TMI Blog2022 (2) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... ELHI] . We are not required to reconcile between these orders of this Tribunal as there is, already available to us, guidance from a High Court on this question. We are required, therefore, to reconcile between two decisions of the Hon ble Gujarat High Court in BHARTI J. GANDHI VERSUS UNION OF INDIA [ 2009 (12) TMI 439 - GUJARAT HIGH COURT] and UNION OF INDIA VERSUS OSWAL AGRICOMM PVT. LTD. [ 2010 (7) TMI 712 - GUJARAT HIGH COURT] . Whereas Bharti Gandhi holds that authorities under the Customs Act do not enjoy jurisdiction over SEZ units, Oswal Agricomm reaches the opposite conclusion, but without referring to its own earlier decision in Bharti s case. In any case and in our opinion, it is not for us to weigh the relative merits of the reasoning adopted by these two judgements, both being rendered by a High Court, to which we must defer. The benefit of the interpretations, drawn consistently by various Benches, are in favour of the tax payer/ appellants herein, in these batch of cases, including the decision of the Hon ble Gujarat High Court in Bharti Gandhi s case which, both parties before us agree, has attained finality. The impugned order and the demands and penalties raised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited to the one within SEZ but also an offence of smuggling dutiable goods from a territory outside India into the Indian Customs territory; that by its activities, AGPL had imported 385512.5 grams of gold bars of 995 purity between 05/04/2012 to 08/08/2014; that the total export of ornaments by AGPL was 336727.464 grams (of 995 purity); that there was a shortage of 48785.036 grams of imported gold; that during search, neither the stock of gold was found nor was any permission for removal produced, nor did AGPL give any satisfactory explanation; that statements of various persons recorded under Section 108 revealed that the above 48785.036 grams of imported gold found short was smuggled out of the unit by the said Shri Sanjay Subrao Nikam, Managing Director of the AGPL which was also corroborated by the letter dt. 15/09/2014 of the Specified Officer, Cochin Special Economic Zone (CSEZ, for short) and that various searches had resulted in the recovery of gold/gold ornaments to the extent of 27598.711 grams. It was therefore alleged in the show-cause notice that the above gold/gold ornaments recovered were liable for confiscation under Section 120 of the Customs Act, 1962 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated under the provisions of Section 111(b), (j), (k) and (o) of the Act ibid. (iv) 4346.890 grams of gold articles seized from M/s. Southern Gold Pvt. Ltd., Trichur on 12-08-2014 and made out of 4 kgs. of gold smuggled out from M/s. Ashwin Gold Pvt. Ltd., CSEZ on 08-08-2014 should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) of the Act ibid. (v) 4581.581 grams of gold articles seized from M/s. Ajay Co., Trichur should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) of the Act ibid. (vi) 1075.317 grams of gold articles seized from M/s. Leo s Angel Gold, Trichur should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) of the Act ibid. (vii) An amount of ₹ 2.85 crores lying with M/s. Joyalukkas (I) Pvt. Ltd. being the sales proceeds of 10 kgs. of smuggled gold purchased from Shri Sanjay Subrao Nikam, should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) read with Section 121 of the Act ibid. (viii) 4 kgs. of gold bars lying at the Air Cargo Complex, Nedumbassery being imported into a non-existing unit and with the intention of diverting into the DTA should not be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 111(b), (j), (k) and (o) of the Act ibid. (ii) Penalty should not be imposed on them under the provisions of Section 112(b) ibid. 2.8. M/s. Ajay CO. was directed to show-cause as to why:- (i) 4581.581 grams of gold articles seized from them should not be confiscated under the provisions of should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) of the Act ibid. (ii) Penalty should not be imposed on them under the provisions of Section 112(b) ibid. 2.9. M/s. Leo s Angel Gold, Trichur was directed to show-cause as to why: (i) 1075.317 grams of gold seized from them should not be confiscated under the provisions of should not be confiscated under the provisions of Section 111(b), (j), (k) and (o) of the Act ibid. (ii) Penalty should not be imposed on them under the provisions of Section 112(b) ibid. 2.10. S/Shri. Ujval Jose, Joemon and Happy Kurien, Partners of M/s. Awesome Jewel Concepts, Trichur were directed to show-cause as to why penalty should not be imposed on them under the provisions of Section 112(b) ibid. 3. In response to the above show-cause notice, replies were filed denying the allegations but a further time was sought; but however, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dt. 13/08/2014, which is placed on record, has various corrections made but, no care is taken to ensure that the maker of the statement was aware of such corrections. This is a serious lapse which could affect the veracity and consequently the evidentiary value of statement itself. 5.2. The next statement is dated 27-08-2014, wherein it is recorded that he had given two statements which he has stated to have gone through and reiterates that whatever the facts given in both his earlier statements were true and correct. 