Import Of New/Unused Jewellery For Remaking After Melting In An SEZ, Is Permissible; Bombay High Court Sets Aside Levy Of Customs Duty

The Bombay High Court has ruled that import of finished jewellery for the purpose of melting and remaking of fresh pieces of jewellery in a Special Economic Zone (SEZ), is an authorised operation. Therefore, the Court held that there is no prohibition on import of finished jewellery for remaking, without payment of Customs Duty, in terms of Rule 27(1) of the Special Economic Zones Rules, 2006 (SEZ Rules). In a batch of writ petitions filed before the Bombay High Court, challenging the levy of Customs Duty along with interest and penalty under the Customs Act, 1962, the bench of Justices K.R. Shriram and A.S. Doctor were dealing with the issue as to whether the petitioners were permitted to import new/unused jewellery for remaking after melting. The petitioner- M/s. Renaissance Global Limited, is engaged in the manufacture and export of gold, platinum and silver jewellery. Its unit is located within the Santacruz Electronic Export Processing Zone (SEEPZ), a notified export processing zone covered by the Special Economic Zone Act, 2005 (SEZ Act). The petitioner imported a consignment of gold and silver jewellery for remaking, which was detained by the Assistant Commissioner of Customs, Air Intelligence Unit. The Assistant Commissioner issued a Show Cause Notice, proposing to confiscate the consignment under Sections 111(d) and 111 (m) under the Customs Act, 1962 and impose penalty. The Show Cause Notice also proposed to levy Customs Duty under Section 28 of the Customs Act along with interest. The respondent no. 2/ Commissioner of Customs passed an order confirming the allegations made against the petitioner in the Show Cause Notice, levying Customs Duty along with interest, penalty and redemption fine on the petitioner. Section 111 of the Customs Act provides for confiscation of goods which are imported or attempted to be imported contrary to any prohibition under the Customs Act or any other law for the time being in force. The petitioner- M/s. Renaissance Global Limited, filed a writ petition before the Bombay High Court, seeking to quash the show cause notices and set aside the order of the Commissioner of Customs. The petitioner submitted before the High Court that its unit was governed by the provisions of the SEZ Act and not the Customs Act, and that respondent no.3/ Assistant Commissioner of Customs had no jurisdiction to issue the show cause notice. The petitioner averred that it manufactures branded jewellery for international buyers and exports the same. It added that when some of the jewellery exported by the petitioner remains unsold, the said foreign buyers resell the said jewellery back to the petitioner who reimports the said jewellery on an outright purchase basis. The petitioner contended that the jewellery so imported is subsequently melted, and the precious metals derived from melting are used for the manufacture of fresh pieces of jewellery. The revenue department argued that the petitioner was not entitled for any exemption from Customs Duty on the import of finished jewellery for remaking under the SEZ Rules; therefore, Customs Duty was recoverable from the petitioner under Section 28 of the Customs Act along with interest. It added that since the petitioner had reimported unused finished jewellery, the consignment was imported in violation of paragraph 4.A21 of the Foreign Trade Policy, 2002, which allows import of raw material only in the form of metal scrap / used jewellery. Thus, the department contended that Section 111(d) of the Customs Act was correctly invoked by the department, since the said consignment was imported contrary to the prohibition imposed under the Foreign Trade Policy. The department added that in view of the alternate and efficacious remedy of statutory appeal available to the petitioner under the provisions of the Customs Act, the High Court must not exercise its extra-ordinary Writ Jurisdiction under Article 226 of the Constitution of India. While holding that the availability of an alternate remedy does not prohibit the High Court from entertaining a writ petition, the Court noted that there were divergent views taken by two Government of India authorities, i.e., the Development Commissioner under the SEZ Act and the Customs Authorities. While the Development Commissioner under the SEZ Act submitted that import of new/unused jewellery for remaking by petitioner was permissible under the SEZ Act, the Customs Authorities contended that the petitioner was not entitled for any exemption from Customs Duty on the import of finished jewellery for remaking under the SEZ Rules The Court observed that Section 11 of the Customs Act provides power to the Central Government to prohibit importation or exportation of goods. While noting that the prohibition under the Customs Act is imposed by way of notifications issued under Section 11 of the Customs Act, the Court ruled that...

Import Of New/Unused Jewellery For Remaking After Melting In An SEZ, Is Permissible; Bombay High Court Sets Aside Levy Of Customs Duty

Parina Katyal

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Import Of New/Unused Jewellery For Remaking After Melting In An SEZ, Is Permissible; Bombay High Court Sets Aside Levy Of Customs Duty

Parina Katyal

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INR 1099+GST

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