Forged DEPB scrips cannot support customs exemption, while pre-import forgery may fall outside customs penalty jurisdiction.

A DEPB scrip obtained through forged shipping bills and forged BRCs cannot confer a valid customs exemption on a purchaser, because a licence or scrip rooted in fraud is not protected by bona fide purchase principles. The importer's duty demand, confiscation and related penalty were therefore sustained. By contrast, penalty on the person who procured the scrips by submitting the forged documents was set aside, as the alleged misconduct occurred at the pre-import stage and concerned procurement of the licence before the DGFT rather than a customs infraction.

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Issues: (i) Whether an importer who purchased DEPB scrips from the market could retain the benefit of duty exemption where the scrips had been obtained on the basis of forged shipping bills and BRCs. (ii) Whether penalty imposed under Section 112A of the Customs Act, 1962 on the person who procured the DEPB scrips by forgery could be sustained.

Issue (i): Whether an importer who purchased DEPB scrips from the market could retain the benefit of duty exemption where the scrips had been obtained on the basis of forged shipping bills and BRCs.

Analysis: The DEPB scrips were not merely irregular; they were obtained through forged shipping bills and forged BRCs submitted before the DGFT. The distinction drawn in earlier decisions in favour of bona fide purchasers was held inapplicable because those cases concerned different factual settings, whereas here the foundational documents for issuance of the scrips themselves were forged. In such circumstances, the purchaser could not claim the benefit of a licence or scrip that had come into existence through fraud.

Conclusion: The demand of duty, confiscation and related penalty against the importer were upheld and the appeal of the importer was dismissed.

Issue (ii): Whether penalty imposed under Section 112A of the Customs Act, 1962 on the person who procured the DEPB scrips by forgery could be sustained.

Analysis: The role attributed to the person penalised was limited to submitting forged shipping bills and BRCs before the DGFT for obtaining the DEPB scrips. Since the alleged fraud related to procurement of the licence at the stage preceding import, the authorities concerned with the validity of the licence were the DGFT authorities and not the customs authorities. On that reasoning, and applying the view that pre-import misstatement in relation to the licence does not attract customs action in the same manner as a post-import infraction, the penalty could not be maintained against him.

Conclusion: The penalty against the person who procured the DEPB scrips was set aside and his appeal was allowed.

Final Conclusion: The appeal of the importer failed, while the appeal of the person who had procured the forged DEPB scrips succeeded, resulting in partial relief in the batch of matters.

Ratio Decidendi: A DEPB scrip obtained on the basis of forged export documents cannot confer a valid customs benefit on a purchaser, but penalty for pre-import forgery in obtaining the licence cannot be sustained against a person whose alleged wrongdoing falls within the domain of the licensing authority rather than customs.

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