[Order per : Archana Wadhwa, Member (J)]. - All the appeals are being disposed off by a common order as they arise out of the same impugned order passed by the Commissioner vide which he has absolutely confiscated the rough diamonds imported by the appellant and imposed penalties of varying amounts on the ground that the said rough diamonds were over-valued.

2. After hearing both sides duly represented by Shri J.C. Patel, Shri Naresh Thacker, Shri Hardik Modh, Advocates for the assessee and Shri Rajendra Nagar, SDR for the Revenue, we find that the various firms imported the rough diamonds which were exempted from payment of Customs Duty under of Notification No. 21/2002, dated 1-3-02. The said import of rough diamonds was required to be accompanied by Kimberly Process certificate (hereinafter referred to as KP certificate). There is no dispute that such certificate stand accompanied with the consignment of the imported rough diamonds.

3. As per the recordings made in the impugned order, an intelligence was received by the Directorate of Revenue Intelligence that large scale over-valuation of rough diamonds imported from Dubai/Hongkong is being done by the importers, the consignment of imported rough diamonds were detained by the officers of DRI under Panchnama dated 25-5-03 for further investigation. The said sealed consignments were subsequently brought in the office of the appraising officer for examination of the value of the same. The said seals were broken in presence of Panchas and the panel members of export panel, which consisted of 7 members. The panel members comprised of representatives/owners of firms engaged in the import/export of rough diamonds, Government approved valuers and two officers of Indian Diamond Institute (IDI). The said export panel so constituted by the Department opined that the value of the import consignment of rough diamonds was at par with the declared value of the consignment in the Bills of Entry. The panel thereafter submitted their report dated 10-6-03, duly signed by all the six nominated members of expert panel.

4. However, not being satisfied with the above report of the expert panel, Revenue decided to have examination of the goods done by another expert panel nominated by Gem and Jewellers Export Promotion Council, Mumbai (GJEPC). It stand recorded in the Para 5 of the impugned order that subsequent to above examination, (i.e. report dated 10-6-03), further intelligence was received by DRI indicating that the value given by the panel was not fair and the valuation of the rough diamonds is dependent upon the subjective satisfaction of the person well-versed in the examination and value of the said goods, it was decided to have the examination of the above goods done by GJEPC panel. Accordingly, on 25-7-03, nominated panel members of GJEPC conducted examination/valuation of the six imported consignments of rough diamonds and submitted their report dated 25-7-03. As per the said report, the value of the said imported consignments of rough diamonds was ranging from 0.40 USD/Carat to 20 USD/Carat. They, accordingly, submitted their report under the cover of their letter dated 28-7-03.

5. Even the said report dated 25-7-03 was not accepted by the Revenue and another panel was constituted to examine and assess the value of the imported rough diamonds. As per the third report dated 15-11-03, the value was much on the lower side, which value stand accepted by the Commissioner in his impugned order.

6. Thereafter, after completing the formality, the diamonds were placed under seizure under Panchnama on 29-7-03. Subsequently, search operations were conducted at the premises of all the importers and the statements of representatives of importing firms were recorded on various dates admitting that the rough diamonds were overvalued.

7. On the above basis, proceedings were initiated against them which culminated into passing of the impugned order by Commissioner absolutely confiscating the rough diamonds and imposing penalty. The said order is impugned before us.