5.3. The next statement is dated 07-11-2014 wherein also, it is recorded that he had gone through the earlier statements which were true and correct. Out of the above, the inconsistency as to the recipient of 10.5 kgs. of gold has not been ironed out, nor is there anything brought on record as to the corrections as pointed herein above. Next statement is dated 13-01-2015, wherein also a reiteration is recorded to the effect that all the statements recorded from him earlier were true and correct. It is also recorded here that he had sold one power press machine and that all other machines were available in the SEZ unit. There is also a final statement dated 16-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorization to import. The SEZ authority had not cancelled its license. In his order dated 05.12.2014 passed consequent to the directions dated 20.04.2014 of the Hon ble High court of Kerala in W.P.(C) No. 34191/2014 (page 118, at page 119 paragraph 3(i) of the appeal memo), the Commissioner has recorded that the above import was made vide Bill No.176-0-11-7112 dated 10.8.2014. The OIO of the Development commissioner cancelling license is dated 27.03.2015 (page 132 of the appeal memo). Elsewhere in this order we have observed from the statement of Sanjay that all the machines were available in the SEZ unit except one machine, which was sold. Hence, it was too premature to assume diversion, without there being any evidence on hand. 7. The Commissioner has in fact called the shots at a very early stage and in haste. Said gold was also confiscated on assumptions and presumptions which according to us, is also too premature, which action is discernibly contrary to the basic principles of jurisprudence inasmuch as the same being contrary to principles of natural justice, rule of law and fair trial. It is also the basic tenet of Indian Criminal jurisprudence that there shall not be any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act and the Rules there-under have the overriding effect over the provisions contained in any other law, because of the non-obstante clause in the said section. In this regard, reliance is placed on the following decisions/orders:- i. M/s. Canon India Pvt. Ltd. Vs. Commissioner of customs (SC), ii. Commissioner of customs Kandla Vs. M/s. Agarwal Metals Alloys (SC), iii. Essar Steel Ltd. Vs. UOI (Guj.) iv. Bharti J Gandhi Vs. UOI [2010(257) ELT 168 (Guj.)] v. Meenakshi International Vs. CC(I G), Delhi [Final Order dt. 16/11/2016 in Customs appeal No.175/2011] vi. Charisma Jewellery Pvt. Ltd. Vs. CC(Airport) [2016(340) ELT 221 (Tri. Mumbai)] vii. Sangam International Vs. CC, Air Cargo(Export), New Delhi [Final Order No.53585-53590/2017 dt. 15/05/2017] viii. Bajirao Ghosalkar vs. CC(CSI, Airport) [2018(363) ELT 523 (Tri. Mumbai)] ix. Kishan Lal Jewels Pvt. Ltd. Vs. CC, Noida [Order in Cusoms misc. application No.70492/2019 dt 28/11/2019] x. Chetan Mayach Vs. CC (Prev.), Jaipur [2021(376) ELT 732 (Tri. Del.)] xi. Yakub Ebrahim Yuseph Vs. CC, Mumbai [2011(263) ELT 685 (Tri. Mum.). 8.2. The representative for the Revenue, on the other hand, seriously opposed the preliminary objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice is able to satisfy the court about its locus standi and its jurisdiction, authority cannot be allowed to usurp the power to issue show cause notice. Otherwise, the entire object and purpose of establishment of Special Economic Zone will stand frustrated . 7. Considering the observations of Hon ble Gujarat High Court and CESTAT quoted above, we find that customs did not have jurisdiction within Special Economic Zone established under SEZ scheme by the Ministry of Commerce, Government of India and present proceedings initiated by the customs were beyond jurisdiction. Therefore, impugned order is without proper authority of law and is hereby set-aside. Appeal is allowed with consequential relief to the appellant. [ Emphasized in italics by us] 8.4. It is equally relevant here, to also understand the analysis drawn by Ld. Mumbai bench of CESTAT in the case of Charisma Jewellery (supra). We may even have to say that the analysis as to SEZ Act vis- -vis customs authorities have been very subtly brought about in the order. In the case of Oswal Agricomm (supra), however, the Hon ble High Court has examined the issue under writ jurisdiction. We also find that the following ratio laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act, 1962 have been contravened but only in relation to imports. The definition of import under section 2(23) of the Customs Act, 1962 is restricted to with its grammatical variations and cognate expressions, means bringing into India from a place outside India. Notwithstanding the deemed status of being outside the Customs territory, zones are very much within the territory of India and the bringing out of goods from a zone fails to meet the definition of import under Customs Act, 1962 and consequently fails the test of invoking the provisions of Sections 111 and 112. Even if the goods are subject to duty, Section 12 of the Customs Act, 1962 is not applicable owing to the definition of import ; the charging section is Section 26 of Special Economic Zones Act, 2005 which is outside the scope of invoking by the original authority. Colloquial comprehension of usage of export or import in relation to movement of goods to and from zones cannot substitute for the statutory definitions. Recourse to penal provisions without clear understanding of legalities is the surest mode of reverting to arbitrariness and lawlessness that preceded the dawn of Civilization. 