Appellant not liable for import duty fraud, purchased license in good faith. Extended notice period inapplicable.

The Tribunal found that the appellant was not involved in the fraud and had purchased the license in good faith. The Tribunal held that the appellant could not be held responsible for the payment of import duty, interest, and penalty. The extended period for issuing the Show Cause Notice was also deemed inapplicable, making the demand time-barred. The impugned order was set aside, and the appeal was allowed.

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Issues Involved:
1. Confirmation of Customs duty and recovery thereof under Section 28(4) of the Customs Act, 1962.
2. Demand for interest under Section 28(AB) and penalty under Section 114(A) of the Customs Act.
3. Legality of utilizing fraudulently obtained duty-free scrips (FPS license) for import.
4. Applicability of extended period for issuance of Show Cause Notice under Section 28(4) of the Customs Act.
5. Responsibility of the appellant for verifying the authenticity of the FPS license before purchase.

Issue-Wise Detailed Analysis:

1. Confirmation of Customs Duty and Recovery Thereof:
The appeal challenges the confirmation of Customs duty and recovery under Section 28(4) of the Customs Act, 1962. The Directorate of Revenue Intelligence (DRI) discovered a syndicate involved in obtaining duty credit licenses through fake export documents. The appellant purchased an FPS license from M/s Nilesh International, which was obtained fraudulently. The Adjudicating Authority confirmed the demand against the appellant, which is contested in this appeal.

2. Demand for Interest and Penalty:
The Adjudicating Authority also confirmed the demand for interest under Section 28(AB) and imposed a penalty under Section 114(A) of the Customs Act. The appellant argued that the license was validly issued by the DGFT and had not been canceled, thus denying the benefit of the license was not permissible. The appellant cited several judgments, including Pee Jay International vs. Commissioner of Customs, to argue that duty could not be demanded from an importer not involved in the fraud.

3. Legality of Utilizing Fraudulently Obtained Duty-Free Scrips:
The appellant contended that they were a bona fide purchaser of the FPS license without knowledge of the fraudulent activities. The license was purchased after due inquiry and payment through banking channels. The appellant relied on the decision in Union of India vs. Sampat Raj Dugar, where it was held that the cancellation of a license after the date of import is irrelevant if the goods were covered by a valid license at the time of import.

4. Applicability of Extended Period for Issuance of Show Cause Notice:
The appellant argued that the extended period for issuing the Show Cause Notice under Section 28(4) of the Customs Act was not applicable. They cited the decision in Commissioner of Customs, Amritsar vs. Vallabh Design Products, where it was held that the extended period could not be invoked if the transferee of DEPB Scrips obtained them in good faith from the open market without any misrepresentation, collusion, or suppression of facts.

5. Responsibility of the Appellant for Verifying the Authenticity of the FPS License:
The appellant argued that it was impractical for buyers to verify the existence of the license issuer, as licenses are traded like commodities. The appellant verified the existence of the license issued by the DGFT, which had not been canceled despite a request from the DRI. The Tribunal agreed, stating that the appellant could not be held responsible for verifying the existence of M/s Nilesh International before purchasing the license.

Conclusion:
The Tribunal found that the appellant was not involved in the fraud and had purchased the license in good faith. The FPS license was still valid in the records of the DGFT. The Tribunal held that the appellant could not be held responsible for the payment of import duty, interest, and penalty. The extended period for issuing the Show Cause Notice was also deemed inapplicable, making the demand time-barred. The impugned order was set aside, and the appeal was allowed. The judgment did not examine the impugned order concerning other noticees in the Show Cause Notices.

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