8. The appellants have very strongly contested the findings of the adjudicating authority as regards over-valuation of the rough diamonds. It stand argued that import of rough diamonds did not attract any duty and as such the valuation exercise conducted by Revenue was futile. In any case, the learned advocate has submitted that first panel constituted by the DRI consisted of the Director of Indian Diamond Institute (IDI), Senior Faculty-cum-Division Head of IDI, President of Surat Diamond Association, two Government approved valuers and two members of diamond trade. The valuation report given by six member expert panel constituted by DRI is supporting the appellant’s case that the invoice value was fair. The said valuation report given by the said expert panel on 10-6-03 does hot stand accepted by Revenue and is discarded by them without giving any justifiable reason for the same. It simply stand recorded in the SCN that subsequent to the above examination, further intelligence received from the Directorate indicated that the value given by the above panel was not fair. Shri Patel argued that from the above narration, it can be safely concluded that the decision to carry out re­valuation was without any justifiable reason and the same can be on the basis of either the informer or the person, who can be considered rival, in which case, the intelligence could be bogus and fictitious. This clearly reflects to a conspiracy and collusion to cause unnecessary suffering both mental as well as financial to the appellant. There is nothing on record to show as to who decided not to accept the above expert panel report and who decided to go in for second valuation of the consignment and on what basis the said report of the panel was discarded and it was decided to go in for second report, does not stand disclosed in the order. It stand further contested before us that there is no evidence brought on record to show that the actual value/price payable to the supplier of the diamonds is not the invoice value. The valuation report dated 10-6-03 was signed not only by two Panchas as witnesses, but also by each of the seven panel members including the DRI intelligence official Shri Y.K. Choudhary and the Customs Appraiser Shri Desai. Having put their signatures as a token of having accepted the value without any objection/protest, it was not open to the Revenue to go in for second valuation report by a different panel, who did not have experts as its panel members. Shri Patel has further submitted that even cross-examination of Shri Y.K. Choudhary during adjudication revealed that only a letter was received from DRI stating that they were sending new panel from GJEPC, inasmuch as they have intelligence that value given by the first panel was not correct. To the same effect is the result of cross-examination of Shri B.K. Sharma, Appraiser, DRI, Surat, indicating that it was decided to have a second panel on the advice of DRI, Mumbai. He submits that valuation of diamonds being in conformity with the declared value, as accepted by first panel, the constitution of the second panel was not in accordance with the law and subsequent reports date 25-7-03 and 15-11-03 are simply indicative of the fact that Revenue wanted to establish their allegations of over-valuation at any cost. Even though, the Commissioner has accepted that valuation of the rough diamonds is dependent upon the subjective satisfaction of the person well-versed in the examination and valuation of the said goods, valuation done by the expert in their first report date 10-6-03 should have been accepted. Further, the’ show cause notice indicates that the value given by said expert panel (subsequent one) was an average value which would indicate that each member has given his own value for each lot and signed/inspected by him and as such there was no uniformity or unanimity even amongst the panel members of subsequent panels.

9. It stand contended before us that there is no evidence produced by the department to show that the invoices issued by foreign supplier was either fabricated or fake or that any relationship existed between foreign supplier and the appellant. The Commissioner has only relied upon the report of the third panel and the retracted statements of the Director of the appellant-company. Relying upon the Tribunal’s decision in the case of M/s. Mahalaxmi Gems v. CC, Mumbai, (Tri.-Mum.) as confirmed by Hon’ble Supreme Court in (S.C.), he submits that the transaction value cannot be rejected merely on the basis of report given by the trade panel constituted by the department in the absence of any evidence to show the violation of provisions of Rule 4(2) of the Customs Valuation Rules, 1988. The Hon’ble Supreme Court while upholding the Tribunal’s judgment has observed that where the department failed to show any contemporaneous evidence and has failed to show that the invoices are fabricated/fake or any relationship existed between importer and exporter, the transaction value cannot be rejected based upon the any expert panel report.

10. Further, relying upon Hon’ble Supreme Court’s judgment in case of M/s. Polyglass & Acrylic Mfg. Co. Ltd., (S.C.), learned advocate submitted that it was held in that case that where the report stand obtained at the instance of the department itself, it has great force and it ought not to be ignored. First panel report was obtained by DRI itself and it was not open to them to ignore the same without any valid and cogent reason. The report given by the first panel was by a body of experts whereas the members of panel who gave subsequent report on 25-7-03 and 15-11-03 were not even qualified or experienced and were not Government approved valuers. The same were members of trade who did not take any technical or vocational course in diamonds and were not members of any valuation panel on the any earlier occasion. Some of them even do not deal with import and trade of rough diamonds and had signed the report without even understanding the contents of the same. Inasmuch as the members of panel constituted subsequently, had neither requisite qualification nor experience to opine on the valuation of the imported rough diamonds and the earlier panel being comprised of experts and technically qualified members, first report date 10-6-03 has to be adopted instead of subsequent report given on 25-7-03 and 15-11-03.

