CESTAT Allahabad Set Aside of Customs Duty Demands, Penalties, and Confiscations in Alleged Gold Jewellery Diversion and Duty Drawback Misuse

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 07.07.2026

CESTAT Allahabad Set Aside of Customs Duty Demands, Penalties, and Confiscations in Alleged Gold Jewellery Diversion and Duty Drawback Misuse

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Allahabad recently delivered a significant judgment in a series of appeals involving Shokeen Jewellers Pvt. Ltd., Raj Jewellers, and several individuals. The case revolved around allegations of customs violations, gold jewellery diversion, and improper availing of duty drawback benefits. This article provides a detailed overview of the case, the tribunal’s findings, and its broader implications for the gold export sector.

Background of the Case

The dispute originated from two show cause notices issued to the appellants, following intelligence received by the Directorate of Revenue Intelligence (DRI) about alleged misuse of the Special Economic Zone (SEZ) scheme by M/s Raj Jewellers. The authorities claimed that gold jewellery, manufactured from duty-free imported bullion, was being diverted into the domestic market instead of being exported, as required under the SEZ scheme.

Key Parties Involved

1. M/s Shokeen Jewellers Pvt. Ltd. (New Delhi)
2. M/s Raj Jewellers (Noida SEZ, Proprietor: Mr. Ashok Kumar Verma)
3. Mr. Ajit Singh (Businessman, Delhi)
4. Mr. Nishant Shokeen (Director, Shokeen Jewellers)

Allegations by Customs Authorities

• Diversion of Duty-Free Gold: Raj Jewellers was accused of diverting gold jewellery meant for export into the domestic market by exchanging bags at the airport after customs clearance.
• Improper Duty Drawback Claims: Shokeen Jewellers allegedly exported the diverted jewellery and claimed inadmissible duty drawback using fake invoices.
• Penalties and Confiscations: The authorities confiscated gold jewellery and bullion, demanded customs duty and interest, and imposed heavy penalties on the companies and individuals involved.

Investigation and Proceedings

• Airport Interception: DRI officers intercepted Mr. Ajit Singh and Mr. Ashok Kumar Verma at IGI Airport, recovering over 13 kg of gold jewellery.
• Searches and Seizures: Searches at Raj Jewellers’ SEZ premises and Shokeen Jewellers’ office led to further seizures of gold bullion and jewellery.
• Statements and Retractions: Statements were recorded from the accused, but both Mr. Ajit Singh and Mr. Ashok Kumar Verma later retracted their statements, alleging coercion.
• Denial of Cross-Examination: The appellants repeatedly requested cross-examination of key witnesses and panch witnesses, but these requests were denied without reasoned orders.

Appellants’ Defense

• Procedural Irregularities: The appellants argued that the panchnama (seizure record) was unreliable, as panch witnesses were not present during the actual interception.
• Improbability of Alleged Modus Operandi: They highlighted that airport security protocols make it impossible for domestic and international passengers to exchange bags post-security.
• Lack of Corroborative Evidence: The case was built solely on uncorroborated statements, with no financial or documentary evidence of diversion or hawala payments.
• Genuine Export Transactions: Documentary evidence from foreign buyers confirmed receipt of jewellery, and all banking and VAT records supported the legitimacy of transactions.

Tribunal’s Findings

The CESTAT bench, after reviewing the evidence and submissions, found several critical flaws in the customs authorities’ case:

1. Unreliable Statements: Key statements were retracted and not corroborated by independent evidence.
2. Defective Panchnama: The seizure record was not substantiated by witness examination.
3. Denial of Natural Justice: The appellants were denied cross-examination and a fair hearing, especially during the COVID-19 pandemic.
4. Lack of Substantiation: No credible evidence supported the allegations of gold diversion or improper duty drawback claims.
5. Compliance by Appellants: The appellants had fulfilled export obligations, received remittances, and maintained proper records.

Final Order and Consequences

The tribunal set aside the impugned order, allowed all four appeals, and directed the return of confiscated gold and jewellery to the appellants. The judgment underscores the importance of procedural fairness, the need for corroborative evidence in customs cases, and the rights of appellants to cross-examination and a reasoned hearing.

Implications for the Gold Export Sector

• Due Process: The ruling reinforces the necessity for authorities to follow due process and provide fair opportunities for defense.
• Documentation and Compliance: Exporters must maintain robust documentation and ensure compliance with all regulatory requirements.
• Checks on Arbitrary Action: The judgment acts as a check on arbitrary or unsubstantiated actions by enforcement agencies.

Conclusion

The CESTAT Allahabad’s decision in the Shokeen Jewellers case is a landmark in upholding the principles of natural justice and evidentiary standards in customs proceedings. It serves as a reminder to both authorities and businesses of the critical balance between enforcement and fairness in India’s export-import regime.

Source: CESTAT Allahabad

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