Tribunal Upheld Duty Payment for Fraudulent DEPB Licenses

The Tribunal upheld the applicability of the extended 5-year period under Section 28 of the Customs Act when DEPB licenses were found to be fraudulent. It held that the importer is liable to pay duty even if the licenses were valid at the time of import but later cancelled due to fraud. Goods imported under fraudulently obtained DEPB licenses were confiscated. The Tribunal rejected the application of promissory estoppel in such cases. Penalties on individuals associated with fraudulent export were upheld due to non-prosecution. The majority decision set aside the impugned order, allowing the appeals with consequential relief.

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Issues Involved:
1. Applicability of the extended period of 5 years under Section 28 of the Customs Act, 1962.
2. Liability of the importer to pay duty when DEPB licenses used were valid at the time of import but subsequently cancelled due to fraud.
3. Confiscation of goods imported under DEPB licenses found to be fraudulently obtained.
4. Applicability of the principles of promissory estoppel.
5. Imposition of penalties on individuals associated with the fraudulent export.

Issue-Wise Detailed Analysis:

1. Applicability of the Extended Period of 5 Years under Section 28 of the Customs Act, 1962:
The Tribunal examined whether the extended period of 5 years for making the demand under Section 28 of the Customs Act could be applied. The appellants argued that there was no evidence or allegation of misrepresentation or suppression by them, and the fraud was committed by the exporter. However, the Tribunal noted that several decisions upheld the application of the extended period under Section 28 where DEPB licenses were found to be forged or obtained by fraud. The Tribunal concluded that the extended period is invokable when DEPB licenses used for importing goods are found to be fake, forged, or obtained by fraud, whether by the importer, exporter, or their agents.

2. Liability of the Importer to Pay Duty When DEPB Licenses Used Were Valid at the Time of Import but Subsequently Cancelled Due to Fraud:
The Tribunal considered whether the importer is liable to pay duty when DEPB licenses, valid at the time of import, were later cancelled due to fraud. The appellants relied on the Larger Bench decision in Hico Enterprises, which held that the benefit of the notification should be extended to a bona fide purchaser of a license. The Tribunal distinguished the facts of the present case from Hico Enterprises, noting that the DEPB licenses were cancelled ab initio. The Tribunal held that the importer is liable to pay duty and interest as the licenses were not valid due to fraud, and the benefit of the notification cannot be claimed.

3. Confiscation of Goods Imported Under DEPB Licenses Found to Be Fraudulently Obtained:
The Tribunal upheld the confiscation of goods under Section 111(o) of the Customs Act, as the condition of the notification requiring a valid DEPB license was not fulfilled. The goods were liable to confiscation because the DEPB licenses were void ab initio due to fraud.

4. Applicability of the Principles of Promissory Estoppel:
The Tribunal rejected the applicability of promissory estoppel, stating that the buyer of a DEPB license does not get a good title when the license is obtained by fraud or misrepresentation. The detailed discussion on the DEPB scheme showed that the principle of promissory estoppel does not apply in such cases.

5. Imposition of Penalties on Individuals Associated with the Fraudulent Export:
The Tribunal noted that the appeals of the individuals associated with the fraudulent export were not pursued, and none of the appellants or their advocates were present in the hearings. Therefore, the appeals were rejected for non-prosecution.

Separate Judgments:

Member (Judicial) - Archana Wadhwa:
Disagreed with the majority view, relying on the Larger Bench decision in Hico Enterprises and the Gujarat High Court's decision in a similar case involving M/s. Binani Cement Ltd. She held that the DEPB licenses were valid at the time of import, and the subsequent cancellation did not affect the imports already made. She set aside the impugned order on merit and limitation, allowing the appeals with consequential relief.

Third Member (Judicial) - P.G. Chacko:
Agreed with Member (Judicial) Archana Wadhwa, emphasizing that the DEPB licenses were valid at the time of import, and the subsequent cancellation did not render the imports illegal. He also noted the Gujarat High Court's decision and the Supreme Court's judgment in Sneha Sales Corporation, which supported the appellants' case. He concluded that the appeals should be allowed as held by Member (Judicial).

Final Order:
In view of the majority decision, the impugned order was set aside on merit and limitation, and the appeals were allowed with consequential relief.

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