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Dated: 18.03.2025

CESTAT Delhi- Commissioner’s rejection of provisional release of the seized gold was legally unsustainable

Case Overview:

The case concerns M/s. Shree Gold Art Pvt. Ltd., a gold jewellery manufacturer and exporter, which had imported 53 kgs of duty-free gold under an Advance Authorization License issued by the Directorate General of Foreign Trade (DGFT). The company filed an appeal challenging the Commissioner of Customs’ order rejecting its request for the provisional release of the seized gold.

• Case Number: Customs Appeal No. 52026 of 2024
• Tribunal: Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi – Principal Bench
• Bench: Justice Dilip Gupta (President) & Ms. Hemambika R. Priya (Member, Technical)
• Date of Hearing: February 13, 2025
• Date of Decision: March 17, 2025

1. Background of the Case

• M/s. Shree Gold Art Pvt. Ltd. was granted an Advance Authorization License on February 19, 2019, to import duty-free gold for manufacturing and exporting jewellery under the Foreign Trade Policy 2015-2020.
• On August 13, 2020, the company imported 53 kgs of gold bars through two Bills of Entry and cleared them from Customs.
• The export obligation period for this import was 120 days, but due to the COVID-19 pandemic, deadlines were extended till December 31, 2021.

Customs Allegations & Seizure of Gold:

• The Directorate of Revenue Intelligence (DRI), Noida, conducted a search at the company’s premises on August 13-14, 2020, alleging illegal diversion of duty-free gold.
• The 53 kgs of gold was not found inside the declared premises during the search but was later discovered in a chest at another location on August 17, 2020.
• On December 22, 2020, the DRI seized the 53 kgs of gold, alleging that it had been kept outside the premises with the intention of diversion.

2. Legal Proceedings & High Court Involvement

• The company filed Writ Petition No. 1166 of 2021 before the Delhi High Court, seeking release of the gold and extension of the Advance Authorization.
• On December 22, 2023, the Delhi High Court ruled in favor of the company, observing:
  • The gold was ultimately found in the declared premises, meaning no evidence of illegal diversion existed.
• • The company could not bring the gold inside the premises earlier due to the DRI’s search operation.
• • Provisional release of gold should be considered under Section 110(A) of the Customs Act, 1962.
• The company then applied for provisional release of the seized gold on January 22, 2024, but the Commissioner of Customs rejected the request on May 1, 2024.
• This rejection led to the present appeal before the CESTAT.

3. Tribunal’s Analysis & Key Observations

A. Flaws in the Customs Department’s Case

1. No Evidence of Diversion

• The Delhi High Court already determined that the gold was inside the declared premises when detained.
• Since the gold was seized before export, the company could not fulfill its export obligation, meaning there was no proof of intended diversion.

2. Gold was Legally Imported

• The Bills of Entry clearly showed the gold was imported through the proper channel.
• The Customs Department failed to prove any illegal activity related to the import or handling of the gold.

3. Lack of Fully Mechanized Facility Argument Was Weak

• The Commissioner claimed that the premises lacked a fully mechanized manufacturing facility, which was required under the Advance Authorization Scheme.
• However, DRI’s own search records confirmed the presence of jewellery-making machines on the premises.

4. Procedural Violations by Customs

• The Delhi High Court ruled that the gold should not have been seized, yet Customs refused to release it.
• The Commissioner wrongfully treated the goods as “prohibited”, which was not part of the original show-cause notice.

5. CESTAT Ruling & Final Decision

• The Tribunal ruled in favor of M/s. Shree Gold Art Pvt. Ltd., holding that the Commissioner’s rejection of provisional release was legally unsustainable.
• The Tribunal ordered the immediate release of the 53 kgs of seized gold.
• Key Findings:
  • No proof of diversion: Gold was legally imported and stored appropriately.
• Company was prevented from fulfilling its export obligation due to wrongful seizure.

Final Verdict:

• Appeal Allowed
• Seized Gold Ordered to be Released
• Commissioner’s Order Set Aside

Conclusion

The CESTAT’s decision in favor of M/s. Shree Gold Art Pvt. Ltd. underscores the importance of due process in Customs enforcement. The ruling ensures that exporters under the Advance Authorization Scheme are not unfairly penalized due to procedural lapses by authorities.

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Source: CESTAT Delhi

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