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Issues: (i) Whether duty could be recovered from the transferee on utilisation of DEPB scrips later found to be forged or fraudulently obtained; (ii) whether the extended period of limitation could be invoked; (iii) whether redemption fine was payable when the goods were not physically available for confiscation.
Issue (i): Whether duty could be recovered from the transferee on utilisation of DEPB scrips later found to be forged or fraudulently obtained.
Analysis: The DEPB benefit was taken on the strength of scrips that were found to be forged and issued on fraudulent premises. A transferee does not acquire a better title than the transferor, and benefit obtained through a forged document cannot be retained. The absence of inquiry with the issuing authority also negatived bona fides, so the protection available to a bona fide purchaser was not available.
Conclusion: Duty was recoverable from the respondents.
Issue (ii): Whether the extended period of limitation could be invoked.
Analysis: The proviso to section 28 applies where duty has not been levied or has been short-levied by reason of collusion, wilful misstatement, or suppression of facts. Fraud attached to the DEPB scrips continued to operate against the purchaser, and the taint was not washed away by transfer. In the absence of bona fide conduct, the extended limitation period was correctly applied.
Conclusion: The extended period of limitation was rightly invoked.
Issue (iii): Whether redemption fine was payable when the goods were not physically available for confiscation.
Analysis: Redemption fine is linked to actual confiscation and cannot be sustained where the goods were not available and no bond had been executed. The circumstances did not justify sustaining the fine merely because the goods had been cleared under the DEPB benefit.
Conclusion: Redemption fine was not payable.
Final Conclusion: The demand of duty and invocation of extended limitation were sustained, but the redemption fine was set aside, resulting in only partial success for the Revenue.
Ratio Decidendi: A transferee of a forged or fraudulently obtained DEPB scrip cannot claim bona fide protection or retain duty exemption, and the extended limitation period under the Customs law applies where the benefit is derived through such non-genuine documents.
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