.

10. It, therefore, appears that the aforesaid duty free gold weighing 6410.885 grams and valued at Rs.28,72,076.48 were neither exported nor were available in the physical stock and thereby violating the conditions of the aforesaid Customs Notification and, consequently, appear to have rendered themselves liable for confiscation under section 111(o) of the Customs Act, 1962.

12. Now, therefore, the respondent was called upon to pay Rs.20,82,255.45 as customs duty at the rate of 50% (BCD) + 15% CVD (as applicable on 11.11.1995) on the aforesaid shortage of gold weighing 6410.885 grams valued at Rs.28,72,076.48 as specified above under section 28 of the Customs Act, 1962 and in terms of the Bond executed with the Assistant Commissioner of Customs, SEEPZ and explain in writing to the Commissioner of Customs (Preventive), New Customs House, Ballard Mumbai 400 038, as to why the aforesaid amount should not be recovered and penalty imposed under sections 112(a) and (b) and 114A of the Customs Act, 1962.

18. The Commissioner of Customs in his order dated 27.7.2001, after considering the show-cause-notice and the reply filed by the respondent, observed that on 11.11.1995, the Officers attached to Preventive Commissionerate of Mumbai Customs conducted the stock taking and verification of records which resulted in detection of shortage of 6410.885 grams of gold, valued at Rs.28,72,076/-. During the investigation, the respondent unit claimed that the said quantity of gold found short was recoverable from the dust/slurry lying in the unit. Shri Mohanlal M. Kedia, Proprietor of the firm in his statement recorded under section 108 of the Customs Act, 1962 stated that the quantity of 6410.885 grams was the loss taken place at the time of manufacturing and the year-wise excess loss from 1990-91 to 1995-96 was ranging between 1.16% to 3.21% whereby the average excess loss for the period was approximately 1.28%. They also admitted that they did not maintain wastage register. Therefore, by their own admission they had been incurring wastage of gold more than the permissible limit as prescribed in the Notification 196/87-Cus and 177/94-Cus and also vide Para 147 of the Hand Book of Procedures read with Para 90 of the EXIM Policy, 1992-97.

23. The respondent, aggrieved by the said order of the Commissioner of Customs, preferred an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench, Mumbai (for short the Tribunal).

46. In view of the clear legal position crystallized by a series of judgments that in case where the assessees are not guilty of suppression of facts, collusion or wilful misstatement of facts, therefore, the extended period of limitation cannot be invoked under proviso to section 28(1) of the Customs Act, 1962 in the instant appeal and the other connected appeals. Consequently, this appeal and other connected appeals filed by the appellant have to be dismissed being time barred.

47. Since this appeal and other connected appeals are dismissed on the ground of limitation, therefore, we do not deem it necessary to deal with the other submissions made by the parties.

48. This appeal and other connected appeals filed by the appellant are accordingly disposed of. The demand and penalty raised against the respondent in this appeal and against the other respondents in the connected appeals, if any, are dropped. In the facts and circumstances of the case, we direct the parties to bear their own costs.