Jewellers in SEZ allowed to reimport jewellery for melting and remaking: Bombay High Court

The Bombay High Court Wednesday held that reimporting new or unused jewellery into Special Economic Zone for remaking imitation jewellery by melting the imported jewellery, is permissible in law and need not be penalised [Renaissance Global Limited v. UOI & Ors.]..A bench of Justices KR Shriram and AS Doctor, therefore, set aside an order passed by the Commissioner of Customs imposing a penalty of over ₹2 lakh with respect to the goods confiscated from certain jewellers. The order of the Commissioner had also sought to penalise and confiscate goods which may have been cleared in the past and penalty was to the tune of over a billion rupees (₹1,67,54,89,562 precisely) including fine, and recovery of duty. .The facts of the case are that the petitioners were engaged in the manufacture of gold, platinum and silver imitation jewellery which was exported for international buyers. Sometimes, the jewellery would remain unsold for various reasons which the foreign buyers would resell back to petitioner on an outright purchase basis.The imported finished unsold jewellery was then melted and the precious metal derived from it was used for the manufacture of fresh jewellery.The manufacturing units of the petitioners were located within the Santacruz Electronic Export Processing Zone (SEEPZ). SEEPZ is a notified export processing zone and is covered by the Special Economic Zone Act, 2005 (SEZ Act). The Government of India had issued a notification in 2006, declaring that SEEPZ will be deemed to be a port under the Customs Act and the Special Economic Zones (Customs Procedure) Regulations, 2003 would not apply to it..One consignment of the petitioners was intercepted by the Office of the Commissioner of Customs at the Mumbai International Airport in 2009 even before it reached SEEPZ. The Joint Development Commissioner of SEEPZ (DC) informed the Commissioner of Customs that the SEZ units had the approval of the competent authority to import / re-melt and export the imported finished jewellery.Despite that, the Assistant Commissioner of Customs issued a show cause notice to the petitioners on why the consignment should not be confiscated and penalty imposed.Thereafter, the customs department passed an order imposing fine including retrospective penalty.This came to be challenged before the High Court by way of the present plea.The petitioner claimed that the customs department did not have jurisdiction to investigate, seize and issue show cause notice against the petitioner after the coming into force of the SEZ Act..The customs office claimed that the petitioners had failed to make a proper declaration that they were reimporting goods which had been exported by it earlier. For such non-compliance, they are liable to be penalised, and the SEEPZ authorities ought to take action against it. SEEPZ meanwhile submitted that as long as the jewellers were re-exporting the goods back into the international market, without diverting it through the domestic market, they were adding to the increase of the National Foreign Exchange. This was permissible and the petitioners’ did no wrong, their counsel, advocate Advait Sethna submitted. .The Court agreed with the SEEPZ contention. It also additionally reasoned that the SEZ license of the petitioner had not been cancelled till date. Hence, the petitioners had rightfully and legally continued to avail the exemption of customs duty under Section 26 of the SEZ at all points in time, the Court ruled. “Even if the SEZ registration of petitioner is cancelled, the petitioner is only liable to remit the duty concessions which have been availed with respect to capital goods and unused raw material / unsold finished stock only. Even at the highest, there is no question whatsoever of going back 5 years and demanding customs duty on all imports made in the past,” the Court held..Senior Advocate Vikram Nankani with Advocates Prithwiraj Choudhuri, Malcolm Siganporia, Dhiren Durante and Sahil Namavati briefed by Lexicon Law Partners appeared for few petitioners.Nankani with Advocates Naresh Thacker, Jitendra Motwani, Chirag Shetty, Shilpi Jain, Mehul Talera and Diva Devarsha briefed by Economic Laws Practice appeared for remaining petitioners.Advocates Vijay Kantharia, Jitendra Mishra and Dhananjay Deshmukh appeared for customs.Sethna appeared alongwith Advocates Ashutosh Misra, Sandeep Raman, Rangan Majumdar and AA Ansari.[Read Judgment]