2011 (2) TMI 545 - HC - Customs

Importers Liable for Penalties and Duty under Customs Act for Using Forged Licenses

The High Court upheld the penalties and duty liabilities imposed on the importers who cleared goods using forged licences. The Court found that the ... Penalty - forged and fabricated licences - Based on the enquiries as conducted by the Department and also the statements of Manikchand Lalchand Tarker and Gautam Chaterjee and others, the Adjudicating Authority came to the conclusion that there were as many as 12 bogus advance licences registered at the Custom House against which TRAs had been issued in favour of number of importers including the appellants - The fact that no enquiry regarding the normal premium was made by the Department cannot justify the appellant’s stand of having purchased the advance licences bona fide at such a low price - This case related to fulfilling of certain export obligations under the licence and it was recorded, as a matter of fact, that the raw materials imported by the licence holders were sold before fulfilling the export obligations under the licence and that even the export proceeds had not been realized - Decided against the assessee Issues Involved:1. Sustainability of the impugned order dated 30th March, 2010, passed by CESTAT confirming the order of the Adjudicating Authority imposing penalties on the appellants.2. Liability of the appellants to pay import duty on goods cleared using forged and fabricated licences.Issue-wise Detailed Analysis:1. Sustainability of the Impugned Order Confirming Penalties:The appellants, importers who cleared goods based on forged licences, challenged the penalties imposed by the Adjudicating Authority and confirmed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The appellants argued that they were bona fide purchasers of the advance licences and had no reason to doubt their genuineness as the licences were registered with the Customs House and the Transfer Release Advice (TRA) was issued by the Customs House.The Tribunal, however, found that the appellants did not take adequate precautions to verify the genuineness of the licences. The following points were considered:- The licences were purchased through Gautam Chatterjee, an employee of a CHA, which should have raised suspicion.- Payments were made to Uno Enterprises, not the actual licence holders.- The licence premiums were significantly lower than the normal premium rate, indicating potential fraud.The Tribunal concluded that the appellants were aware or should have been aware of the forged nature of the licences and thus were liable for penalties under Section 114(A) of the Customs Act. The Tribunal's decision was based on the un-retracted statement of Gautam Chatterjee and corroborated by other evidence.2. Liability to Pay Import Duty:The appellants also contested their liability to pay import duty on the goods cleared using the forged licences. The Tribunal held that since the licences were forged, the imports should be treated as if made without any advance licence, thereby making the appellants liable to pay the full customs duty. The Tribunal referenced several judgments to support this position:- East West Exporters v. AC, Customs (1993): Established that goods imported under forged licences are liable for duty.- ICI India Limited v. CC, Calcutta (2005): Affirmed by the Supreme Court, supporting the duty liability for imports under forged licences.- CC, Amritsar v. ATM International (2008): Reinforced the duty liability for imports made under forged licences.The Tribunal also invoked the principle of Caveat Emptor, emphasizing that the appellants should have taken steps to verify the genuineness of the licences. The extended period for recovery of duty under Section 28(1) of the Customs Act was deemed applicable due to the fraudulent nature of the licences.Conclusion:The High Court found no illegality or perversity in the findings of the Adjudicating Authority and the Tribunal. The appellants' failure to verify the licences and their dealings with Gautam Chatterjee, despite suspicious circumstances, undermined their claim of bona fide purchase. The penalties and duty liabilities imposed were upheld, and the appeals were dismissed. The question of law was answered in the affirmative in favor of the Department and against the appellants.