Fraudulent DEPB scrips cannot sustain customs exemption, and fraud also supports extended limitation for duty demand.

Fraudulently obtained DEPB scrips do not support customs duty exemption where the underlying shipping bills were forged and substituted, rendering the scrips void ab initio. A transferee who purchases such scrips from the market without inquiry into their genuineness cannot claim innocent transferee protection or establish bona fides. The commentary also notes that fraud unravels all and justifies invocation of the extended limitation period under Section 28 of the Customs Act, 1962. The stated effect is that duty benefit under the DEPB scheme is unavailable on the basis of void scrips and the revenue demand remains sustainable.

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Issues: Whether the transferee of DEPB scrips obtained by fraud could retain customs duty exemption under the DEPB scheme, and whether the demand was barred by limitation.

Analysis: The DEPB scrips used for discharge of customs duty were found to have been procured on the basis of forged and substituted shipping bills. The appellant had purchased the scrips from the market without making any enquiry from the issuing authority regarding their genuineness. On the facts, the appellant failed to establish bona fides and could not claim protection as an innocent transferee. The exemption claimed under the notification was therefore treated as unavailable where the underlying scrips were void ab initio. The Court also held that fraud unravels all and that the Revenue was justified in invoking the extended period under Section 28 of the Customs Act, 1962.

Conclusion: The appellant was not entitled to duty benefit under the DEPB scheme on the basis of fraudulently obtained scrips, and the demand was sustainable.

Final Conclusion: The appeal failed and the duty demand was upheld.

Ratio Decidendi: A transferee cannot retain customs exemption derived from DEPB scrips that are void ab initio due to fraud, especially where bona fides are not established; fraud also permits invocation of the extended limitation period.

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