TaxTMI 
TaxTMI 
2011 (5) TMI 677
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....tet 474/ 03.11.98 25,37,471 3628020 14.10.98 Sipla Exports & Marketing 8,88,115 2. Diethyl Thiophosp-horyl Chloride 300051/ 24.11.98 10,15,203 3629067 02.11.98 Readymoney Exports 3,55,321 3. S.B.E. Tetrachloro pyridine 300111/ 27.11.98 15,33,657 3629067 2.11.98 - do - 5,36,780 4. Diethyl Thiophosp-horyl Chloride 301380/ 10.12.98 6,47,789 3627550 9.10.98 Vaibhav Sales 2,26,726 5. - do - 300111/ 24.11.98 11,92,703 3628553 26.10.98 - do - 4,17,446 6. - do - 300091/ 24.11.98 25,25,594 3607414 11.06.98 - do - 8,83,958 7. - do - 1323/ 10.11.98 23,06,740 3607421 11.06.98 - do - 8,07,359 8. - do - 1927/17.10.98 35,54,374 3625760 17.09.98 Gautam Enterprises 12,43,419 9. - do - 301388/ 10.12.98 29,03,696 3630886 24.11.98 Jinture Impex 10,16,294 10. - do - 1323/ 10.11.98 12,32,255 3608357 01.07.98 S. Kirti- Kumar 4,31,289 11. - do - 3218/ 29.10.98 33,04,723 3607539 15.06.98 Ritlene Exports 10,66,514 12. S.B.E. Tetrachloro pyridine 300111/ 27.11.98 10,91,688 3626967 30.09.98 S. Kirti- Kumar 3,82,091 13. - do - 2620/19.11.98 17,94,306 3626967 30.09.98 - do - 6,28,007 14. - do - 2620/ 19.11.98 20,22,969 3608357 01.07.98 - do - 7,08,039 15. - do - 474/ ....
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....aid on the above consignments imported by De-Nocil. Interest on such duty was also demanded. 3. While the above SCNs were pending adjudication, DRI gathered further evidence by way of recording statements or further statements of some of the persons involved in the DEPB racket, obtaining inputs from the DGFT's Mumbai office etc., whereupon the modus operandi of the racketeers became clear and it was also found that all the DEPBs in question had been cancelled ab initio by the licensing authority (Dy. DGFT, Mumbai) during April-June 1999. Later the DRI issued SCN dated 5.10.2001 invoking caveat emptor principle and calling upon De-Nocil to show cause to the Commissioner of Customs (Adjudication), Mumbai, as to why: "(a) demand totalling Rs. 1,09,70,956/- raised vide 19 Less Charge Demand Show Cause Notices issued from time to time by Assistant Commissioner of Customs, Group IIA, Nhava Sheva, under section 28(1) of the Customs Act, 1962 as indicated in Para 65 above should not be confirmed; (b) the goods imported valued at Rs. 3,41,33,774/- should not be held liable to confiscation under Sec. 111 (d) and Sec. 111 (o) of the Customs Act, 1962, However as the same are not availab....
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....ecember 1998, the SCN dated 5.10.2001 for confirming the demand of duty was issued without the sanction of law and, therefore, it should be considered as an independent proceeding under Section 28 of the Customs Act. This SCN was issued beyond the normal period of limitation without alleging against De-Nocil collusion, willful misstatement of facts or anything else required to invoke the extended period of limitation. Hence the demand of duty is barred by limitation. (e) As the goods were not prohibited under the Customs Act or any other law and as any condition of Notification 34/97-Cus. was not violated by the importer, the goods are not liable to confiscation under clause (d) or (o) of Section 111 of the said Act and the importer cannot be penalized under Section 112 of the Act. Further, there can be no penalty on the importer under Section 114A of the Act where the demand of duty on them under Section 28 of the Act is not sustainable. 5. After hearing M/s. De-Nocil and Shri P.K. Srinivas, the Commissioner of Customs (Adj.) passed the impugned order (a) confirming against De-Nocil demand of duty of Rs.1,09,70,956/- under Section 28(2) of the Customs Act with interest t....
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....f the contentions raised by De-Nocil is to the effect that as the cancellation of DEPB licences was without notice to them, it cannot affect their right qua bona fide purchaser. But they have not shown us any provision of law which obligates the licensing authority to put transferees of DEPB licence also to notice of a proposal for cancellation of the licence, nor has their counsel argued that the rule of natural justice requires the transferees also to be heard before cancellation of the licence. In any case, the fact remains that De-Nocil, who learnt at least from SCN dated 5.10.2001 that the DEPB licences had been cancelled ab initio by the licensing authority did not choose to challenge that authority's order. 9.2 We have also examined the evidence gathered by DRI, which includes (i) statements (recorded under Section 108 of the Customs Act) of the persons who played various roles in forging SBs and BCERs and obtaining DEPB licences mostly in the name of non-existent firms from DGFT's office on the basis of the forged documents, (ii) documents such as DEPBs, SBs, BCERs and application forms for DEPBs collected from DGFT's office, (iii) customs verification reports regarding S....
