2010 (10) TMI 736 - AT - Customs

Appeal denied due to fraudulent DEPB scheme claim; lack of diligence cited. Fraud nullifies transactions.

The Tribunal dismissed the appeal, ruling that the appellant was not entitled to duty benefits under the DEPB scheme as the scrips were fraudulently ... Exemption - Under Notification No. 34/97-Cus., dated 7-4-1997 issued under Section 25 of the Customs Act, 1962 against DEPB Scrip - fraudulently obtained DEPB scrips - The assessee imported goods against DEPB Scrips without payment of duty - It was later found that DEPB Scrips were obtained by producing forged bank certificate of export and realization. The DEPB Scrips were cancelled by the competent authority - Accordingly, demand of duty was confirmed after notice. The assessee purchased DEPB Scrips from M/s. Vivek Impex Private Limited who purchased the same from M/s. Shyam International who had purchased the same from M/s. Parker Industries - The Commissioner of Customs held that any concession availed of on the basis of DEPB Scrips obtained by producing forged documents could not be retained - Do not find any ground to interfere with the order upholding demand of duty on goods in respect of which exemption had been availed of on the basis of DEPB Scrips obtained against forged documents - Decided against the assessee. Issues Involved:1. Validity of DEPB scrips obtained fraudulently by the transferor.2. Entitlement of the appellant to duty benefits under DEPB scrips.3. Applicability of extended period for issuing show cause notice.4. Liability of the appellant for not verifying the genuineness of DEPB scrips.5. Impact of fraud on the validity of DEPB scrips and subsequent transactions.Detailed Analysis:1. Validity of DEPB Scrips Obtained Fraudulently by the Transferor:The Tribunal held that the DEPB scrips used by the appellant to discharge customs duty were obtained fraudulently by the transferor based on forged/substituted shipping bills. The issuing authority had canceled these scrips, rendering them ab initio void and non-est. The appellant's claim to these scrips was invalid because the transferor had no legitimate title to transfer them.2. Entitlement of the Appellant to Duty Benefits Under DEPB Scrips:The appellant argued that they should not be denied the benefits of DEPB scrips as they had acquired them bona fide and utilized them before their cancellation. However, the Tribunal found that the appellant failed to exercise due diligence by not verifying the genuineness of the DEPB scrips with the JDGFT. The principle that 'fraud and justice are sworn enemies' was emphasized, and the appellant's lack of vigilance precluded them from claiming innocence or bona fide status. The Tribunal cited multiple judgments to support the view that fraudulent misrepresentation nullifies any claim to benefits, regardless of the appellant's knowledge or intent.3. Applicability of Extended Period for Issuing Show Cause Notice:The appellant contended that the show cause notice issued by the Customs Authority was barred by limitation. However, the Tribunal upheld the extended period under Section 28 of the Customs Act, 1962, citing that fraud nullifies everything and the adjudication was not time-barred. The Tribunal referred to the principle enshrined in Section 17 of the Limitation Act and various judgments, including CC v. Candid Enterprises, to support this stance.4. Liability of the Appellant for Not Verifying the Genuineness of DEPB Scrips:The Tribunal emphasized that the appellant, as a transferee of DEPB scrips, had a responsibility to verify their authenticity. By failing to do so, the appellant could not claim bona fide acquisition. The Tribunal noted that the appellant's failure to inquire with the JDGFT about the scrips' genuineness crippled their claim of innocence and bona fide status.5. Impact of Fraud on the Validity of DEPB Scrips and Subsequent Transactions:The Tribunal reiterated that fraud vitiates all transactions. It cited several judgments, including those of the Apex Court, to underline that any benefit derived from a fraudulent act is null and void. The Tribunal held that the DEPB scrips, being obtained through fraud, were non-est and could not confer any title or benefit to the appellant. The appellant's reliance on forged documents meant that they could not retain any duty benefits availed under the DEPB scheme.Conclusion:The Tribunal dismissed the appeal, holding that the appellant was not entitled to duty benefits under the DEPB scheme due to the fraudulent nature of the scrips obtained by the transferor. The Tribunal emphasized the principle that fraud nullifies all transactions and the appellant's failure to exercise due diligence in verifying the scrips' authenticity precluded them from claiming any benefits. The decision was pronounced in the open court on 8-10-2010.