TaxTMI 
TaxTMI 
2008 (9) TMI 479
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.... crores. In addition personal penalties stand imposed upon the other appellants in terms of the provisions of Section 112(b) of the Customs Act, 1962. 2. As per the facts on record, M/s. H. Kumar Gems Inc. imported 12 consignments of gold bars and 3 consignments of silver during the period 24-5-1996 to 20-6-1997 by availing the benefit of concessional rate of duty in terms of Notification No. 117/94-Cus. Dt. 27-4-1994. The said notification exempted gold and silver imported to India, on production of Special Import Licence (hereinafter referred to as SIL) issued in terms of Export and Import Policy, April, 1992-March, 1997. The benefit of the said notification was extended to the appellant at the time of import, on the production of 22 SILs submitted by the appellant and the assessments were finalized accordingly. 3. However, subsequently investigations were initiated by the customs and as a result, it was found that 15 SILs out of 22 SILs submitted by the said appellant were defaced and cancelled by the DGFT authorities on the request of the actual owner of the respective SILs. Though the 7 SILs were not found to be defaced or cancelled by the DGFT authorities, it was found ....
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....ancellation or defacement by the DGFT authorities, the appellant cannot be held guilty of any fraud on their part. It has also been contended that the said letter of DGFT does not give the exact date of cancellation and it is not clear as if the licences in question were cancelled between the period April 1997 to July, 1997, when the goods were imported and allowed clearance after debiting the said licences. They are the holders of the licences in due course, which stand transferred to them after due verification of the banker, which is judicial mode of transfer and as such, the benefit of the same cannot be denied to them. The demand has also been assailed on the point of limitation. 6. On the other hand, it is the Revenue's contention that the licences, having been cancelled by the DGFT authorities, were not available for import of the goods and as such the benefit of the notification has been wrongly availed by the appellant. The forgery committed by the appellant in producing the defaced/cancelled licences vitiates everything and the fact that the appellant was not aware of the cancellation of the licences is of no relevance. 7. Reliance stands placed upon various decisio....
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.... the monthly bulletin published by DGFT, there was no indication, whatsoever to show that the licences were cancelled. As such, in our views the said letter dt. 24-2-1998 issued by Shri Sohan Chand, first and foremost, do not constitute a valid evidence to show that the licences in question were cancelled. 9. There is a prescribed procedure for cancellation of the licences and in the absence of requisite endorsements on the said licences, it cannot be said that there had been substantial compliance with statutory requirements. Cancellation is not an empty formality and in the absence of the said licences carrying the endorsements of cancellation, it cannot be said with conviction that the licences were actually cancelled. The said licences are freely transferable and therefore, are akin to negotiable instruments. We reproduce Section 89 of the Negotiable Instruments Act, 1981 as under :- "(1) Where a promissory note, bill of exchange or cheque has, been materially altered but does not appear to have been so altered, or where a cheque is presented for payment which does not at the time of presentation appear to be crossed or to have had a crossing which has been obliterated, p....
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....he Appellant is not a party to any fault. The Appellant had no knowledge of any defect in the title of the transferor. The Appellant had no notice of the alleged removal of the licences from the office of the DGFT or of the alleged cancellation thereof. The Appellant was guided by the apparent tenor of the licences which on the face thereof or any part thereof have no remark or endorsement of the cancellation thereof. As such, we are of the view that the appellant cannot be held guilty of procuring the SILs in the open market and using the same for clearance of the goods at the concessional rate of duty. 11. The appellants further claim that Notification No. 117/94-Cus. Dt. 27-4-1994 exempts gold and silver subject to production of SILs. The exemption admittedly relates to gold and silver, the goods are exempted by the SILs, irrespective of whether the transfer letters are valid or not and without reference to the alleged denial of the transferee, the benefit of the Notification cannot be denied. Admittedly, the appellant had produced SILs, which were valid to cover the goods in terms of the description, quantity and value, we are of the view that the benefit of the exemption ca....
