The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has quashed the confiscation of 2,66,619.708 grams of duty-free imported gold and 4,083.900 grams of gold jewellery, while also directing release of 1,796.740 grams of gold bullion that had been absolutely confiscated by customs authorities.
The Bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) held that the core allegation of diversion was not established. The Tribunal noted that the company did not have its own manufacturing facility and operated through supporting manufacturers and job workers. Some job workers had not been formally endorsed in the licence at the relevant time, but their names were subsequently approved and regularised by DGFT.
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The case arose from an investigation by the Directorate of Revenue Intelligence (DRI) into alleged diversion of duty-free gold imported under the Advance Authorisation Scheme. Noor Jewel Impex had obtained an Advance Authorisation from the Directorate General of Foreign Trade (DGFT) permitting duty-free import of 10 lakh grams of gold for manufacture and export of jewellery. Between March 2020 and July 2021, the company imported 7,69,000 grams of gold bars from Dubai-based suppliers for manufacture and subsequent export of jewellery.
DRI searches conducted on 8 July 2021 at Kolkata and Chennai premises led to seizure of 2,68,416.448 grams of primary gold and 4,083.900 grams of finished jewellery. The department alleged that the imported gold had been diverted to job workers who were not listed as supporting manufacturers in the Advance Authorisation.
Customs department alleged that appellant had violated the “Actual User” condition by transferring duty-free gold to unapproved job workers, maintaining incorrect records, and attempting export through mis-declaration. Based on these allegations, a show cause notice sought confiscation of the seized gold and jewellery, recovery of duty, and imposition of penalties.
The Tribunal has held that failure to obtain prior endorsement of certain job workers constituted only a curable procedural lapse and could not be treated as diversion of gold into the domestic market. The order records that the supporting manufacturers were later endorsed by DGFT and the irregularity stood regularised.
Consequently, CESTAT held that seizure and confiscation of 2,66,619.708 grams of gold was not in accordance with law and set aside both the confiscation and the ₹50 lakh redemption fine.
DRI had also seized 4,083.900 grams of gold jewellery after finding the actual weight of an export consignment higher than the quantity declared in the invoice. The Tribunal accepted the company’s explanation that the excess resulted from a clerical and packing error and that the exporter intended to correct the documents through its customs broker before interception by DRI officers.
Importantly, the Bench observed that exporting more jewellery than declared would not have yielded any pecuniary benefit to the exporter and therefore no mens rea or mala fide intent could be attributed. The confiscation of the jewellery and the ₹17 lakh redemption fine were accordingly set aside.
The adjudicating authority had absolutely confiscated 1,796.740 grams of gold bullion on the allegation that it was sourced from unauthorised channels. CESTAT rejected this finding, noting that the gold formed part of the imported quantity under the Advance Authorisation and was seized before expiry of the export obligation period.
The Tribunal directed customs authorities to release the bullion within one month so that the exporter could utilise it for fulfilment of export obligations.
CESTAT also set aside penalties imposed on Noor Jewel Impex, partner Mohammed Azhar, Dubai-based associate Mohammed Kaiser, operations manager J.N. Shabeer Ahamed, and employee SK. Pintu.
The Bench held that the department had failed to produce evidence of diversion into the local market or mismatch between imported gold and exported jewellery. Allegations were found to rest largely on assumptions and presumptions.
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