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....r Section 17 of the Customs Act and allowed under Section 47 of the Act to be cleared for home consumption. Later on, in adjudication of a show-cause notice issued by the Directorate of Revenue Intelligence (DRI), the Collector of Customs, Bombay ordered absolute confiscation of the goods under clauses (d), (l), (m) and (p) of Section 111 of the Act read with Section 3(2) of the Imports and Exports (Control) Act, 1947 and imposed a penalty on the importer under Section 112(a) of the Customs Act. In his order, the Collector noted that the aforesaid licences had been cancelled ab initio by the licensing authority (CCIE) by order dated 18.12.1986 on the ground that the original licensee had obtained the licences fraudulently.He held that there was no licence in existence at the time of import and the goods had been imported in contravention of the provisions of the Imports and Exports (Control) Act and hence liable to be confiscated under clause (d) of Section 111 of the Customs Act. On certain other grounds, the Collector held the goods liable to confiscation under clauses (l), (m) and (p) of the Section also. In an appeal filed by the Corporation against his order,....
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....) Order, 1955. In the wake of this development, the Customs authorities withheld clearance of the goods on the premise that the import was without valid licence, against which the party moved the High Court under Article 226 of the Constitution of India. The licences in question, eventually, came to be cancelled by the CCIE by order dated 30.11.1987 in adjudication of a show-cause notice which had been issued to the original licensee on 11.9.1987. The High Court, after considering the apex court's judgment in Sneha Sales Corporation's case and the Kings Bench decision in Master vs. Miller [4 T.R. 320], held that the effect of fraud was not to render the transaction void ab initio but to render it voidable at the instance of the party defrauded and that the transaction continued to be valid until the said party decided to avoid it. It was also observed that 'the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions governed by common law and not by provisions of any statute'. On the facts of the case i....
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....issued to them alone." A Special Leave Petition (SLP) filed by the Commissioner against the above decision of the High Court was dismissed by the Hon'ble Supreme Court [2008 (227) ELT A29 (SC)] thus: "The Special Leave Petition is dismissed both on the ground of delay as also on merits." 9.6 In the case of Ajay Kumar & Co. vs. Commissioner [2006 (2005) ELT 747 (Tri.-Del)], the assessee had utilised for duty-free import of goods in terms of Notification No.34/97-Cus., two DEPB scrips procured from M/s. Vivek Impex Pvt. Ltd. who had acquired the same from M/s. Parker Industries, the original licensees, who had obtained the scrips from the DGFT. After the licensing authority cancelled the DEPB scrips on the ground that the same had been obtained by M/s. Parker Industries fraudulently, the department initiated action under Section 28 of the Customs Act for recovery of duty from the assessee in respect of the goods imported by them. The assessee contended that they were bona fide purchasers of the DEPB scrips without notice of any fraud committed by the original licensee, that the scrips were valid when used for duty-free clearance of the imported goods and that the demand ....
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....against the Tribunal's LB decision was dismissed by the Hon'ble Supreme Court in Commissioner vs. Hico Enterprises [2008 (228) ELT 161 (SC)]. 9.8 In the case of Commissioner vs. Vallabh Design Products [2007 (219) ELT 73 (P&H)], the assessee had imported goods without payment of duty in terms of Notification No.34/97-Cus. by making use of a DEPB scrip which was transferred to them by M/s. Parker Industries who had obtained it from the Joint DGFT fraudulently on the basis of forged BCERs. When the fraud came to light, the Jt. DGFT cancelled the DEPB. After noting this fact, the Commissioner of Customs ordered recovery of duty with interest from the importer and imposed a penalty on M/s. Parker Industries. He refrained from imposing penalty on the assessee in the absence of any evidence indicating that they colluded with the exporter or purchased the DEPB scrip otherwise than in a bona fide manner.An appeal filed by the assessee against the demand of duty was allowed by the Tribunal following the LB decision in Hico Enterprises case. An appeal filed by the department against the Tribunal's order was dismissed by the Hon'ble High Court (following its own earlier judgment in the case....
