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2019 DIGILAW 572 (GUJ)

Commissioner of Customs v. Pravin R. Ajudiya

2019-05-08

BHARGAV D.KARIA, HARSHA DEVANI

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ORDER : HARSHA DEVANI, J. 1. By this application, the applicant seeks stay of the order dated 2.7.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal (here in after referred to as “the Tribunal”) in Case No.C/13932/2014. 2. By an order-in-original dated 5.11.2014, the adjudicating authority had ordered absolute confiscation of the seized rough diamonds weighing 10,510.60 carats valued at Rs.1,05,58,474/- under the provisions of sections 111(d), 111(l) and 111(m) of the Customs Act, 1962 (hereinafter referred to as the “Act”) and imposed penalty of Rs.45 lakhs upon Shri Pravinkumar R. Ajudiya under section 112(b) of the Act. 3. By the impugned order dated 2.7.2018, the Tribunal has allowed the appeal with consequential relief. 4. Mr. Dhaval Vyas, learned senior standing counsel for the applicant, submitted that this is a case where the impugned order passed by the Tribunal deserves to be stayed without release of goods on any condition. It was submitted that the respondent has failed to show licit possession of the rough diamonds and that diamonds are not permitted to be imported without Kimberley Processing Certificate (KPC) and that the respondent has failed to show that the diamonds in question have been imported on the basis of KPC and hence, the same are liable to absolute confiscation. It was submitted that the orders on which the respondent seeks to place reliance were the cases where the seized goods were gold or jewellery, whereas in this case, the rough diamonds have not been imported under a KPC and if any goods are imported contrary to any condition imposed under law, then the adjudicating authority has the discretion to absolutely confiscate the goods. It was emphatically argued that no credibility is attached to the respondent and if the seized goods are released, it will result into an irreversible situation. It was further submitted that the respondent has not been able to satisfy that there were documents to establish legitimate ownership over the diamonds and that while it is the case of the respondent that the diamonds were imported by Himani Gems in the year 2009-10, such submission has been found to be false. It was submitted that if the appeal is allowed and absolute confiscation is directed, the diamonds would vest in the Government. 4.1 It was submitted that in case of rough diamonds, the consistent view is to absolutely confiscate the diamonds. It was submitted that if the appeal is allowed and absolute confiscation is directed, the diamonds would vest in the Government. 4.1 It was submitted that in case of rough diamonds, the consistent view is to absolutely confiscate the diamonds. In this regard the attention of the court was invited to various orders-in-original as well as orders passed by the Tribunal in appeal against such orders, to submit that in case of rough diamonds without KPC, the normal practice is to direct absolute confiscation. It was submitted that if the seized goods are ordered to be released, they will not be available for absolute confiscation in case the applicant ultimately succeeds in the appeal. It was submitted that under section 125 of the Customs Act, the authority has the discretion to absolutely confiscate the goods and that the question as to whether such power has been properly exercised is under consideration in the appeal. It was, accordingly, urged that the impugned order passed by the Tribunal be stayed in entirety. 5. Opposing the application, Mr. Paresh Dave, learned advocate for the respondent, submitted that the seized goods, namely, rough diamonds are not harmful goods and have no impact on the society. Moreover, rough diamonds are freely importable and are not dutiable. According to the learned advocate, the violation committed is not so grave that the respondent should be deprived of his property and, therefore, redemption may be allowed subject to conditions. It was submitted that today there is an order of the Tribunal in favour of the respondent and therefore, the applicant be directed to release the goods subject to such conditions as may be deemed fit by the court. It was submitted that today there is an order of the Tribunal in favour of the respondent and therefore, the applicant be directed to release the goods subject to such conditions as may be deemed fit by the court. 5.1 The attention of the court was invited to two orders passed by this court: (i) in Tax Appeal No.62 of 2018 in the case of Commissioner of GST and Central Excise, Surat v. Dharmesh Pansuriya, wherein the court by an order dated 22.2.2018, had permitted the gold bars valued at Rs.6.75 crores to be released upon payment of redemption fine of Rs.40 lakh [5.92 % of the value of goods] and penalty of Rs.6 lakh [1% of the value of goods] and bank guarantee of Rs.1 crore; and (ii) in Tax Appeal No.1303 of 2018 in the case of D. Jewel v. Commissioner of Customs, Surat, wherein by an order dated 14.2.2019, the goods being gold bars, diamonds/precious stones/moti and gold jewellery, totally worth Rs.5,91,09,147/- were permitted to be released on payment of redemption fine of 59,10,915/- [10% of the value of goods] and fine of Rs.5,91,091/-[1% of the value of goods] and two bank guarantees of Rs. 50 lakh each. It was submitted that in the second matter, it was the assessee who was in appeal and therefore, he was required to deposit a higher amount of 10% of the value of goods whereas in the first case, it was the revenue which was in appeal and hence, the assessee was required to deposit 6% of the value of goods by way of redemption fine. It was submitted that in line of the above orders, the seized diamonds be released in favour of the respondent upon payment of appropriate redemption fine and penalty and furnishing bank guarantee of proportionate amount. 6. In this case, while the adjudicating authority has ordered absolute confiscation of the rough diamonds, the Tribunal has held in favour of the respondent and has allowed the appeal of the respondent against the order-in-original. Therefore, as on date there is an order of the Tribunal in favour of the respondent. This court, after hearing the learned advocates for the respective parties has found merit in the appeal and has admitted the same by framing substantial question of law. 7. Therefore, as on date there is an order of the Tribunal in favour of the respondent. This court, after hearing the learned advocates for the respective parties has found merit in the appeal and has admitted the same by framing substantial question of law. 7. At this stage, the question that arises for consideration is, whether the applicant has made out a case for staying the impugned order or whether the seized goods can be ordered to be released subject to certain terms and conditions. Insofar as the contention that if the order of absolute confiscation is upheld by the court, the goods would not be available for confiscation is concerned, in any case, even if there is absolute confiscation of goods, ultimately, the same would be auctioned by the authorities and, at best, the same would fetch the market price. In this case the value of the goods has already been determined as reflected in the order-in-original and hence, in case of absolute confiscation of goods, the applicant may be entitled to recover the entire value of the goods from the respondent. Therefore, at this stage, when the respondent has succeeded before the Tribunal and rough diamonds are otherwise freely importable and are duty free, the court is of the view that a case of absolute stay of the order of the Tribunal has not been made out. However, to protect the interest of the revenue, the goods may be permitted to be released subject to certain conditions. Such conditions would be in line with the earlier orders passed by this court in case of Dharmesh Pansuriya (supra) and D. Jewel (supra). 8. In light of the above discussion, the application partly succeeds and is accordingly allowed to the following extent : Pending the department’s appeal, the seized diamonds are ordered to be released in favour of the respondent upon the respondent paying redemption fine equal to 10% of the value of goods and fine equal to 1% of the value of the goods and providing a bank guarantee for a sum of Rs.25 lakh to be kept alive till final disposal of the appeal. The respondent shall also file an undertaking before this court that in the event, the applicant succeeds in the appeal and if absolute confiscation of the goods is ordered or the respondent is held liable to pay an amount more than the amount paid under this order, the respondent shall pay the differential amount that he may become liable to pay under such order. 9. The application stands disposed of accordingly.