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2022 (11) TMI 1015 - HC - CustomsLevy of penalty - SEZ unit - import of new/unused jewellery for remaking after melting is permitted or not - whether petitioner is permitted to import new/unused jewellery for remaking after melting the same? HELD THAT:- The import of finished jewellery for the purpose of remaking in a SEZ is a permitted / authorised operation and there is no prohibition whatsoever on such an activity. In this connection the definition of “manufacture” as contained in Section 2(r) of the SEZ Act is important - in view of what is stated in Rule 27 of the SEZ Rules, it is patently clear that only the DC (respondent no.5) can decide whether any goods or services as required by a unit or developer are for authorised operations or not. This position has also been clarified by the DC (respondent no.5) vide letter dated 22nd May, 2009 addressed to the Commissioner of Customs, Sahar Airport. However, respondent no.2, even though being fully aware of this position, has failed to consider the said letter while adjudicating the case and passing the impugned order. Section 111(m) deals with intentional misdeclaration and mis-match between what has been declared on the Bill of Entry and what has actually been imported by the importer - In the facts of the present case, there is absolutely no misdeclaration between the description and / or value declared in the Bill of Entry and the goods actually imported by petitioner, both being diamond studded gold and silver jewellery. Accordingly, question of invoking Section 111(m) of the Customs Act does not arise at all in the present case. It is also noteworthy that there is no such requirement under the SEZ Act. Alleged Violation of Rule 29(7) of the SEZ Rules - HELD THAT:- There is no allegation in the SCN and / or no finding in the impugned order with respect to any alleged violation of Rule 29(7) of SEZ Rules. This entire issue was raised for the first time in the affidavit dated 25th November 2009 filed by respondent no.2 before this Court. It is settled law that a show cause notice is sacrosanct and all allegations must find mention therein for an assessee to effectively deal with it and respondents cannot be permitted to improve upon the show cause notice or the impugned order by way of filing an affidavit in the Court - In any event the ingredients of Rule 29(7) of the SEZ Rules are not applicable to the facts of the present case. The imports in question do not correspond to any of the four (4) scenarios mentioned in Rule 29(7) of the SEZ Rules. Accordingly, it cannot be said in any manner that petitioner has not followed the due procedure under Rule 29(7) of the SEZ Rules as petitioner was in law never required to do so. Violation, if any, of non-adherence to procedure of Rule 29(7) of SEZ Rules, is only a procedural violation under the SEZ Rules for which appropriate action may be taken by the DC, and cannot be said to be a violation material for the purpose of invoking the provisions of Section 111(m) of the Customs Act - respondent no.2 has completely erred in invoking Section 111(m) of the Customs Act. Penalty u/s 114A of Customs Act - HELD THAT:- In facts of the present case, petitioner’s SEZ license has not been cancelled under Section 16(1) till date, let alone during the impugned period. Accordingly, petitioner has rightly and legally continued to avail of the customs duty exemption under Section 26 of the SEZ at all points in time. Further, and in any event, even if the SEZ registration of petitioner is cancelled, then petitioner is only liable to remit the duty concessions which have been availed with respect to capital goods and unused raw material / unsold finished stock only. Even at the highest, there is no question whatsoever of going back 5 years and demanding Customs Duty on all imports made in the past - the imposition of penalty under section 114A of the Customs Act ought to be set aside. The impugned notices dated 14th July 2009 read with the addendums dated 21st July 2009 and addendum/corrigendum dated 18th August 2009 to the impugned notice, as well as the impugned orders dated 18th August 2010/19th August 2010 in all petitions are set aside - petition disposed off.
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