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.... everything" is not applicable as licence was transferred for value arising out of importable transaction governed by law and the benefit of the notifications cannot be denied to the licence holder. 15. The Maxim LEX NON COGIT AD IMPOSSIBILIA, which means that "law does not compel a man to do that, which he cannot possibly perform" can be pressed into service in the present case inasmuch as it was an impossible act on the part of the transferee to find out about the fact of defacement or cancellation, in the absence of any indication to that effect on the body of the licence itself and in view of the undisputed fact of the licence numbers appearing in the monthly bulletin as valid licence issued by DGFT. There is no answer by the DGFT authorities to the fact as to when the said licences were cancelled/defaced, why the same were not removed from the list of validly issued licences published in the monthly bulletin and as to why the same continued to appear therein thus giving a reasonable belief to the buyers of the same in the market as if they were still valid at the time of purchase. The subsequent detection of cancellation by the customs authorities cannot result in denial of....
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....porter. As already observed, there is no misstatement or suppression on part of the appellant or their agents inasmuch as they have procured the licences bona fide in the ordinary course of their business. There is no knowledge on their part to show that the said licences were cancelled. Tribunal in the case of Scientific Pharmacy v. CC, ACC, Mumbai [2001 (135) E.L.T. 1085 (Tri.-Mumbai)] has held that advance licence transferred on the basis of mis-representation made by the transferor, extended period cannot be invoked against the transferee. In the case of Zenith Ltd. & others v. CC (Prev.), Mumbai [2006 (73) RLT 77 (CESTAT-Mum.)], the Tribunal while dealing with an identical situation involving the same notification held that silver/gold imported against forged Special Import Licences on payment of concessional duty under Notification No. 117/94-Cus. Dt. 27-4-1994, cannot be denied the benefit of the notification where SILs were purchased by importer and there is no willful misstatement or suppression of facts with intention to evade payment of duty on the part of the importers. For arriving at the above conclusion, reliance was placed on the earlier decision of the Tribun....
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....umar Gadecha directly or through any brokers. The original licence holders have not received any consideration for disposal of these licences. In fact, some of the licences have been submitted to the DGFT authorities for the purpose of cancellation either after use or for reason that they could not use the same. In these cases, the original licence holders have no right to sell these licences. 23.3 Sh. H. Kumar Gadecha claims to have received all these licences after the same changed several hands viz. Mr. Ramesh Chandra, Mr. Sanjay Rai, Mr. Shrenik Mehta, Ms. Vidya Mahadik and Ms. Sunita Goel. In fact, Mr. Ramesh Chandra mentions other name through whom the licences have passed through and reached him and he is not traceable. When the licences changes hands there is cost involved in every such transaction in the form of commission/brokerage paid to the intermediaries. Therefore, procurement of licences after change of so many hands is rather unusual. 23.4 The payments for these 22 SILs have been made by Shri H. Kumar Gadecha only after the import has been completed; the payments have been made to the accounts of M/s. Kohinoor Enterprises and M/s. Mangalam Enterprises by way ....
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....able balance amount. It emerges that the licences were not sold or not saleable by the original licence holders. As a result of series of fraudulent activities/forgeries, these 22 SILs were produced to the Customs Authorities and the benefit of exemption irregularly availed. 24. For invocation of extended period of limitation in terms of proviso to Section 28(1), the suppression or willful misstatement has to be from the importer. As already observed, there is misstatement/suppression on part of Sh. H. Kumar Gadecha and the intermediaries inasmuch as they have procured the licences not in a bona fide manner in the ordinary course of their business. The original licence holders have denied the sales of licence to H. Kumar Gadecha or their agents. Sh. H. Kumar Gadecha and their agents are not in a position to show that they made payments for the licences either to the licence holders or to third parties duly authorized by the licence holders. Their purchase is not bona fide as seen from their overall conduct and circumstances. The substantial part of the 'premium' involved in the disposal of the licences have been shared by these intermediaries. The transferee has chosen to destro....
