CESTAT Hyderabad Quashes Rs. 63 Crore Demand on Diamond India Ltd for Gold Replenishment under FTP

“Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Date: 15.05.2025

CESTAT Hyderabad Quashes Rs. 63 Crore Demand on Diamond India Ltd for Gold Replenishment under FTP

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) delivered a landmark ruling in a batch of appeals involving Diamond India Ltd (DIL), Bullionline LLP, Jurassic Refiners & Jewels Pvt Ltd, and their officials. The dispute revolved around the replenishment of duty-free gold under the Foreign Trade Policy (FTP) 2015–20, alleging violations of Notification No. 57/2000-Cus.

Background of the Dispute

The exporters Bullionline LLP and Jurassic Refiners exported gold jewellery (kadas) and received duty-free gold from DIL, a DGFT-nominated agency, under the FTP’s replenishment scheme. DRI alleged:

The jewellery was not manufactured through the fully mechanized process as claimed (which would require only 2% value addition), but rather semi-mechanized, requiring 3.5% value addition.
The exporters used notional values and misdeclared making charges to falsely show compliance.
DIL failed to conduct due diligence before releasing replenishment gold, leading to duty evasion of ₹63.74 crore.

Key Legal Issues Examined

Was there misdeclaration in the export of jewellery under the Replenishment Scheme?
Whether the duty-free gold supplied by DIL to the exporters violated Notification No. 57/2000-Cus and FTP provisions?
Are statements by government-approved jewellery valuers admissible when cross-examination was denied?
Did the customs authorities overstep their jurisdiction in interpreting FTP, ignoring DGFT’s binding clarification?
Was the adjudication barred by limitation under Section 28(9) of the Customs Act?

CESTAT Observations & Ruling

Mechanization vs. Automation: The Tribunal emphasized that use of tools and machines in multiple stages—even with human intervention—qualifies as “fully mechanized”. The DGFT’s interpretation was held binding under Para 2.57 of FTP.
DGFT Circular Prevails: The Tribunal held that the DGFT Policy Circular No. 28/2019, which clarified that duty-free gold value is to be considered for calculating value addition, cannot be ignored by customs authorities.
Assessment Finality: Since customs officers had verified and allowed exports under Section 50 & 51 of the Customs Act, their assessments had attained finality and could not be reopened under Section 28(4) without fraud, collusion, or suppression.
Valuers’ Statements Invalid: Statements by jewellery valuers used in the investigation were rejected as no cross-examination was allowed, violating Section 138B.
Adjudication Time-Barred: The Tribunal accepted the appellants’ plea that the order was barred by limitation, relying on the Delhi High Court judgment in Swatch Group India.

Outcome

The Tribunal:

Quashed the customs duty demands of over ₹63 crore against DIL.
Set aside the penalties imposed on DIL, Bullionline LLP, Jurassic Refiners, and their officials.
Held that there was no fraudulent intent or violation of the FTP or customs law.

Implications

This judgment reinforces:

The binding nature of DGFT clarifications in FTP-related disputes.
That nominated agencies cannot be penalized without actual misuse of gold quantities.
Customs officers must not override policy interpretations issued by competent FTP authorities.

Listen to this on our #YouTube Channel

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: CESTAT Hyderabad

Disclaimer

Handy Download:

CESTAT Hyderabad OrderDownload

Connect with us for more-

@ Team S J EXIM SERVICES, New Delhi, IN

CP: Ms. Shubhra Jha, Founder

Tel: +91-11-4999 2707 I +91-9999005693

Web: www.sjexim.services

EMAIL: operations@sjexim.services I shubhra@sjexim.services

Facebook: www.facebook.com/sjeximservices

LinkedIn: https://www.linkedin.com/company/90794255/admin/feed/posts/