Forged export documents and DEPB fraud: confiscation and firm-level penalty upheld, but separate personal penalty set aside.

Fraudulent use of forged Bank Realization Certificates to obtain DEPB scrips was treated as a contravention attracting confiscation and penalty, because the exporter had not complied with export declaration and foreign exchange realisation requirements. The prohibition under the Foreign Exchange Regulation Act, read with the relevant notification, was treated as a prohibition deemed to be imposed under the Customs Act, and the use of false documents also attracted the Foreign Trade (Regulation) Rules. The penalty on the exporting firm was upheld. The separate personal penalty on the proprietor was set aside, while his liability for the firm's penalty as erstwhile partner was affirmed.

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Issues: Whether the penalty imposed under Section 114 of the Customs Act, 1962 on the exporting firm and its proprietor was sustainable in view of the fraudulent use of forged Bank Realization Certificates for obtaining DEPB scrips.

Analysis: The evidence established that the DEPB benefits were obtained on the strength of forged Bank Realization Certificates and that the exporter had not complied with the requirements governing export declarations and realisation of foreign exchange. The prohibition under Section 18(1)(a) of the Foreign Exchange Regulation Act, 1973, read with the notification issued thereunder, was treated as a prohibition deemed to be imposed under Section 11 of the Customs Act, 1962 by virtue of Section 67 of FERA, 1973. The use of false documents also attracted the prohibition contained in Rule 14 of the Foreign Trade (Regulation) Rules, 1993. On these findings, the goods were held liable to confiscation and the exporter was held liable to penalty. As regards the proprietor, the personal penalty was considered unsustainable to the extent it was separately imposed in addition to the penalty fastened on the firm, while his liability as the erstwhile partner for the firm's penalty was affirmed.

Conclusion: The penalty on the exporter firm was upheld, the separate personal penalty of Rs. 1 lakh was set aside, and the proprietor was held liable for the firm's penalty of Rs. 4 lakhs.

Ratio Decidendi: Fraudulent use of forged export realisation documents to obtain export incentives constitutes a contravention attracting confiscation and penalty, but a separate personal penalty may be unsustainable where liability is already fastened on the exporting entity on the same facts.

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