CESTAT Chennai: Bonafide purchasers must predeposit duty for using fraudulent DEPB scrips

The Appellate Tribunal CESTAT CHENNAI ruled that M/s. Glory Impex, M/s. K.T.V. Oil Mills Ltd., M/s. Crystal Traders, and M/s. Jupiter Trading Corporation, despite being bonafide purchasers, were required to predeposit the confirmed duty amount less what was already paid within 12 weeks due to importing goods using fraudulent DEPB scrips. Interest and penalties were waived for these applicants. V. Sankaran, the broker involved in the fraud, was directed to predeposit 50% of the confirmed penalty amounts within 12 weeks, with the balance waived during the appeals process.

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Issues:
Waiver of predeposit of duty, interest, and penalty for multiple applicants under the Customs Act, 1962.

Analysis:
The judgment by the Appellate Tribunal CESTAT CHENNAI involved multiple applicants seeking a waiver of predeposit of duty, interest, and penalty under the Customs Act, 1962. The applicants, including M/s. Glory Impex, M/s. K.T.V. Oil Mills Ltd., M/s. Crystal Traders, and M/s. Jupiter Trading Corporation, claimed to be bonafide purchasers of DEPB scrips and argued that they had discharged duty liabilities at the time of goods clearance. However, it was revealed during the investigation that the applicants were involved in importing goods using fraudulent DEPB scrips obtained from a broker named V. Sankaran. The Tribunal noted that duty was demanded, along with interest and penalties imposed on all applicants, as well as penalties on the broker, V. Sankaran.

The Tribunal considered the submissions made on behalf of the applicants, emphasizing that, except for V. Sankaran, they were bonafide purchasers who were not complicit in acquiring fraudulent DEPB scrips. The applicants claimed to have lodged complaints with the police against the brokers, leading to arrests and informing customs authorities. After hearing the arguments and examining the records, the Tribunal concluded that duty payment was necessary due to the importation using fraudulent DEPB scrips. Citing a previous decision, the Tribunal directed M/s. Glory Impex, M/s. K.T.V. Oil Mills Ltd., M/s. Crystal Traders, and M/s. Jupiter Trading Corporation to predeposit the confirmed duty amount less what was already paid within 12 weeks, with compliance to be reported by a specified date. Interest and penalties were waived during the appeal process for these applicants.

Regarding V. Sankaran, the Tribunal found his active involvement in the fraud. Consequently, V. Sankaran was directed to make a predeposit of 50% of the confirmed penalty amounts within 12 weeks, with compliance reporting required by a specified date. The balance of the penalty was to be waived during the pendency of the appeals. The judgment was dictated and pronounced in open court by the Tribunal.

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