2008 (7) TMI 246 - AT - Customs

First appellant (nominated agency) imported gold duty free under Customs Not. 80/97 out of that some gold were delivered to the second appellant (jeweller) who converted the gold to jewellery and exported the same foreign exchange representing the sale proceeds has not been realized by the exporter as there is no any dispute about export of jewellery using imported gold or about fulfillment of export obligation by jeweller neither nominated agency nor jeweler are liable to pay duty

Issues Involved:
1. Jurisdiction of Customs Authorities
2. Compliance with EXIM Policy and Hand Book of Procedures
3. Notification No. 57/2000-Cus., dated 8-5-2000
4. Realization of Foreign Exchange
5. Liability under Section 72 of the Customs Act
6. Confiscation and Penalty under Sections 111(j), 111(o), and 112(a) of the Customs Act

Issue-wise Detailed Analysis:

1. Jurisdiction of Customs Authorities:
The appellants argued that the Customs Authorities lacked jurisdiction to adjudicate violations of the EXIM Policy and FEMA, asserting that designated authorities under the Foreign Trade (Development and Regulation) Act, 1992, and FEMA, 1999, should handle such violations. They cited case laws to support their position. The Tribunal agreed, emphasizing that Customs Authorities are not notified to adjudicate such violations.

2. Compliance with EXIM Policy and Hand Book of Procedures:
The first appellant, a nominated agency, imported gold duty-free under the EXIM Policy, which mandates export of value-added products. The second appellant, an exporter, converted the gold into products and exported them. The Tribunal noted that the gold was indeed exported, fulfilling the physical export requirement. The Tribunal found no violation of the EXIM Policy or Hand Book of Procedures by the first appellant, as the non-realization of foreign exchange does not constitute a violation under the Customs Notification.

3. Notification No. 57/2000-Cus., dated 8-5-2000:
The notification allows duty-free import of gold by nominated agencies, provided the gold is exported within 120 days. The Tribunal highlighted that the notification does not impose a condition on the importer to ensure realization of foreign exchange. Since the gold was exported, the Tribunal concluded that the conditions of the notification were met, and no duty liability arises.

4. Realization of Foreign Exchange:
The Tribunal noted that the responsibility for realizing foreign exchange lies with the exporter under FEMA, 1999, and related regulations. The Customs Authorities are not tasked with enforcing foreign exchange realization. The Tribunal found no collusion between the appellants to evade foreign exchange realization and held that non-realization does not constitute a violation of the Customs Notification.

5. Liability under Section 72 of the Customs Act:
The Tribunal examined Section 72, which outlines circumstances under which duty can be demanded from the importer. The Tribunal found that none of the situations enumerated in Section 72 applied to the first appellant, as the gold was exported, and there was no evidence of improper removal from the warehouse.

6. Confiscation and Penalty under Sections 111(j), 111(o), and 112(a) of the Customs Act:
The Commissioner had ordered confiscation of the gold and imposed penalties on both appellants. The Tribunal disagreed, stating that the first appellant did not violate the Customs Notification or the Customs Act. The Tribunal also found no basis for imposing penalties on the second appellant, as they fulfilled their export obligations. Consequently, the Tribunal set aside the confiscation and penalties.

Conclusion:
The Tribunal allowed the appeals of both appellants, ruling that the first appellant is not liable for the demanded duty, and neither appellant is liable for penalties under Section 112(a) of the Customs Act. The Tribunal emphasized that matters of foreign exchange realization fall under FEMA, not the Customs Act, and the Customs Authorities lacked jurisdiction to adjudicate such issues.

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