2002 (9) TMI 190 - AT - Customs

Entitlement to customs exemption for imports using forged DEPB scrips - duty confirmed, s.114A penalty set aside, interest upheld

Whether importer was entitled to exemption under Notification No.34/97-Cus: DEPB scrips were found to be forged and therefore null and void ab initio; no ... Entitlement to duty exemption - forged and fake documents - unrebutted evidence - surcharge on imports of non-restricted items of raw materials - availing exemption under Notification No. 34/97-Cus - Post-export DEPB certificates/scrips/licences issued by the DGFT to an exporter were transferable in the market and a transferee-importer - HELD THAT:- The DEPB 'licences' which have been found to be forged and fake documents are null and void ab initio and whatever verification or other proceedings made or taken on the documents by any authority in the Customs department has not had any effect whatsoever on the inherent nullity of the 'licences'. No right or benefit could accrue from the null and void 'licences'. In other words, no credit of duty was available to the appellants under the forged DEPB scrips. The paramount condition under Notification No. 34/97 remained unfulfilled and consequently the appellants were not entitled to the benefit of exemption under the notification. The appellants were liable to pay duty on the imported goods. The Commissioner's order confirming the demand of duty is legally correct and hence cannot be interfered with. In the instant case, the appellants cannot even claim the sympathy of a court of equity as they were defrauding the Revenue by availing credit under forged documents. The paramount condition under the notification was not fulfilled by the importer. However, we note, the adjudicating authority has not examined under Section 125 the question whether the goods were redeemable on payment of a fine. Ld. Commissioner imposed penalty equal to duty on the appellants under Section 114A 'having regard to the liability of the impugned goods to confiscation under Section 111 (o) of the Customs Act.' We find that any liability of the goods to confiscation under Section 111 is no ground for imposing a penalty under Section 114A. However, we notice the finding recorded by the Commissioner as to the appellants' complicity in the evasion of customs duty. We note that in this appeal there is no challenge to the demand of interest. The SCNs demanding duty were issued under Section 28(1) of the Customs Act. The Commissioner has confirmed the demand on 25-5-2000 under Section 28(2). The appellants are liable under Section 28AA of the Act to pay interest on the duty amount from 25-8-2000 till the date of payment of duty. The duty demand as confirmed by the adjudicating authority is affirmed. The appellants shall, within three months from the date of receipt of this order, pay up the duty with interest from 25-8-2000 at such rate as prescribed under Section 28AA of the Customs Act. The penalty imposed on the party under Section 114A is set aside. Issues: (i) Whether import duty exemption availed under Notification No. 34/97 on the basis of DEPB scrips found to be forged and fake is admissible to the importer where the scrips were verified/endorsed by Customs officials; (ii) Whether the imported goods are liable to confiscation under Section 111(o) of the Customs Act and whether they are redeemable under Section 125; (iii) Whether penalty under Section 114A can be imposed on the appellants for short-levy/non-levy of duty.Issue (i): Whether import duty exemption availed under Notification No. 34/97 on the basis of forged DEPB scrips, although verified/endorsed by Customs officers, is admissible to the importer.Analysis: The question turns on the legal effect of forged documents and whether subsequent official action can validate them. A forged document is inherently null and void and cannot confer legal rights or benefits. Reliance placed on equitable authorities was considered; however, those decisions applied equity where no forgery sanctioned benefits. The applicable legal principle is that forgery cannot be sanctified by later official actions; therefore the paramount condition of the notification (valid DEPB licence) remains unfulfilled when the scrips are forged.Conclusion: The DEPB scrips being forged are null and void ab initio; no exemption under Notification No. 34/97 was available. The demand of customs duty on imports is affirmed (against the appellants).Issue (ii): Whether the imported goods are liable to confiscation under Section 111(o) and whether redeemability under Section 125 should be examined.Analysis: Conferral of exemption being invalid for want of a valid licence renders the goods liable under the confiscation provision cited. The adjudicating authority did not examine redeemability under Section 125; that procedural point requires a limited further enquiry.Conclusion: The goods are liable to confiscation under Section 111(o) (against the appellants). The adjudicating authority is directed to consider redeemability under Section 125 after giving the appellants an opportunity to be heard.Issue (iii): Whether penalty under Section 114A can be imposed on the appellants for short-levy/non-levy of duty.Analysis: Section 114A requires proof of collusion or wilful misstatement or suppression of facts. The adjudicating authority's finding amounted to inference from the appellants' indifference rather than a specific finding of collusion with identified parties or of wilful misstatement/suppression. Absent establishment of the statutory ingredients (collusion, wilful misstatement or suppression), penalty under Section 114A cannot be sustained.Conclusion: The penalty imposed under Section 114A is set aside (in favour of the appellants).Final Conclusion: The duty demand and confiscation order are affirmed while the penalty under Section 114A is set aside; interest on the duty is payable as provided by law and the question of redeemability is remitted for limited consideration.Ratio Decidendi: A forged document is null and void ab initio and cannot confer statutory benefits even if subsequently verified or endorsed by officials; thus benefits under a fiscal exemption scheme cannot be claimed on the basis of forged licences, and penalties under Section 114A require proof of collusion or wilful misstatement or suppression of facts.