DELCO PRECITONE JEWELLERS (P) Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE first of the three appellants (hereinafter referred to as M/s. Delco) is a 100% export oriented unit established for manufacture of studded jewellery in the Special Export Oriented Complex, Jhandewalan (in short, JJC). Under Customs Notification No. 3/88 -Cus, dated 14.1.98.issued by the Central Government under Section 25(1) of the Customs Act, the goods specified in the Annexure thereto, when imported into India for the purposes of use in the manufacture of jewellery for export out of India by 100% EOU established in the above Special Export Oriented Complex were exempt from customs duty and additional customs duty, subject to the conditions laid down under the Notification. Gold was one of the goods specified for such import. M/s. Metal and Minerals Trading Corporation (in short MMTC) was the nominated agency to import gold for being supplied to the jewellery units in JJC including M/s. Delco. MMTC had obtained a private bonded warehouse licence for the said purpose and had also executed a general bond in respect of gold etc. imported and warehoused. The bond was subject to the condition, inter alia, that MMTC would produce to the satisfaction of the Assistant Collector of Customs, proof of actual use of the imported goods by M/s. Delco and other EOUs at JJC in the manufacture of jewellery for export. It was also stipulated (as a condition of the bond) that the decision of the Assistant Collector of Customs regarding the use of the imported goods in the EOUs for manufacture of jewellery for export shall be final and binding on MMTC. In terms of the above provision, M/s. MMTC imported 180 kgs. of gold bars during the period January 1991 to June 1994 without payment of duty for supply to the EOUs at the JJC for the purpose of use in the manufacture of jewellery for export. 65 kgs. of gold bars out of the said 180 kgs were issued by them to M/s. Delco for manufacture of jewellery for the purpose of export under the Notification. This was done in terms of an agreement between M/s. Delco and M/s. MMTC, where under M/s. Delco was an associate of M/s. MMTC, and was, in such capacity, under an obligation to manufacture gold jewellery out of the gold bars supplied by M/s. MMTC and to export such jewellery "on the account of MMTC" in terms of the relevant provisions of the Exim Policy. M/s. Delco used the above quantity of 65 kgs. of gold bars for manufacture of studded jewellery and exported such jewellery "on the account of M/s. MMTC" without payment of duty in terms of the above agreement read with the provisions of Notification ibid.

(2.) IN the show cause notice issued by the Department to M/s. Delco and the other two appellants subsequent to a visit by Customs Officers to the premises of the EOU, the only charge levelled against the appellants was that they had unauthorisedly removed from the JJC a quantity of 12 kgs. of duty -free gold valued at Rs. 40,68,890 (CIF) and, therefore, they were liable to be penalised under Section 112 of the Customs Act, 1962. The appellants contested the allegations by way of a detailed reply to the show -cause notice. The Commissioner of Customs, who adjudicated the matter, imposed penalties of Rs. 4 lakh, Rs. 50,000 and Rs. 50,000 on appellants Nos. 1, 2 and 3 respectively under Section 112 of the Customs Act as per order dated 29.9.99. This order of the Commissioner is under challenge in the present apeals.

(3.) I have carefully examined the impugned order and connected records. I have also heard Shri J.M. Sharma, learned Consultant for the appellants and Shri Y.R. Kilania, learned JDR for the respondent.