13. Question that, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied offence under sub-section (1) of Section 21. Similarly, no other officer or agency has been declared as Enforcement officer or Agency under sub-section (2) of Section 21 of the SEZ Act, 2005 for the purpose of the Customs Act or any other Central Act. 33. 34. But section 53 being limited to that extent of authorised officer , who was earlier empowered to perform certain jobs and chapter XA, the power of the customs authorities under the Customs Act, including the power to confiscate and imports penalty under section 111 to 114, as enumerated in Chapter XIV of the Customs Act, is not taken away. 35. Thus, we hold that the competent authorities under the Customs Act are still empowered to confiscate any goods under Sections 111 and 112 and impose penalty under Sections 113 and 114 in appropriate cases, even with regard to the units situated within the Special Economic Zone. The competent authorities are also empowered to take penal action under any other Central Act if such violation is found to have been committed by any or other unit of SEZ including the writ petitioners, with regard to which no notification has been issued either under sub-section (1) or sub-section (2) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.3. It is thus clear that the Supreme Court has laid down the principle that if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted . Although this principle so laid down was in the context of penalty, and Their Lordships specifically stated so in so many words, it has been consistently followed for the interpretation about the statutory provisions as well. In another Supreme Court judgment, Petron Engg. Construction (P.) Ltd. v. CBDT [1989] 175 ITR 523/[1988] 41 Taxman 294 the above principle of law has been reiterated by observing as follows: . . . . . . . . Counsel submits that when two interpretations are possible to be made, the interpretation which is favourable to the assessee should be adopted. In support of that contention, learned counsel has placed reliance upon a few decisions of this Court in CIT v. Madho Prasad Jatia (1976) 105 ITR 179 (SC); CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and CIT v. Kulu Valley Transport Co. P. Ltd. (1970) 77 ITR 518 (SC) : . . . . . . . . The above principle of law is well-established and there is no doubt about that. . . . . . . 10.4.1. In this context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making the provision of the Customs Act, 1962 applicable to the working of Special Economic Zones under the SEZ Act, 2005. In the absence of any clarification from the Commerce Ministry on Instructions dated 3-8-2006 it is possible that the said instructions dated 3-8-2006 are applicable only to the enactments specified in Section 57 of the SEZ Act, 2005 because under Notification No. S.O. 320(E), dated 14-3-2006, issued by the Commerce Ministry under the SEZ Act, 2005 the provision of the Customs Act, 1962 have been specifically notified to be not applicable. 88.5.2 Further, it is observed from the provisions contained in Section 30 of the SEZ Act, 2005, read with Rules 34, 50 and 51 of the SEZ Rules, 2006, that no duty is demandable even under the SEZ scheme of working from a SEZ developer if the goods brought into a SEZ area are removal to DTA for Authorized Operations as defined in Section 2(c) of the SEZ Act, 2005. Any Customs/Central Excise Duty, on account of improper utilization or removal of goods to DTA can be demanded and recovered under the SEZ Act, 2005 and SEZ Rules, 2006. In this regard, it has to be seen whether any removals from SEZ area to DTA, made by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods from SEZ area to DTA or within SEZ area under intimation/approval of the appropriate authorities, if not properly accounted for or not brought back within the stipulated period, adequate recovery machinery exists under the SEZ Act, 2005 and SEZ Rules, 2006 to recover Customs/Central Excise dues. Accordingly, for all the situations mentioned at (i), (ii) and (iii) of Para 89.1 above, if approvals have been given by the SEZ authorities, the operations have to be treated as Authorized Operations defined in Section 2(c) of the SEZ Act, 2005. Even if some of the removals/operations undertaken by the appellants are not authorized, but done with the approval/under intimation to the SEZ authorities, then also the power to demand/recover duties of Customs/Central Excise from SEZ, is vested with the authorities created under the SEZ Act, 2005 and SEZ Rules, 2006. This view is also fortified by the Statements of Objects and Reasons given before the beginning of the SEZ Act, 2005. The spirit of these Objects and Reasons and the SEZ Act, 2005 is that SEZ and its units are required to be delicately handled to achieve the desired goals and SEZ/units cannot be exposed in their day to day worki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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