2010 (3) TMI 1068 - HC - Customs

Court upholds Tribunal decision on license acquisition, duty demand barred by limitation

The Tribunal concluded that the licenses were validly acquired in good faith from the market, and the duty demand was barred by limitation. The High Court ... - Issues Involved:1. Validity of the conclusion by the Tribunal regarding duty demand based on licenses acquired from the open market.2. Tribunal's conclusion on the authenticity of the licenses despite their submission for cancellation.3. Liability of the respondent to pay duty under Section 28 of the Customs Act, 1962.4. Tribunal's conclusion on the acquisition of licenses from the open market despite the original holders' denial.5. Application of the principle of holder in due course by the Tribunal.Issue-wise Detailed Analysis:1. Validity of the Conclusion by the Tribunal Regarding Duty Demand Based on Licenses Acquired from the Open Market:The Tribunal found that M/s H. Kumar Gems Inc. had purchased twenty-two Special Import Licenses from Ms. Sunita Goel, who received them through a chain of brokers. The Tribunal noted that these licenses were validly issued and presented at the time of clearance, with no cancellation endorsement. The Tribunal concluded that the licenses were procured in good faith from the market, and the Revenue's case lacked substantial evidence to prove the licenses were canceled, as the key witness did not appear for cross-examination.2. Tribunal's Conclusion on the Authenticity of the Licenses Despite Their Submission for Cancellation:The Tribunal recorded that the Revenue's case relied on a letter by Shri Sohan Chand, which did not disclose the cancellation date of the licenses. The Tribunal emphasized that the letter alone, without cross-examination of its author, did not constitute valid evidence. Other Foreign Trade Officers admitted to issuing the licenses, and there was no indication of cancellation on the licenses. The Tribunal held that the bonafide purchaser could not be deprived of benefits due to the absence of cancellation endorsement.3. Liability of the Respondent to Pay Duty Under Section 28 of the Customs Act, 1962:The Tribunal found no suppression or willful misstatement by the respondent, who procured the licenses in good faith. The Tribunal concluded that the demand for duty was barred by limitation as the extended period under Section 28(1) of the Customs Act was not applicable. The Tribunal held that the respondent was a victim of circumstances due to the DGFT's failure to follow proper cancellation procedures.4. Tribunal's Conclusion on the Acquisition of Licenses from the Open Market Despite the Original Holders' Denial:The Tribunal noted that the transfer letters bore all necessary details and were verified by banks. The Tribunal observed that the customs authorities did not verify the genuineness of the bank's signature verification stamps. The Tribunal concluded that any dispute over the title of the licenses was a matter between individuals, and customs authorities had no jurisdiction over such disputes when valid licenses were produced for clearance.5. Application of the Principle of Holder in Due Course by the Tribunal:The Tribunal applied the principle of holder in due course, stating that the respondent acquired the licenses for valuable consideration without knowledge of any defect in the title. The Tribunal held that the respondent was entitled to the benefits of the licenses, as they were valid and transferable in the market. The Tribunal emphasized that the customs authorities could not deny the benefit of the notification based on alleged defects in the transfer letters.Conclusion:The Tribunal's findings were based on the evidence that the licenses were valid and acquired in good faith. The Tribunal held that the demand for duty was barred by limitation and that the customs authorities had no jurisdiction over disputes regarding the title of the licenses. The High Court dismissed the appeals, finding no substantial question of law and upholding the Tribunal's order.