11. The appellants have further contended that even the subsequent reports are not in consonance with the provisions of Section 14 of the Customs Act, 1962. Value stand defined in Section 2(41) of the Customs Act, 1962 and the value of the imported goods determined in accordance with the provisions of Section 14. As per Section 14, the value of the imported goods shall be the price on which such light goods are offered for sale in the course of international trade for delivery at the time and place of importation. There being no other import of contemporaneous goods and the subsequent panel’s report being based upon the subjective satisfaction of the person consisting the same, the value given by said panel cannot be held to be in accordance with the above provisions. The appellants have also cross-examined the various members of different panels relatable to number of samples drawn from the consignment as also number of packages and sub-packages of the consignment, where inconsistencies appeared. Further, they have submitted that even if the diamonds are of same quality, purity and other specifications, their price would still differ depending upon the country of origin as accepted by Shri Bakul Mehta during his cross-examination. Inasmuch as the country of origin has not been taken into consideration, their value cannot be ascertained.

12. As regards reliance by the authorities on statements recorded during the investigation, learned advocate submitted that while dealing with the allegations of valuation (either under-valuation or over-valuation), the same cannot be established on the admissions and acceptance thereof, but was required to be arrived at based on the valuation rule, as observed by Tribunal in case of Galaxy Funworld Pvt. Ltd. v. CC (Prev.), Mumbai, (Tri.-Mum.). He has also placed reliance on various other decisions of the Tribunal, some of which stand confirmed by Hon’ble Supreme Court.

13. In any case, the learned advocate has submitted that inasmuch as the rough diamonds did not attract any duty on their importation, no penalty should have been imposed upon the appellant as held by the Tribunal in case of Suraj Diamonds India Ltd. v. CC (Import), Mumbai, (T) = 2008 (86) RLT 400.

14. As regards absolute confiscation of the goods, learned advocate has submitted that the same was not called for inasmuch as the diamonds being not dutiable there was no revenue implication. However, the appellants in their written submission, have made a prayer to allow re­-export of the goods inasmuch as on account of detention of the same over a long period, they have been unable to clear the same and effect payments to the foreign supplier. They drew attention of the Bench to another Order of CC Mumbai (being Order No. Commr/TKG/ADM/20/2008/09, dated 30-12-08, wherein by taking note of the Board’s Circular No. 53/2003/Cus, dated 23-6-03, it was held that absolute confiscation was not warranted. Inasmuch as there is no misdeclaration of the value, absolute confiscation of the goods in terms of provisions of Section 111(m) of the Customs Act is not justified. As regards the order of confiscation under Section 111(d), the same has been arrived at on the ground that KP certificate admittedly produced by the importer do not cover the goods in question. The Commissioner has relied upon the Board’s circular and Para 7 thereof for absolute confiscation. However, the appellants have drawn our attention to the Para 6 of the same circular laying down that when rough diamonds are imported without KP certificate, which is not produced within 7 working days, the said goods would be sent back to the exporting authority i.e. certifying authority of the country of origin. As the import of rough diamonds without KP certificate is not permissible under the import policy, the appellants have contended that Board has prescribed re-export of the goods in spite of such prohibition. In the present case, requisite KP certificates, have been produced and as such absolute confiscation was not warranted and the Commissioner should have allowed re-export of the goods. They have relied upon the Larger Bench decision of the Tribunal in case of M/s. A.K. Jewellers v. CC, Mumbai, (Tri.-LB), laying down that even if the goods are ordered to be confiscated under Section 111(d) of the Customs Act, 1962, the same should be allowed to be re-exported on a normal fine or without fine and penalty. They have also drawn our attention to another decision of the Tribunal in case of M/s. Shree Corporation v. CC, Mumbai, (Tri.-Mum.), wherein the goods were allowed to be re-exported on a normal fine of Rs. 50,000/- and penalty of Rs. 20,000/- was held to be adequate. As held by Hon’ble Supreme Court in case of Hargovind Das K. Joshi v. Collr. of Customs, (S.C.), it is necessary for the respondent to have given special reason for not giving an option to redeem the said goods.

