2017 (10) TMI 1139 - AT - Customs

Court upholds Rs. 2,00,000 penalty for fraudulent DEPB scrip scheme

The appellant was found to be actively involved in a fraudulent scheme of acquiring and selling DEPB scrips, defrauding the Revenue. The penalty of Rs. ... Duty Exemption Pass Book (DEPB) Scheme - it came to light of Revenue that the documents filed before Jt. DGFT to obtain the DEPB scrips were fake including the BRC bearing No. 0305023 dated 16.07.1998 claimed to have been issued by Union Bank of India, Bandra, Mumbai - Held that: - Impugned DEPB scrips were obtained by appellant fraudulently from Jt. DGFT and that was sold by him. He was actively and consciously involved in defrauding revenue for which interest of Customs was prejudiced. Appellant was not at all a stranger to the commission of the offence alleged by investigation. Having pre-determined mind to deceive the exchequor, he perpetuated fraud against Revenue. Accordingly, he was liable to the penal consequence provided under section 112(a) of the Customs Act, 1962 - if circumstances establish that there is high degree of probability that a prudent man ought to act on the supposition that there was design to obtain DEPB scrips without any export and such scrips sold for duty free import in contravention of the law or abetting to achieve such ill object, such act against public Revenue calls for penal consequence to curb such mischief. Penal provisions are enacted to suppress the evils of defrauding Revenue which is an anti-social activity adversely affecting the public revenue, earning of foreign exchange, economic and financial stability of the economy. Therefore such provisions are construed in a manner to suppress the mischief and to promote the object of the statute, preventing evasion, foiling artful circumvention thereof. Thus construed, the term fraud within the meaning of these penal provisions is wide enough to take into its fold any one or series of acts committed. Appellant fails to succeed in his appeal having acted malafide causing detriment to the interest of public revenue. Ill will of appellant came to record. Pre-ponderance of probability was in favour of Revenue and lent credence to its case. Appeal dismissed - decided against appellant. Issues Involved:1. Fraudulent acquisition and use of DEPB scrips2. Appellant's involvement in defrauding the Revenue3. Validity of the penalty imposed under Section 112(a) of the Customs Act, 19624. Applicability of the Evidence Act to quasi-judicial proceedingsDetailed Analysis:1. Fraudulent Acquisition and Use of DEPB Scrips:The appellant was found to be one of the key individuals behind the fraudulent acquisition and sale of Duty Exemption Pass Book (DEPB) scrips. The DEPB scrips were obtained from the Joint Director General of Foreign Trade (Jt. DGFT) using fake documents, including false shipping bills and Bank Realisation Certificates (BRCs). The Customs authorities discovered that no actual exports were made, and the documents submitted to obtain the DEPB scrips were fabricated. The scrips were then used by various entities, including Unique Exim, to make duty-free imports, thereby defrauding the Revenue.2. Appellant's Involvement in Defrauding the Revenue:The investigation revealed that the appellant, along with his associates, was actively involved in the fraudulent scheme. He had gained experience in defrauding the government by selling DEPB scrips obtained through fraudulent means. The appellant and his associates filed shipping bills in the names of non-existent firms and used forged documents to obtain DEPB scrips. These scrips were then sold in the market, and the proceeds were laundered through bank drafts. The appellant's involvement was further corroborated by his actions, such as printing fraudulent documents and using fabricated rubber stamps to affix false seals on shipping bills.3. Validity of the Penalty Imposed Under Section 112(a) of the Customs Act, 1962:The adjudicating authority imposed a penalty of Rs. 2,00,000 on the appellant under Section 112(a) of the Customs Act, 1962, for his role in defrauding the Revenue. The appellant's plea of innocence was rejected based on the investigation's findings, which demonstrated his active involvement in the fraud. The court held that the appellant's actions were premeditated and aimed at deceiving the exchequer, thus justifying the penalty imposed.4. Applicability of the Evidence Act to Quasi-Judicial Proceedings:The court emphasized that the Evidence Act does not insist on absolute proof, as perfect proof is seldom found. Under Section 3 of the Evidence Act, a fact is said to be proved when its existence is considered probable by a prudent person. The court noted that in quasi-judicial proceedings, the preponderance of probability is sufficient to establish a case. The Revenue was not required to prove its case with mathematical precision, and the circumstantial evidence provided a high degree of probability that the appellant was involved in the fraudulent scheme.Conclusion:The court concluded that the appellant had fraudulently obtained and sold DEPB scrips, causing significant detriment to the interest of Customs and the public revenue. The investigation's findings and the adjudicating authority's decision remained unchallenged by the appellant. The court held that fraud nullifies everything and that any undue gain made at the cost of the Revenue must be restored. The appellant's appeal was dismissed, and the penalty imposed under Section 112(a) of the Customs Act, 1962, was upheld.(Order pronounced in the Court on 27.10.2017)