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....e made under valid licences. Hence the emphasis placed on 'ab initio' by the JCDR is inconsequential. Yet another case law cited by the learned counsel is on the question whether the rights of a bona fide purchaser of DEPB licence could be affected by its subsequent cancellation. Here again, the answer is against the Revenue and in favour of the importer vide Hico Enterprises (supra). In this context, it needs mention that M/s. Binani Cement Ltd. acted upon the DEPB licences believing that they were legally valid documents under which they could claim benefit. The Revenue also acted upon the transaction with the same belief. I am of the considered view that it is not open to the Revenue to say that the DEPB licences used by the importer were not legally valid documents at the time of the imports." 9.11 In the case of Commissioner vs. Jupiter Exports [2007 (213) ELT 641 (Bom.)], the Hon'ble High Court held as follows:- "With regard to the issue as to whether a license issued by the D.G.F.T. is valid or not is an issue that has to be determined by the D.G.F.T. and not the Customs Authorities. It is now well settled that until the licenses are cancelled by the licensing authority ....
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....been found to be forged whether there was collusion or fraud on the part of the appellant in the issue of the DEPB licences/scrips becomes absolutely immaterial and irrelevant since no credit can be derived from a forged DEPB. The credit is made available on the strength of a valid DEPB. If the DEPB is forged, then the same is non est and therefore, there is no valid DEPB. As such no credit can be derived thereunder. In such circumstances, one may defend his case that one may not be liable for collusion or fraud and exposed to other penalties therefor, but still then one would be liable to pay the duty and interest and for other statutory consequences which one cannot avoid." A SLP filed by the party against the above order of the High Court was dismissed by the Supreme Court vide 2005 (187) ELT A31 (SC). 9.14. In the case of Friends Trading Company vs. Commissioner [2006 (202) ELT 611 (Tri.-Del.)], M/s. Parker Industries had obtained transferable DEPB scrips from DGFT, which were successively transferred to M/s. Shyam International, M/s. Vivek Impex Pvt. Ltd. and M/s. Friends Trading Company (assessee) who ultimately used the scrips for duty-free import of goods in November, 2....
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....; In the case of Golden Tools International vs Joint DGFT [2006 (199) ELT 213 (P&H)], the Hon'ble High Court dismissed two writ petitions filed against the order passed by the Additional Director-General of Foreign Trade [appellate authority under the Foreign Trade (Development & Regulation) Act, 1992] upholding the order passed by the Assistant DGFT cancelling a DEPB ab initio under Section 9 (4) and levying penalty under Section 11 (2) of the said Act. The DEPB was cancelled on the ground that it had been obtained by the petitioner by producing forged documents (BCERs). The Hon'ble High Court rejected the contention that 'cancellation of DEPB ab initio was not contemplated under Section 9 (4) of the Act particularly when the period of its validity was over.' SLP No. 5472/2006 filed against the High Court's judgment was dismissed by the apex court by order dated 3.4.2006. 9.17 In the case of Aafloat Textiles (India) Ltd vs Commissioner [2006 (201) ELT 39 (Tri-Mum)], the appellant had imported nine consignments of gold and silver under Special Import Licences (SILs) purchased from brokers, and cleared the goods by availing exemption under Notification No. 117/94-Cus dated 2....
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....ts of the case, that the equitable doctrine of promissory estoppel was not invocable against the Central Excise authorities in relation to the exemption claimed by the petitioner-company under Notification No. 108/95-CE dated 28.8.1995 (as amended) on the strength of the certificates issued by the respondent (TCAPL). The said Notification exempted from payment of BED and AED (GSI) all excisable goods when supplied to projects financed by the United Nations or an international organization and approved by the Government of India., Where the project was approved by the Government of India for implementation by a State Government, a certificate issued by the executive head of the Project Implementing Authority (TCAPL, in this case) and countersigned by the Principal Secretary to the State Government certifying that the goods were required for the execution of the project and that the project had been duly approved by the Government of India for implementation by the State Government, was required to be produced by the manufacturer to the Assistant Commissioner of Central Excise having jurisdiction over his factory. The certificates issued by TCAPL and produced by the....
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....the DEPBs used by De-Nocil were liable to be considered as fake and non est rather than as genuine documents obtained by the original licensees on the basis of forged shipping bills etc. This contention was raised when it was pointed out by the counsel for De-Nocil that none of the show-cause notices had alleged that the DEPBs themselves were forged or otherwise fake. JCDR also relied on Macnair Export (P) Ltd vs Commissioner [2002 (142) ELT 593 (Tri-Bang)] wherein it had been held that a jurisdictional objection could be raised at any stage of the proceedings. The Commissioner's Civil Appeal against the decision was dismissed by the Supreme Court 'on the ground of delay as well as on merits' vide 2003 (152) ELT A87 (SC). 9.21 In Sneh Exports vs Commissioner [2006 (202) ELT 7 (SC)] it was held that 'a situation contemplated under one statute cannot, in absence of any express or clear intendment, be made to apply or given effect to while applying the provisions of another statute.' The learned JCDR cited this ruling of the apex court in support of his submission that Yasha Overseas (vide supra) was not relevant to De-Nocil's case. He submitted that neither DEPB licence....
