Fraudulent DEPB Benefits: Section 28 Proviso Applies to Successor Importers; Tainted Scrips Remain Liable, Appeal Dismissed

HC upheld the Tribunal's finding that the importer's conduct in availing DEPB benefits on the basis of forged documents was not bona fide. It held that the proviso to Section 28, extending limitation where there is fraud, willful misstatement or suppression, applies not only to the original holder of a fraudulently obtained DEPB scrip but equally to a purchaser or successor who steps into such shoes. The taint of fraud attached to the document continues and cannot be washed off by transfer. As no substantial question of law arose, the appeal was dismissed and the demand sustained.

---

---

Issues Involved:
1. Differing views of concurrent Benches of the CESTAT.
2. Binding nature of Full Bench orders on two-member Benches of the Tribunal.
3. Adherence to Supreme Court and High Court judgments by the CESTAT.
4. Nature of licenses obtained on fabricated documents.
5. Legality of imports under a subsequently canceled DEPB Scrip.
6. Invocation of proviso (2) sub-section (1) of Section 28 of the Customs Act, 1962.
7. Retrospective effect of DEPB Scrip cancellation.
8. Extended period of limitation in cases without fraud or collusion by the importer.
9. Ignorance of Section 28 of the Customs Act, 1962, by the CESTAT.

Detailed Analysis:

1. Differing Views of Concurrent Benches of the CESTAT:
The appellant questioned whether a concurrent Bench of the CESTAT could take a differing view on an issue identical to other judgments of the concurrent Bench. The court did not find merit in this argument, emphasizing that the Tribunal's decision aligned with the precedent set by the same court in similar cases.

2. Binding Nature of Full Bench Orders:
The appellant raised the issue of whether a two-member Bench could ignore binding judgments of the Full/Larger Bench of the Tribunal. The court held that the Tribunal's decision was consistent with the established legal principles and did not contravene any binding precedents.

3. Adherence to Supreme Court and High Court Judgments:
The appellant contended that the Tribunal should have followed the law as laid down by the Supreme Court and various High Courts in identical cases. The court reaffirmed that the Tribunal's decision was in line with the judgments of this court and did not deviate from the established legal framework.

4. Nature of Licenses Obtained on Fabricated Documents:
The appellant argued that a license obtained on the basis of fabricated documents was merely voidable until avoided. The court rejected this contention, stating that a forged document is ab initio unlawful and void, and no benefit can be derived from it.

5. Legality of Imports under Canceled DEPB Scrip:
The appellant claimed that imports under a DEPB Scrip, which was valid at the time of import but canceled later, could not be deemed illegal. The court held that the benefit of a forged document could not be retained, and the cancellation of the DEPB Scrip rendered the imports illegal.

6. Invocation of Proviso (2) Sub-section (1) of Section 28:
The appellant argued that the extended period under proviso (2) sub-section (1) of Section 28 could not be invoked without collusion, misstatement, or suppression by the importer. The court held that the proviso covered actions of both the importer and their predecessor. The fraudulent nature of the DEPB Scrip justified the invocation of the extended period.

7. Retrospective Effect of DEPB Scrip Cancellation:
The appellant contended that the cancellation of a DEPB Scrip could not operate retrospectively. The court disagreed, stating that fraud nullifies everything, and the fraudulent nature of the DEPB Scrip meant that no legitimate benefit could be derived from it, regardless of the timing of its cancellation.

8. Extended Period of Limitation:
The appellant argued that the extended period of limitation could not be invoked without a finding of fraud or collusion by the importer. The court held that the fraudulent nature of the DEPB Scrip justified the extended period of limitation, regardless of the importer's direct involvement in the fraud.

9. Ignorance of Section 28:
The appellant claimed that the CESTAT ignored Section 28 of the Customs Act, 1962. The court found that the Tribunal had correctly applied the law, noting that the fraudulent nature of the DEPB Scrip warranted the invocation of the extended period of limitation.

Conclusion:
The court dismissed the appeal, upholding the Tribunal's decision. It reaffirmed that the fraudulent nature of the DEPB Scrip justified the extended period of limitation and rendered the imports illegal. The court emphasized that fraud nullifies any benefit derived from a forged document, and the appellant could not retain the benefits of such a document.

---