2016 (9) TMI 72 - AT - Customs

Tribunal Upholds Duty Recovery & Interest, Clears Appellants of Forgery Charges

M/s. Kedia Overseas Ltd. Versus CC&CE, Visakhapatnam-II

The tribunal confirmed the demand for duty recovery, interest, and penalties on appellants for using forged DEPB licenses and TRAs. The documents were ... Genuineness of DEPB licence / scrips – clearance of crude palmolien - Notification No.45/2002-Cus dated 22.04.2002 – principles of natural justice – Held that: - it was established in the case Aafloat Textiles 2009 (2) TMI 75 - SUPREME COURT that it was for the buyer to establish that he had no knowledge about the genuineness or otherwise of the SIL in question. The appellant have established that they had no knowledge about the non-genuineness of the documents. Recovery of duty with interest – Held that: - there is no estoppel, bar or impediment which can preclude the department from demand and recovery, at the earliest, of the wrongful benefit which accrued to the appellant on account of the impugned documents – demand of duty and interest sustainable. Imposition of penalty – Held that: - Once it is established that the appellants had no role in fabrication or forgery of the impugned documents, there is no ground for imposition of penalty either on the appellant or on the Executive Director – penalty set aside – appeal disposed off – partly decided in favor of appellant. Issues Involved:1. Validity of DEPB scrips and TRAs for discharge of duty liability.2. Compliance with principles of natural justice in adjudication process.3. Implication of CBI investigation in fabrication/forgery of documents.4. Timing of show cause notice issuance and assessment finalization.5. Applicability of caveat emptor principle in determining buyer's knowledge.6. Imposition of penalties and demand of customs duty based on forged documents.Issue 1: Validity of DEPB scrips and TRAs for discharge of duty liability:The case involved the use of DEPB licenses and TRAs for the clearance of imported crude Palmolien. Customs authorities discovered that these documents were forged, leading to a demand for duty recovery, interest, and penalties. The appellants argued that DEPBs are openly traded, and the department failed to provide a mechanism to verify their genuineness. However, the tribunal confirmed that the forged nature of the documents rendered them void ab initio, justifying the demand for differential duty not paid by the appellant.Issue 2: Compliance with principles of natural justice in adjudication process:Initially, the adjudication order was remanded for reconsideration due to a violation of natural justice principles. In the subsequent adjudication, the lower authority confirmed the duty demand and penalties. The appellant alleged that the authority did not follow tribunal directions regarding document provision and witness cross-examination. However, the tribunal found that the appellant had sufficient opportunities for participation, and the adjudication process was conducted fairly.Issue 3: Implication of CBI investigation in fabrication/forgery of documents:The CBI investigation did not implicate the appellants in the fabrication or forgery of DEPB scrips or TRAs. The tribunal noted that the appellants had no knowledge of the documents' non-genuineness and were not involved in their forgery. This lack of implication by the CBI supported the appellants' position and led to the setting aside of penalties imposed on them.Issue 4: Timing of show cause notice issuance and assessment finalization:The appellants contested the timing of the show cause notice issuance, arguing that it preceded the final assessment, violating the Customs Act. However, the tribunal held that the demand for duty recovery based on forged DEPB scrips was valid, irrespective of the notice timing. The duty not paid on account of the forged documents was deemed recoverable by the department.Issue 5: Applicability of caveat emptor principle in determining buyer's knowledge:The department relied on the caveat emptor principle, emphasizing the buyer's responsibility to verify the genuineness of documents. Citing a Supreme Court judgment, the department argued that the buyer must establish their lack of knowledge regarding document authenticity. The tribunal acknowledged this principle but ultimately found that the appellants had no role in the documents' fabrication or forgery.Issue 6: Imposition of penalties and demand of customs duty based on forged documents:The tribunal upheld the demand for customs duty and interest on the appellants, as the duty liability was discharged through forged DEPB scrips. However, the penalties imposed on the appellants and their Executive Director were set aside due to their lack of involvement in the forgery. The tribunal concluded that the demand for customs duty and interest was legal and proper, given the wrongful benefit accrued to the appellants from the forged documents.