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....llows:- "The objective of Duty Entitlement Pass Book Scheme is to neutralize the incidence of basic customs duty on the import content of the export product. The neutralization shall be provided by way of grant of duty credit against the export product. The duty credit under the scheme shall be calculated by taking into account the deemed import content of the said export product as per Standard Input Output Norms and determine basic customs duty payable on such deemed imports. The value addition achieved by export of such product shall also be taken into account while determining the rate of duty credit under the scheme. Under the Duty Entitlement Pass Book (DEPB) scheme, an exporter shall be eligible to claim credit as a specified percentage of f.o.b. value of exports made in freely convertible currency. The credit shall be available against such export products and at such rate as may be specified by the Director General of Foreign Trade by a Public Notice issued in this behalf. Any item except those appearing in the Negative List of Imports shall be allowed for import without payment of basic customs duty, special duty of customs as well as additional duty of customs, a....
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....ra 223 provided a scheme for duty-free import of raw materials against REP licences issued against exports of specified products, and also stated that REP licences issued under the scheme would be freely transferable and would not be subject to "actual user" condition. It was laid down in para 225 that, except for certain specified cases, a licence-holder could transfer the licence in full or part in favour of any other person. Para 226 provided as under: "The transfer of the licence will not require any endorsement or permission from the licensing authority i.e., it will be governed by the ordinary law. Accordingly, clearance of the goods covered by an REP licence issued under this policy, will be allowed by the customs authorities on production, by the transferee, of only the document of transfer of the licence concerned in his name. Whenever an REP licence is transferred, the transferor should give a formal letter to the transferee, giving full particulars regarding number, date and value of the licence transferred and the name and address of the transferee, and complete description of the import items for which the licence is transferred......" [underlining supplied] Now th....
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.... for the reason that the apex court was only treating DEPB scrip and REP licence as "goods" for purposes of Sales Tax laws. The court did not compare the two from the point of view discussed in para (9.25) above. As rightly submitted by the learned JCDR drawing support from the Hon'ble Supreme Court's decision in Sneh Exports, a situation contemplated under Sales Tax Act cannot, in the absence of any intendment, be given effect to while applying the provisions of the Customs Act or the Foreign Trade (Development & Regulation) Act. 9.27. In the present case, the DEPBs were cancelled ab initio by the licensing authority after the appellant utilized them for duty-free clearance of the imported goods in terms of Notification No. 34/97-Cus. In the case of Golden Tools International, the Hon'ble Punjab & Haryana High Court examined the scope of the power conferred on the licensing authority under Section 9(4) of the FT(D&R) Act, and held that the authority had power to cancel a licence whether unutilized or utilized. The Court held as under: "13. There is no substance in the plea that a DEPB cannot be cancelled after it had outlived its life. Sub-section (4) of Section 9 of t....
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....ation in the show-cause notices. The allegation was that the DEPBs were obtained by the original allottees by producing forged SBs and BCERs. Therefore, the Revenue cannot be heard to say that the DEPBs per se were forged. Whether a DEPB is forged is not a pure question of law to be allowed to be raised for the first time at this stage. This situation, however, cannot be decisive for the appellant. The learned counsel has contended that a DEPB issued on the basis of forged documents cannot be void ab initio but only voidable at the instance of the affected party and the same is valid till it is cancelled by the authority which issued it. He has also relied on case law on the point. But the question before us is significantly of a different hue and the same is whether any credit of duty can be said to have ever accrued to, or to have been earned by, the allottee of such DEPB which was obtained by producing forged SBs and BCERs. We repeat -- there was no export, no f.o.b. value, no realization of proceeds in the present case; hence no credit of any duty had accrued to the allottees of the DEPBs. Even if it is assumed that the DEPBs, though issued without actual accrual of....
