Forged DEPB scrips cannot confer retained duty benefit; demand, confiscation and firm penalty were sustained, with employee penalties quashed.

Benefit obtained on the basis of forged DEPB documents cannot be retained, and a purchaser of such tainted scrips stands in the same position as the original holder for duty and confiscation purposes. The article notes that the duty demand was sustained, the limitation objection failed because the notice was within the normal period and the extended period was also treated as available on the tainted facts, and confiscation of the imported goods was upheld. The redemption fine was reduced as excessive on the facts. Penalty on the importing firm was sustained, while penalties on the employee appellants were set aside for lack of independent evidence of knowledge of the forgery.

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Issues: (i) Whether duty exemption under DEPB scrips obtained on forged documents could be retained by the importer and the resulting duty demand sustained. (ii) Whether the demand was barred by limitation. (iii) Whether the imported goods were liable to confiscation and the redemption fine required modification. (iv) Whether penalty was sustainable on the importing firm and on the employee appellants.

Issue (i): Whether duty exemption under DEPB scrips obtained on forged documents could be retained by the importer and the resulting duty demand sustained.

Analysis: The admitted position was that the DEPB scrips had been obtained by submitting forged documents. The importer had availed benefit on the strength of those scrips. The governing principle applied was that benefit taken on the basis of a forged document cannot be retained, and a purchaser of such a document does not acquire a better title than the transferor. The fact that the scrips were purchased from the market did not displace the effect of the forgery attaching to the instrument.

Conclusion: The duty demand was sustained and the claim to DEPB benefit failed, against the assessee.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The show-cause notice had been issued within the normal period of limitation. The later judicial view relied upon by the Tribunal also recognised that where the importer claims benefit under forged DEPB scrips, the taint continues and the extended period can be invoked against the successor or purchaser as well. On the facts, the limitation objection was not accepted.

Conclusion: The limitation challenge failed, against the assessee.

Issue (iii): Whether the imported goods were liable to confiscation and the redemption fine required modification.

Analysis: Since the goods were imported and cleared by availing benefit under tainted DEPB scrips, confiscation was justified. At the same time, the quantum of redemption fine imposed by the adjudicating authority was considered excessive in the facts of the case, warranting reduction.

Conclusion: Confiscation was upheld, but the redemption fine was reduced to 10% of the value of the confiscated goods, partly in favour of the assessee.

Issue (iv): Whether penalty was sustainable on the importing firm and on the employee appellants.

Analysis: Penalty on the importing firm was sustained because the firm attempted to import goods under forged documents and thereby attracted liability for suppression and misuse of the exemption mechanism. As to the employee appellants, the finding of knowledge was based only on presumption from the premium paid, without any admission or independent evidence showing awareness of forgery.

Conclusion: Penalty on the importing firm was upheld, against the assessee, while the penalties on the employee appellants were set aside, in favour of the assessee.

Final Conclusion: The duty demand, confiscation, and firm-level penalty were maintained, but the redemption fine was reduced and the penalties on the employee appellants were quashed, resulting in a mixed outcome.

Ratio Decidendi: Benefit obtained on the basis of forged documents cannot be retained, and a purchaser or successor of such tainted documents stands in the same position as the original holder for purposes of duty demand and confiscation.

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