15. They have further submitted that the Commissioner’s reliance upon Hon’ble Supreme Court judgment in case of M/s. Om Prakash Bhatia v. CC, Delhi, (S.C.), is not appropriate inasmuch as the subject matter of that judgment was as regards the Customs jurisdiction to determine the value under Section 14 of the Customs Act in respect of goods which were exported under scheme of duty drawback, which in turn is based upon the FOB value of the goods. Inasmuch as in the present case, the importer was not drawing any benefit of any sort by alleged over-valuation of the diamonds and the diamonds did not attract any duty liability, it was not open to the Customs authorities to go into the question of valuation. The valuation has to be resorted to in terms of Section 14 of the Customs Act only where the goods are chargeable to duty on ad valorem basis. For the above proposition, reliance is placed upon the Tribunal’s judgment in case of Eicher Tractors Ltd. v. CC, (S.C.) as also on another judgment of Apex Court in case of Associated Cement Companies Ltd. v. CC, (S.C.).

16. Countering the arguments, the learned SDR reiterates the reasoning adopted by the adjudicating authority for holding against the appellant. It stand contended that first panel report was discarded by DRI official on the basis of intelligence received that the same is not fair and just. It was open to the Customs authority to arrive at correct valuation of the rough diamonds imported by the authorities by constituting another expert panel. Learned SDR submits that merely because no reason stand given for not accepting the first report that by itself cannot be made a ground to hold that the second or third report given by the subsequently constituted expert panel, was not fair and just. The valuation given by the subsequent panel, when read with the statements of various persons, lead to inevitable conclusion that the value of the rough diamonds in question was on higher side. However, on being questioned as to whether the rough diamonds were exempted from payment of duty, in which case the valuation question would not be of much relevance, learned SDR fairly agree that the rough diamonds were not leviable to pay duty but submits that as per intelligence report of DRI, such over-valuation was being done by the importer for other illegal activities. As regards absolute confiscation, not being in accordance with the law, and the appellants request to allow re-export, in the light of the Board’s Circular No. 53/2003-Cus., dated 23-6-03, he leaves the matter to the discretion of the Bench. As regards penalty, though he admits that in terms of provisions of Tribunal’s decision in case of M/s. Suraj Diamonds (India) Ltd. v. CC (Airport), Mumbai, (Tribunal) = 2008 (86) RLT 400 (CESTAT-Mum.), No penalty is imposable on the ground of alleged misdeclaration of value, when there is no revenue implication, he, in any case, prays for upholding the penalty.

17. After appreciating the submissions made by both sides and after having gone through the impugned order passed by Commissioner, we find that whole dispute in the present case, relates to the valuation of the consignments of rough diamonds imported by the various appellants. Without recording any details, we find that the said consignments which were detained by DRI officers on the basis of intelligence received, was got examined by expert panel, the said expert panel was constituted by the DRI itself and comprised of Director of IDI, Sr. Faculty-cum-Division Head of IDI, person from Surat Diamond Association and two Government approved valuers and two persons of the Diamond trade. The value given by the said panel was in consonance with the value of the diamonds declared by the appellant, and was made known to Department vide their report date 10-6-03. It is not at all clear as to why the said report given by the expert panel which was constituted by DRI itself, was not accepted and what was the reason compelled the DRI officers to constitute another panel consisting of the members from the trade and not any experts in the field. No valid reason has been given either in the SCN or in the impugned order in support of DRI decision to go ahead with the second valuation. Not only that even the second valuation report which was against the assessee, was not accepted and it was decided to obtain third report from the third panel. It is only when the third report was given on 15-11-03 indicating the value of the rough diamonds much on the lower side, the same was accepted to be correct by department and made basis for issuance of SCN.