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....ownership. When goods are confiscated under the Customs Act, the ownership of the goods will get transferred to the Central Government. In this case, the goods though were liable for confiscation were not available. No order confiscating any goods unless the owner of the goods or such person (like the person from whose custody the goods have been seized from) is issued a show cause notice under Section 124. In this case, at the time of issue of show cause notice, the owner of the goods has not been identified and hence no show cause notice was issued to him. The fine imposable under Section 125 is by way of an option. When the fine is paid, the confiscated goods shall stand released to the owner/the person from whom the goods were seized. Unless the goods are confiscated and the property vested in the Govt. the question of granting an option under Section 125 to the owner or the person from whose custody the goods seized does not arise. Therefore, while the goods are liable for confiscation, giving option to pay fine in lieu of confiscation when the goods are not actually available for confiscation, cannot be sustained. 28. Appeal No. C/217/04 of S. H. Kumar Gadecha is disposed ....
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.... Ms. Vidya Mahadik/Mr. Shrenik Mehta who received the same from Mr. Sanjay Rai. All are licence brokers. Sanjay points to one Mr. Ramesh Chandra and gives his mobile number. None of the persons involved in the chain by which the licences were allegedly forged, have admitted to any forgery thereof. Their statements also proceeded on the basis of the transfer letter which came along with the licences and none of them admit forgery of the transfer letters. Since Ramesh was not available for investigation, there is no material on record to throw light on the question as to whether the licences were forged or whether the transfer letters were forged, or whether both were forged. Apart from these statements, there is a letter dated 24-3-1998 from one Mr. Sohan Chand, Foreign Trade officer, who had annexed a list of licences including the 22 licences involved in the present case, and stated that these licences had been cancelled and were removed from the office of the Director General of Foreign Trade. Once again, the trail stops at a dead-end because, admittedly, none of the licences bear any endorsement of cancellation on the face thereof. Cancellation of any instrument, more so a statu....
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....on of forgery in the Customs Act, 1962, we can take recourse to the definition thereof appearing in Section 463 of the Indian Penal Code, which reads as under :- "Whoever makes any false document or part of a document, with intent to cause damage or injury to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed, commits forgery." 34. None of the ingredients of forgery are to be found in the facts set out above. The other four Foreign Trade officers (other than Mr. Sohan Chand), who were cross-examined, admitted to having issued the licences. The claim of the Revenue that they were thereafter surrendered to the licensing authority and not transferred to Mr. H.K. Gadecha, does not render them forged licences. Once it is held that the licences in question are not forged, the rights acquired by a person who claims to be transferee for valuable consideration, and who is not a party to the fraud, are required to be considered. Mr. H.K. Gadecha admittedly paid consideration for acquiring licences in question. The unus....
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....e transfer letters are false, it may be that Mr. H.K. Gadecha has not acquired a clear title to the licences in question. In the event of any defect in title, it is open to the person claiming to be the original owner of the licences to sue Mr. H.K. Gadecha for loss or damage to him; however, insofar as the customs authorities are concerned, a licence which is not forged, produced for clearance of goods, is otherwise valid to cover the goods in terms of description, quantity, value and all other material particulars. In other words, the customs authorities have no jurisdiction to sit over a dispute to title to the licences as between two individuals. Notification 117/94-Cus which is the notification under consideration in the present cases, provides for exempting goods when imported against special import licences and, therefore, it follows that so long as the licences produced are valid, the goods will be allowed to clear by the person (importer) producing the same. 36. In any event, the evidence on record does not bring out any knowledge on the part of Mr. H.K. Gadecha that the transfer letters were forged. The licences were transferred along with the letters; all persons conn....
