2016 (2) TMI 387 - AT - Customs

Tribunal upholds duty demand for forged DEPB licenses, emphasizes buyer's duty to verify authenticity

DCW Ltd. Versus Commissioner of Customs, Tuticorin

The Tribunal upheld the demand of Rs. 95,29,591 under Section 28(1) of the Customs Act, confirming the clearance of goods using forged DEPB licenses. The ... Demand of duty - Import of fake / forged DEPB licences - Appellant purchased the DEPB licneces from the market - Levy of interest and penalty - Held that:- The Hon'ble Apex court has clearly laid down and discussed the issue what is 'Fraud' and 'Caveat Emptor' and clearly held that buyer has no remedy against the seller and takes all risks of defect and clearly held that appellant, buyer of the licence has to establish that he made enquiry and took requisite precautions to find out the genuineness of the licence which he purchased and the apex court said that if he has not done so, the consequences had to follow. Appellants filing F.I.R after the fraud was detected by the Department is of no consequence and it is only an afterthought to save their lapses. Therefore the apex court's decision in Aafloat Textiles case [2009 (2) TMI 75 - SUPREME COURT] is clearly applicable to the present case and the appellant's contention that above Supreme Court judgement is per incurium is not acceptable. The goods were cleared by the appellant by forged/fake DEPB licences and forged TRAs - Demand of duty confirmed - though penalty waived - Decided against the appellant. Issues Involved:1. Legitimacy of DEPB licenses used for duty-free import.2. Invocation of extended period of limitation.3. Right to cross-examination of witnesses.4. Applicability of the Supreme Court's decisions on fraud and forgery.5. Imposition of penalties.Issue-wise Detailed Analysis:1. Legitimacy of DEPB Licenses Used for Duty-Free Import:The appellants imported Vinyl Chloride Monomer (VCM) using nine DEPB licenses, later found to be forged. The investigation revealed that the DEPB licenses and corresponding TRAs were not issued by the legitimate authorities, establishing the use of fake licenses. The Tribunal upheld the findings that the licenses were forged, confirming the fraudulent nature of the transactions.2. Invocation of Extended Period of Limitation:The Tribunal addressed whether the extended period of limitation was applicable. The appellants argued that they were unaware of the forgery and acted in good faith. However, the Tribunal referred to the Supreme Court's decision in the case of Commissioner of Customs Vs Aafloat Textiles (India) Pvt. Ltd., which established that fraud extends the limitation period. The Tribunal found that the appellants failed to take necessary precautions to verify the authenticity of the licenses, thus justifying the extended period for demand of duty.3. Right to Cross-Examination of Witnesses:The appellants contended that their right to cross-examine the witnesses was denied. However, the Tribunal noted that the adjudicating authority had discussed the issue in detail, confirming that the officials had verified the forgery of the licenses. The Tribunal found no justification in the appellants' contention, as the officials were not beneficiaries and had certified the forgery in their official capacity.4. Applicability of the Supreme Court's Decisions on Fraud and Forgery:The Tribunal relied on the Supreme Court's decision in Aafloat Textiles (India) Pvt. Ltd., which emphasized that fraud vitiates all transactions and that the buyer must take necessary precautions to verify the authenticity of the licenses. The Tribunal also referenced the Supreme Court's decision in TISCO Vs CC Mumbai, which upheld the demand against the transferee of a fraudulent license. The Tribunal concluded that the appellants failed to establish that they made sufficient inquiries to verify the genuineness of the licenses.5. Imposition of Penalties:The Tribunal considered the imposition of penalties on the appellants. While the demand for customs duty was upheld, the Tribunal decided to waive the penalty of Rs. 50,000 imposed on the appellants, taking into account the overall facts and circumstances of the case.Conclusion:The Tribunal upheld the demand of Rs. 95,29,591/- under Section 28(1) of the Customs Act, confirming that the goods were cleared using forged DEPB licenses. The penalty of Rs. 50,000/- was waived, but the appeal was otherwise dismissed. The Tribunal's decision was guided by the principles established in the Supreme Court's judgments on fraud and forgery, emphasizing the duty of the buyer to verify the authenticity of the licenses.