18. We will deal with the other legal issues raised before us by the appellant a little later, but what surprises us is that without any reason or rhime, first report given by the expert panel was not accepted by the DRI and it was decided to go for the second report and subsequently for the third report indicating much lower value. As observed by the Hon’ble Supreme Court in case of M/s. Polyglass & Acrylic Mfg. Co. Ltd., (S.C.), while dealing with more or less identical issue, the Hon’ble Supreme Court observed that Tribunal’s reasoning in accepting the report of Central Revenue Control Laboratory while ignoring the report from IIT, which was also obtained at the instance of department, was contradictory. Report in favour of the appellant by Government department cannot be rejected on superfluous ground. By applying the ratio of above decision to the facts of the instant case, we really fail to understand as to how the valuation report of first expert panel, which was constituted by the department itself, and was given by the experts in the field, can be ignored without assigning any reason for such rejection. What prompted the Revenue to go for second and third panel, is a grey area without any reasons being put forth by the Revenue. We may observe here that it is not at the whims and fancies of the officers to go on constituting the panel till a report acceptable to them is obtained. This would amount to making mockery of the justice. There is no indication that the seven members of the first panel were either influenced or any other reason to give a wrong report so as to discard the same. The panel constituted was consisting of expert members in the field and it is not only difficult but seems to be impossible to accept that said members would have given an unacceptable report. Apart from that we note that the members of second and third panel were not experts in the field and were picked up from the trade. The cross-examination of the said members of the subsequent panel conducted during the course of adjudication has revealed that they were neither Government approved valuers nor regular importer of diamonds nor have taken any technical or vocational course in diamonds. In this regard, cross-examination of Shri Ramesh Sanghvi, Vishal P. Shah, Mavjibhai Patel, Chhaganbhai Patel, Kanaiyalal L. Narola can be referred to in the impugned order. The report of the panel which neither consisted of qualified person or experienced person, cannot be preferred over the report of the panel consisting of members which were not only technically qualified but more experienced.

19. We also take note of the various discrepancies pointed out by the appellant in the report of the two subsequent panels. As per factual position, there are six consignments (packages) and each consignment consisted of several sub-packages. The report dated 10-6-03 according to which there is no over-valuation of the goods, gives the value of all the sub-packages in each consignment. Subsequent report shows that only 4 samples were drawn from each of the six consignments. The version of all the members as regards there being six packages and number of sub-packages, while doing the valuation of said goods, differs from member to member. Some of them have stated that there were no sub-packages and some of them have reported during cross-examination that they do not remember whether small packages were there. In fact, Shri Chhaganbhai Patel admitted that he signed the report without reading and understanding the same. Further, where one of the members had said that no samples were drawn and entire consignments were examined, the others have stated that samples were drawn from the packages. As such, there is no uniformity in the versions of various members and the facts as narrated in the notice, thus, making the result of the second and third report not free from doubt. In any case, having already held that there was no reason to discard the first report, which was in agreement with the value declared by the appellant, we find no justifiable reason to adopt the valuation given in the second or third report.

20. As rightly contended by the learned advocate, the statements recorded during the course of investigation, cannot be made sole basis for upholding the charge of over-valuation against them. The various decisions relied upon by the appellant duly support their above contention. Reference at this stage is made to Tribunal’s decision in the case of CC, Calcutta v. M/s. Ramapati Exports, (Tri.-Kolkata) as affirmed by Hon’ble Supreme Court in (S.C.).

21. We also agree with the learned advocate that the charges of mis-declaration in valuation of the goods, are required to be proved by production of reliable and affirmative evidence. Valuation enhanced on the basis of opinions of experts cannot be held to be in accordance with the settled law on the issue inasmuch as the transaction value has to be first rejected by adopting suitable mode for changing the valuation of the goods under consideration. In the present case, Revenue has not adduced any evidence on record to show that the invoices were not reflecting the correct value of the rough diamonds or they were fake and bogus invoices. There is also no allegation of any relationship between the appellant and foreign supplier of the goods, thus, casting any shadow of doubt on the truthfulness of the value given in the invoice. KP certificate produced by the appellant also reflects the same value and there is no dispute or doubt about the correctness of the said KP certificate.

In the case of M/s. Mahalaxmi Gems v. CC, Mumbai, (Tri.-Mum.), Tribunal, while dealing with the identical dispute, has observed that in the absence of any cogent evidence, enhancement of the value of the rough diamonds based upon the panel consisting of employees of the department and members of the diamond trade, cannot be resorted to. For better appreciation, we reproduce Para 3 of the said judgment.

