Per Jyoti Balasundaram : The brief facts of the case are that on 16.07.1997 Customs officer and Security official posted at the warehouse gates of Seepz intercepted one maruti car for routine check and found one maroon coloured leather pouch lying open on the seat besides driver i.e. Shri Pravin Kumar Jain. The pouch was found containing three small paper packets containing cut and polished diamonds totally weighing 65.79 cts. valued at Rs. 1,59,986/-.

2. Statement of Shri Pravin Kumar Jain, Managing Director of M/s. Diaster Jewellery Ltd. was recorded, in which he stated that the pouch belonged to him and it was revealed to contain cut and polished diamonds. The diamonds belonged to the stock of the company of which Shri Jain was Managing Director. Stock taking of the total stock of M/s. Diaster Jewellery showed a deficit which accounted for the seized diamonds recovered from Shri Pravin Kumar Jain. The diamonds had been imported duty free in terms of Notification No. 177/94-Cus. dated 21.10.1994 as per condition 4 (ii) of which the units are bound not to remove the goods imported except in the manner stipulated in Exim policy and notification and there was no provision either in the policy or in the notification for removal of goods as in the manner as done by the Managing Director. Therefore the action on the Managing Director in removing the diamonds outside the Seepz resulted in violation of policy in terms of notification and contravention of provisions of Section 111 (d), (i) and (o) of the Customs Act, 1962.

3. Show cause notice was therefore issued to the jewellery unit and its Managing Director proposing confiscation of the diamonds and car and proposing imposition of penalty under Section 112. The notice was adjudicated by the Additional Commissioner who upheld the liability of diamonds to confiscation with option to redeem the same on payment of fine of Rs. 1,50,000/- on the condition that the diamonds were to be taken back for export production and on failure to do so he directed that duty would be payable thereon. Car was confiscated under the provision of Section 115 (2) of the Customs Act with an option to redeem the same on payment of fine of Rs. 50,000/-. The adjudicating authority also imposed penalty of Rs. 50,000/- each on the company and its Managing Director. Commissioner (Appeals) modified the order of the adjudicating authority by reducing the fine in lieu of confiscation of goods to Rs. 75,000/- and fine in lieu of confiscation of car to Rs. 25,000/- and reducing the penalties on the company and its Managing Director to Rs. 10,000/- each. Hence these appeals.

4. I have heard both sides and find that although the learned counsel for the appellants is correct in the submission that provisions of Section 111 (d) and (i) of the Customs Act, 1962 are not attracted against them, still the diamonds are liable to confiscation for violation of provisions of Clause (o) of Section 111 for the reason that at the time of interception and seizure of the diamonds they were attempted to be taken out of the Seepz unit, which is contrary to the condition of Notification 177/94, which provided that duty free benefit was available only subject to the condition of use of the diamonds in the manufacture of export jewellery. The fact that the diamonds were subsequently allowed to be taken back to the unit and that no custom duty demand has been confirmed on them which shows that the diamonds were used later in the manufacture of export jewellery, is not sufficient to hold that there has been no contravention of Section 111 (o) of the Customs Act as attempt to remove the diamonds from Seepz unit was contrary to the condition of the notification and it is clear that the notification condition was not observed by the appellants at the time of seizure of the diamonds. I, therefore, uphold the confiscation in terms of Section 111 (o) of the Customs Act. However, since the liability to confiscation is only for contravention Sec