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....stage. The contention that unutilised licences were destroyed is also not borne out by the statements of either Mr. H.K. Gadecha or his accountant. Even if the licences were destroyed post utilisation, that by itself cannot, and will not incriminate him, for the reason that once the licences are fully utilised and the exchange control copies submitted to the bank for debiting the same, no purpose is served by keeping/retaining utilised/expired licences. 39. The next question is whether Mr. H.K. Gadecha is liable to pay duty. The proviso to Section 28(1) of the Act provides for extended period of limitation in a case where the importer or his agent is guilty of suppression of fact or wilful misstatement or collusion with intent to evade payment of duty. Suppression of facts or wilful misstatement can only arise if Mr. H.K. Gadecha was aware of the cancellation of licence or loss thereof from the office of the Directorate General of Foreign Trade. However, there is nothing on record to bring out such knowledge. There is also no allegation that Mr. H.K. Gadecha colluded with the officers of DGFT or with the customs authorities. Consequently, the proviso to Section 28(1) cannot be i....
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.... another corrigendum is issued, again substituting para 24 (iii) under 4-6-1998 corrigendum in original show cause notice with "why penalty under Section 114A of Customs Act should not be imposed on M/s. H. Kumar Gems and "by suppressing the facts regarding the licence" is added to 4-6-1998 para 24 (iii). The reply of the appellant to the above on 16-7-1998 and 19-8-1998 is that there are no ingredients of proviso to Section 28(1) of Customs Act in the corrigendum dated 4-6-1998 and 10-6-1998 and the demand is barred by time and short paid duty is not quantified, and denied the duty liability and alleged suppression regarding SIL. They are the bona fide purchasers of the SIL in part consideration thereof, and paid Rs. 40 lakhs by way of demand draft as per Ms. Sunita Goel's advise in the name of Kohinoor Enterprises. SILs were purchased at the prevailing market rate at that time as per the list enclosed of SILs purchased. It is a bona fide and genuine transaction entered in good faith in normal relation with Ms. Sunita Goel, who deals in sale and purchase of SILs. They have paid required Customs duty from EEFC account for the clearance of goods put under seizure. Invocation of Sect....
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....alty under Section 114(a) of Customs Act on the ground that they have not fulfilled the requirement of Notification No. 117/94-Cus., dated 27-4-1994 as these clearances was made without any valid SIL by suppressing the facts regarding the Licence. The appellants, in their further reply, on 16-7-1998 (pages 18 to 26) and 19-8-1998 (at pages 26 to 32) have made out a case of bona fide purchaser for value and making proper enquiry before hand with the issuing authority DGFT, Pune, about the issue of Licence in question and its genuineness, and none of the persons, whose statements are recorded under Section 108 of Customs Act, speaking against them in support of the allegations in show cause notice, Corrigendums issued, and showing complete detachment with other co-noticees. Except Ms. Sunita Goel from whom they purchased the SIL in question on payment of Rs. 40 lakhs through draft as per her say. Section 114A of Customs Act is invoked. In that situation penalty under Section 112 of Customs Act, cannot be imposed. Under what circumstances Section 114A of Customs Act can be applied is very clear from the provision itself, which states as follows." — Penalty for short levy or non levy....
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....fore the Calcutta High Court arose out of the Tribunal's decision reported in 2003 (151) E.L.T. 336, wherein forgery was admitted. No question relating to the applicability of the proviso to Section 28(1) arose before the Tribunal. Therefore, the decision of ICI India is distinguishable. On the other hand, the same issue of applicability of the proviso to Section 28(1) against an importer or his agent who is not a party to the forgery or fraud, came up for direct consideration in the case of Zenith Ltd. (supra) and Aafloat Textiles (supra) and the Hon'ble Punjab & Haryana High Court in the case of Leader Engineering [2007 (218) E.L.T. 349 (P&H)]. In the other decision relied upon by the Revenue, viz. New Kailash Jewellery House v. CCE, New Delhi - 2006 (206) E.L.T. 1046, it was held in the light of settled principle of law that a party to a fraud cannot obtain any advantage and the Tribunal remanded the case for determining the factual position. This case, therefore, does not also come to the aid of the Revenue in the absence of any evidence of fraud on the part of Mr. H.K. Gadecha. 40. The decision in DIC India Ltd. v. CC, Kolkata - 2008 (226) E.L.T. 545 (Tribunal) = 2008 (86) ....