Legal principle

Expiry of an SEZ unit's LOA is a default within the Development Commissioner's jurisdiction under the SEZ Act and Rules, and without a specific Customs Act contravention and a show cause notice to the true owner, goods imported for intra-SEZ job work cannot be absolutely confiscated under Section 111(o) or visited with penalties under Sections 112 and 114AA of the Customs Act, 1962.

Court decision

By majority (order pronounced 09.01.2025), all four appeals were allowed with consequential relief. The Member (Judicial) — whose findings S.S. Garg, Member (Judicial), affirmed — held that the issues of invalid LOA and non-maintenance of records fell within the jurisdiction of the Development Commissioner, NSEZ/Special Officer under the SEZ Act and SEZ Rules, and that invocation of Section 111(o) to absolutely confiscate the gold and imposition of penalties under Sections 112(a)&(b) and 114AA of the Customs Act were not tenable and liable to be set aside.

Facts

Based on intelligence, NSEZ Customs officers visited the factory of M/s Encee International NSEZ on 29.08.2018 and found jewellery-making machinery and 2417 grams of gold for which the workers present could produce no documents, whereupon the gold was detained under Section 110 of the Customs Act, 1962. The partner of Encee (Rajnish Jain) initially stated the gold alloy was received from M/s Jayashree Jewellers for job work against Voucher No.69/2018 dated 28.08.2018, later retracted alleging threat and pressure, while Jayashree Jewellers claimed ownership, asserting it had imported 27,000 grams of pure gold under Bill of Entry No.1006893 dated 28.08.2018 and sent 2,470 grams of 22KT gold alloy to Encee for job work. A SCN dated 22.02.2019 was issued to Encee and individuals proposing absolute confiscation under Section 111(o) and penalties under Sections 112(a)&(b) and 114AA, but no SCN was issued to Jayashree Jewellers despite its ownership claim. The Commissioner of Customs, Noida, by Order-in-Original dated 09.07.2019, absolutely confiscated the gold and imposed penalties, leading to four appeals.

Key provisions

• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 7, Customs Act, 1962 — Appointment of customs ports, airports
• Section 21(1), Customs Act, 1962 — Goods derelict, wreck, etc
• Section 110, Customs Act, 1962 — Seizure of goods, documents and things
• Section 123, Customs Act, 1962 — Burden of proof in certain cases
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc