2011 (1) TMI 1303 - HC - Customs

Tribunal Upholds Decision on Duty Demand, Dismissing Appeal

COMMISSIONER OF CUSTOMS Versus RAJNARAYAN JWALAPRASAD

The Tribunal upheld the decision to set aside duty demand, interest, and penalties, dismissing the appeal as no substantial question of law arose. The ... Duty demand as well as the penalties imposed set aside by Tribunal - Held that:- The endorsement of transferability had been made by the licensing authority. It is not the case of the licensing authority that the endorsement was fraudulently obtained, nor has the licensing authority taken any steps to cancel the said licence. In the circumstances, the Customs authorities could not have refused to grant the benefit under the said licence. The Tribunal was therefore, justified in setting aside the duty demand. In the light of the findings of fact recorded by the Tribunal, it is apparent that the provisions of Section 112(a) of the Act could not have been invoked against and M/s. Kuppi Utpadan and, Shri Balkishan Devidayal. As regards penalty imposed on M/s. ACT Shipping, the Tribunal has found that the goods were cleared on the basis of documents filed after due verification by the proper customs authority, in the circumstances the Tribunal was justified in holding that penalty cannot be levied under Section 112(a) of the Act on M/s. ACT Shipping who was an agent, when the liability to confiscation of goods has not been upheld. For the foregoing reasons, it cannot be said that the Tribunal has committed any legal infirmity so as to warrant interference. No question of law, much less, a substantial question of law can be stated to arise out of the impugned order of the Tribunal. The appeal is accordingly dismissed. Issues Involved:1. Validity of Advance Licence obtained through misstatements/misdeclaration.2. Lawfulness of imports made under a fraudulently obtained Advance Licence.3. Definition of 'importer' under Section 2(26) of the Customs Act, 1962.4. Legal implications of a licence obtained by fraud.5. Legality of confiscation of imported goods under Section 111(d) of the Customs Act, 1962.6. Justification of setting aside duty demand, interest, and penalties by the Tribunal.Issue-wise Detailed Analysis:1. Validity of Advance Licence obtained through misstatements/misdeclaration:The appellant argued that the Advance Licence was obtained by submitting forged/fake export documents and should be treated as invalid. The Tribunal, however, noted that the licensing authority (DGFT) had not taken any steps to cancel the licence. The Supreme Court's decisions in *Collector of Customs, Bombay v. Sneha Sales Corporation* and *East India Commercial Company Ltd. v. Collector of Customs, Calcutta* were cited, holding that a licence obtained by fraud is voidable and remains valid until cancelled by the licensing authority. Thus, the Tribunal concluded that the licence remained valid as it was not cancelled by the DGFT.2. Lawfulness of imports made under a fraudulently obtained Advance Licence:The Tribunal observed that the goods were imported under a valid Advance Licence, which bore the endorsement of transferability by the licensing authority. Since the DGFT had not cancelled the licence, the imports made under it could not be deemed unlawful. The Supreme Court's ruling in *Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi* was referenced, asserting that customs authorities cannot refuse exemption based on allegations of misrepresentation if the licensing authority has not cancelled the licence.3. Definition of 'importer' under Section 2(26) of the Customs Act, 1962:The appellant contended that the respondent, being the original licence holder, should be considered the importer. However, the Tribunal found that since the respondent did not import the goods but merely transferred the licence, they could not be held liable for import duty. The actual importers were the transferees of the licence, who had filed the Bill of Entry and cleared the goods.4. Legal implications of a licence obtained by fraud:The Tribunal, following the Supreme Court's precedents, held that a licence obtained by fraud is voidable and remains effective until cancelled by the appropriate authority. Since the DGFT had not cancelled the licence, it remained valid, and the imports made under it could not be considered illegal.5. Legality of confiscation of imported goods under Section 111(d) of the Customs Act, 1962:The Tribunal noted that the goods were imported under a valid licence and thus could not be considered prohibited goods under Section 2(33) of the Customs Act, 1962. The Tribunal set aside the confiscation of the goods, as the licence was valid and the imports were lawful.6. Justification of setting aside duty demand, interest, and penalties by the Tribunal:The Tribunal set aside the duty demand, interest, and penalties, reasoning that the respondent did not import the goods and the licence was valid. Penalties under Section 112(a) of the Customs Act were also set aside, as the respondent's actions did not render the goods liable to confiscation. The Tribunal found no evidence of wrongdoing by the co-noticees that would justify the penalties imposed on them. The Tribunal's decision was based on the fact that the licence was valid and the imports were lawful.Conclusion:The Tribunal's decision to set aside the duty demand, interest, and penalties was upheld. The appeal was dismissed as no substantial question of law arose from the Tribunal's order. The Tribunal acted within the legal framework, following established precedents, and correctly interpreted the relevant provisions of the Customs Act and EXIM Policy.