2007 (6) TMI 2 - HC - Customs

Court Upholds Decision on Duty for Manipulated Exports

COMMISSIONER OF CUSTOMS (EP.) Versus JUPITER EXPORTS

COMMISSIONER OF CUSTOMS (EP.) Versus JUPITER EXPORTS - 2007 (213) E.L.T. 641 (Bom.) , 2007 (80) RLT 875 (Bom.) Issues Involved:1. Confiscation of exports made by manipulating and forging documents.2. Validity and legality of licenses obtained by manipulation and forging documents.3. Entitlement of license holders or transferees to import validly and legally and exemption from payment of duty.Detailed Analysis:Issue 1: Confiscation of Exports Made by Manipulating and Forging DocumentsThe Customs Department issued a show cause notice alleging that the petitioner misused the DEEC scheme by fraudulent means to obtain higher entitlements for duty-free imports. It was alleged that the petitioner altered the export permissions of shipping bills to show an excess quantity of exported goods, thereby obtaining a higher entitlement of duty-free import licenses. The Commissioner of Customs confirmed the duty demand and imposed penalties on the petitioner and its partners. However, the Tribunal concluded that duty must be demanded based on law, not equity, and that only the importer is chargeable with duty under Section 28 of the Customs Act. The Tribunal held that the petitioner was liable to pay duty only for the goods actually imported by it, quantified at approximately Rs. 1.38 lakhs. The High Court agreed with the Tribunal, noting that the Commissioner did not confiscate any goods exported, making the first question moot.Issue 2: Validity and Legality of Licenses Obtained by Manipulation and Forging DocumentsThe Tribunal found that the licenses obtained by the petitioner through manipulation and forging documents were still valid until canceled by the licensing authority (D.G.F.T.). The Supreme Court's precedent in Titan Medical Systems Pvt. Ltd v. Collector of Customs and Sampat Raj Duggar v. Union of India established that Customs authorities cannot refuse exemptions based on alleged misrepresentation unless the licensing authority cancels the licenses. The High Court noted that the licensing authority had not canceled the licenses, and the order exonerating the transferees was accepted by the Revenue, making the second question irrelevant for determination.Issue 3: Entitlement of License Holders or Transferees to Import Validly and Legally and Exemption from Payment of DutyThe Tribunal held that duty under Section 28 of the Customs Act could only be recovered from 'a person chargeable to duty,' which would be the importer in the case of import duty. The definition of 'importer' under Section 2(26) does not include a person who has not caused the import or does not hold himself out to be the importer. Since the respondents (transferees) were bona fide purchasers and not the importers, they were not chargeable with duty. The High Court upheld this view, stating that the demand for duty must be based on law, not on equity or moral considerations. The Tribunal's decision to reject the penalties imposed on the partners of the firm was also upheld, as separate penalties cannot be imposed on partners when the partnership itself is penalized.Conclusion:The High Court rejected the application filed by the Revenue, finding no fault with the Tribunal's view. The Court held that the petitioner is entitled to the amount quantified by the Tribunal, which was Rs. 98.62 lakhs with accrued interest. The Prothonotary and Senior Master was directed to pay the full amount to the petitioner by A/c Payee's cheque. The writ petition seeking implementation of the Tribunal's order was allowed, and the rule was made absolute with no order as to costs.