“3. It is debatable whether the members of the diamond trade would be independent witnesses with regard to the valuation of goods imported by another member of the same trade. In such matter one cannot overlook the fact of competition among these members and expect a member of the panel to rise above such consideration taken impartially. It is however, not necessary for us to rest our decision upon the tack of impartiality of this panel. The fact remains that the value of the goods that was declared was the transaction value. The genuineness of the invoice that the appellant produced has not been questioned. It has not been alleged that it was fabricated or fake or that any relationship between the importer and the exporter. Applying the ratio of the Supreme Court’s judgment in Eicher Tractors Ltd. v. CC - , the transaction value would have to be accepted unless to show the importation fell within the proviso to sub-rule (2) of Rule 4 of the Customs Valuation Rules. We, therefore, do not find sufficient material not to accept the declared value.”

On appeal filed by the Revenue against the above order before Hon’ble Supreme Court, the same was rejected as reported in (S.C.). For better appreciation, we reproduce relevant Para 8 of the said judgment

“8. In the present case, the department has failed to show from any contemporaneous evidence that the invoices were either fabricated or fake or that any relationship existed between the importer and the exporter. We entirely agree with the view taken by the Tribunal that the transaction value has to be accepted until and unless it is shown by some contemporaneous evidence that the price declared in the invoice was not the correct price.”

22. By applying the ratio of the above decision to the facts of the instant case, we find that there is virtually no other evidence on record to indicate that the goods in question were over-valued.

23. As regards absolute confiscation of the goods, it is seen that the same has been done under the provisions of Section 111(m) and 111(d) of the Customs Act. Having already held that there was no over-valuation of the goods, confiscation under Section 111(m) cannot be upheld. As regards confiscation under Section 111(d), the same has been ordered on the ground that KP certificate produced by the importer do not cover the goods in question and reliance has been made on the Board’s Circular No. 53/2003-Cus, dated 23-6-03. The said circular issued by the CBEC is to the effect that in terms of Para 2.2 of the export/import (EXIM) policy, as amended by Notification No. 23/2002-07, dated 26-12-07 issued by Director General of Foreign Trade, no import/export of rough diamonds shall be permitted unless the shipment particulars are accompanied by Kimberly Process (KP certificate) required under the procedure specified by GJEPC. As recorded in the impugned order of the Commissioner, the said K.P. certificate is required along with imported rough diamonds and the absence of the same would invite absolute confiscation. For better appreciation, we reproduce Paras 22.1, 22.2, 22.3 and 22.4 of the impugned order.

“22.1 The international certification scheme for rough diamonds entitled: “Kimberly Process Certificate Scheme” was adopted in a Ministerial meeting held at Interlaken, Switzerland, on 05th November, 2002. India is a signatory to the undertaken Declaration. The scheme has been evolved to deal with the issue of conflict diamonds which are basically rough diamonds whose trade is prohibited by the United Nations Security Council, because the proceeds of that trade are used by rebel movements and their allies to finance conflicts aimed at undermining legitimate governments.

22.2 KP certificate is a forgery resistant document with a particular format which identifies a shipment of rough diamonds as being in compliance with the requirements of Certification Scheme (i.e. KPCS). The KP certificate inter alia contains the details of country of origin, the certificate number, date of issuance, date of expiry, issuing authority, the details of importer and exporter, carat weight/mass, value in US $, number of parcels in shipments, relevant HS code and validation of certificate by the exporting authority. It may also have additional details such as quality, characteristics of rough diamonds in the shipment etc.

22.3 In order to comply with the requirements of KPCS, each shipment of rough diamonds on import and export has to be accompanied with a KP certificate and the procedure for implementation of Scheme is stated as under in Circular No. 53/2003 Cus., dated 23-6-03 issued by CBEC New Delhi:

Imports :

“The imported consignment of rough diamonds is to be accompanied by Kimberly Process Certificate (KP certificate) and usual trade and import documents, generally required in such trade transactions. The importer shall also give necessary instructions to the suppliers that the original of the KP certificate, issued by the appropriate/designated authority of the exporting country, is placed inside the parcel and the certificate number is replicated on the container. On or before arrival of the consignment/parcel, the importer or his authorized representative shall present a copy of the KP certificate and other related documents, such as airway bill, invoice, packing list etc. to the GJEPC for verification and certification. The GJEPC scrutinizes the documents and if found in order, makes endorsements on the copy of the KP certificate, certifying details mentioned therein.

