2008 (4) TMI 271 - AT - Customs

Tribunal upholds penalties for DEPB fraud, cancellation consequences despite transfer

The Tribunal dismissed the appeals based on findings of fraud in obtaining DEPB scrips, the cancellation of licenses, and their legal consequences as ... Penalty - fraudulent availment of credit in the export of goods under DEPB scheme – appellant obtained DEPB scrips from the Joint Director General of Foreign Trade on the strength of forged Bank Realization Certificates (BRCs) - They were later transferred to various buyers for consideration. The buyers made duty free imports on the strength of those DEPBs – penalty is imposable Issues:Fraudulent availment of credit under DEPB scheme, imposition of penalties on appellants, cancellation of DEPB scrips, applicability of penalties without DEPB license cancellation, specification of clauses in show cause notice, legal consequences of fraud in obtaining DEPB scrips.Analysis:1. Fraudulent Credit Availment: The case involved M/s. ATM International engaging in fraudulent practices by obtaining DEPB scrips through forged Bank Realization Certificates. The DEPB scrips were then transferred to buyers for duty-free imports, resulting in evasion of customs duty.2. Penalties Imposition: Show cause notices were issued to buyers and appellants for confiscation of goods, penalty imposition, and duty recovery. Penalties were imposed on the buyers and appellants by the Additional Commissioner, which were upheld by the Commissioner (Appeals) and further appealed to the Tribunal.3. DEPB Scrip Cancellation: The appellants argued that penal action could not be taken without canceling the DEPB license by the authority. However, the High Court's finding stated that DEPB scrips obtained through fraud were canceled ab initio, making the appellants accountable for the consequences.4. Specification in Show Cause Notice: The appellants contended that the show cause notice was vague as it did not specify the clauses of the Customs Act allegedly contravened. The High Court rejected this argument, emphasizing that principles of natural justice were not violated, and no prejudice was caused to the appellants.5. Legal Consequences of Fraud: The judgments by the High Court and Supreme Court highlighted that fraud in obtaining DEPB licenses rendered them non est, and penalties could be imposed on the original allottee despite not being imposed on the transferee.6. Cancellation Retrospective Effect: The argument that cancellation of DEPB licenses would not have retrospective penal consequences was rejected, with the court emphasizing that cancellation operated retrospectively, including utilized and unutilized scrips.7. Consequences of Fraud: Referring to legal precedents, the Tribunal emphasized that judgments obtained through fraud are null and void. The dispute was deemed covered by the High Court's decision, and the appeals were dismissed accordingly.In conclusion, the Tribunal dismissed the appeals based on the findings of fraud in obtaining DEPB scrips, the cancellation of licenses, and the legal consequences thereof as established by the High Court's decision. The judgment highlighted the accountability of the appellants for fraudulent practices and upheld the penalties imposed on them despite arguments regarding show cause notice specifications and cancellation effects.