The importer/CHA shall present the KP certificate endorsed by GJEPC along with the required import documents while filing the Bill of Entry for seeking clearance of the rough diamonds. The importer shall declare the KP certificate number and date on all the copies of the Bill of Entry below the precise description of the goods. The Bill of Entry ill be assessed as usual after physically examining 25% of the consignment, subject to minimum of one lot. Customs will endorse the copy of KP certificate verified by GJEPC to the effect that goods have been cleared vide Bill of Entry No._____dt.______and retain the original. The authorized representative of GJEPC will collect all the original KP certificates retained by the Customs at 6.00 PM on each working day and the copy of the KP certificate (endorsed by GJEPC) which was filed with the bill of entry will be handed back to the importer/CHA.”

22.4 The CBEC circular No. 53/2003 Cus., dated 23-6-03 (supra), further provides that in case of rough diamonds become liable for confiscation under Section 111 of the Customs Act to any contravention, they should be absolutely confiscated by Customs.”

24. For ordering absolute confiscation of the goods, the Commissioner (Appeals) has relied upon the Para 7 of the said Circular which refers to the importation of the rough diamonds through personal baggage under various export promotion schemes and prescribed that if the rough diamonds becomes liable to confiscation under Section 111 of the Customs Act for any contravention, the goods should be absolutely confiscated by the Customs. On going through the Para 7 of the said Circular, we find that the same does not relate to non-production of K.P. certificate, but is in respect of other contravention. The relevant para, which deals with the production of K.P. certificate in Para 6 of the said Circular which is reproduced below for better appreciation.

“6. In case a rough diamond consignment is not accompanied by a KP Certificate) but otherwise in order, the importer in India may be given seven working days to arrange for the original KP Certificate for clearance of the’ said import consignment. If the importer is not able to submit the Original KP Certificate within the said period of seven working days, the goods would be sent back to the Exporting Authority (i.e. the certifying authority) of the country of origin. All formalities in this regard would be completed by the GJEPC and cost of such shipment would also be borne by the GJEPC.”

25. As is seen from the above, if the importer is not able to submit the K.P. certificate, the goods would be sent back. As such, the Board itself prescribed re-export of the goods in the absence of any K.P. certificate, in which case, the absolute confiscation of the rough diamonds by the Commissioner on the ground of non-production of valid K.P. certificate cannot be upheld. Apart from the above and in any case, we find that the K.P. certificate stand produced by the appellant covering the rough diamonds to the extent of value declared by them and having held that the declared value was correct, the K.P. certificate have to be held valid. Consequently, no contravention can be said to have been committed by the exporter, calling for any confiscation of the diamonds in question.

However, at this stage, the appellants have made a prayer that as they have not been able make any payment to their foreign supplier and as the consequent of the rough diamonds does not stand remitted to the exporter, they have requested for re-shipment of the goods. We find no reasons for rejecting the above request of the appellant. Having held that there was no contravention as regards value or production of K.P. certificate, the import consignments are permitted to be re-exported without any redemption fine.

26. As regards penalty, we take note of the Tribunal’s decision in case of Suraj Diamonds (India) Ltd. v. CC (Airport) Mumbai, (Tribunal) = 2008 (86) RLT 400 wherein Tribunal by taking note of the precedent decisions in case of M/s. Nalakath Spices Trading Co., (Tribunal) = 2007 (80) RLT 797 (CESTAT-Bang.), Shree Subhadra Industries v. CCE Chennai, (Tri.-Chennai) and M/s. Jay AR Enterprises, (Tribunal) = 2007 (79) RLT 291 (CESTAT-Chennai) has held that inasmuch as import of rough diamonds were exempted from payment of duty and were not dutiable, no penalty can be imposed under the provisions of Section 112 of the Customs Act, 1962. By following the above decision of the Tribunal, we hold that no penalty is imposable upon any of the appellant. In any case, having held that the value as declared by the appellant was correct value, imposition of penalties upon them is not justified. The same is, accordingly, set aside.

27. In the nutshell, the importers are allowed to re-export the diamonds. Penalties imposed upon them are set aside. All the appeals are allowed in above terms.

(Pronounced in Court on 7-8-2009)