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.... which were cancelled ab initio by the licensing authority after "utilization" of the scrips by the assessee for duty-free clearance of the goods imported by them. The assessee was held liable to pay the duty leviable on the goods. The SLP filed by the assessee was dismissed by the Supreme Court. A Review Petition filed by them was also dismissed by the Court by order dated 20.01.2010 which reads: "We have gone through the review petition and the relevant documents. There is delay in filing the review petition. In our opinion, no case for review of our order is made out both on the grounds of delay as well as on merits and accordingly the review petition is dismissed". [underlining supplied] Obviously, the above order was passed by the apex court after considering the records of the case. It was an order on merits. Therefore, presumably, the SLP had also been dismissed on merits. If that be so, the High Court's decision can be said to have been affirmed on merits by the Supreme Court. Of late, the same High Court has reaffirmed its view in another case of the same party vide Friends Trading Co. Vs. Union of India 2011 (267) ELT 33 (P&H). It is also per....
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.... No. 34/97-Cus. exempted goods imported into India, from BCD and CVD subject to six conditions, the first three reading as follows:- "(i) That the importer has been issued a Duty Entitlement Pass Book by the Licensing Authority in pursuance of paragraph 7.25 read with paragraph 7.29 of the Export and Import Policy (hereinafter referred to as said Duty Entitlement Pass Book). (ii) The importer has been permitted credit entries in the said Duty Entitlement Pass Book at the rates notified by the Government of India in the Ministry of Commerce for the products exported or has been allowed a provisional credit in the said Duty Entitlement Pass Book by the Licensing authority to be set-off by the credits earned on exports to be subsequently effected; (iii) The said Duty Entitlement Pass Book is produced before the proper officer of Customs for debit of the duties leviable on the goods but for exemption contained herein : Provided that exemption from duty shall not be admissible if there is insufficient credit in the said Duty Entitlement Pass Book for debiting the duty leviable on the goods but for this exemption." [underlining supplied] The other conditions are not relevant to....
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....p; Issue No. I stands answered in the affirmative against the assessee. 10.0.Issue No. II: Whether it was open to the department to demand duty from the appellant under Section 28 of the Customs Act without successfully challenging the assessment by recourse to Section 129 D (2) of the Customs Act: 10.1. In the memo of appeal, the appellant has contended that, as the duty liability on the imported raw materials had been discharged under DEPB Scheme on the basis of assessment of the Bills of Entry by the proper officer of Customs, there is no question of non-levy or non-payment of duty and, therefore, the provisions of Section 28 of the Customs Act were not invocable without recourse to the statutory procedure of revision of assessment. This contention is not acceptable as it is contrary to binding case law viz UOI Vs. Jain Shudh Vanaspati Ltd. [1996(86) ELT 460 (SC)]. Para 5 of the Hon'ble Supreme Court's judgment reads as follows:- "5.?It is patent that a show cause notice under the provisions of Section 28 for payment of Customs duties not levied or short-levied or erroneously refunded can be issued only subsequent to the clearance under Section 47 of the ....
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....y, which has been short-levied, would arise only in the case where the goods were already cleared. Hence we hold that it was open to the Department to demand duty from the appellant under Section 28 of the Customs Act without recourse to any other procedure of revision of assessment. 11.0. Issue No. III: Whether, in the facts of this case, the demand of duty is barred by limitation. 11.1. The learned counsel for the appellant reiterated the relevant submissions of De-Nocil contained in their reply to show-cause notice dated 5.10.2001, which we have summarized in para 4 (d) of this order. In this connection, he relied on Geo Tech Foundations & Constructions vs Commissioner [2008 (224) ELT 177 (SC)] wherein a demand of Central Excise duty was held to be time-barred on the facts of the case. In that case, a show-cause notice which was issued within the normal period of limitation under Section 11A (1) of the Central Excise Act demanding duty for the period, June 1994 to February 1995, was withdrawn and a second show-cause notice was issued on 8.5.1996 for the same purpose by invoking the extended period of limitation on the alleged ground of suppre....
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....the Act. As is indicated in para 70 of this show-cause notice dated 05-10-2001, it was issued to cover all the additional facts of the cases in addition to the facts covered in the 19 less-charge demanded notices issued to De-Nocil for importing consignments against DEPBs obtained by the racketeers on the basis of forged Shipping Bills and BCERs. 11.4. It has been argued by the ld. Counsel that the show-cause notice dt. 05-10-2001 is an independent show-cause notice and the demand of duty raised therein is barred by limitation inasmuch as the notice did not allege any fraud or other ingredients of the proviso to Section 28(1) of the Act against the appellant. In this connection, he has relied on the Hon'ble Supreme Court's judgment in Geo Tech Foundations & Constructions. In that case, a show-cause notice which was issued within the normal period of limitation under Section 11A(1) of the Central Excise Act demanding duty for the period from June, 1994 to February, 1995 was withdrawn and another show-cause notice was issued on 08-05-1996 for the same purpose by invoking the extended period of limitation on the alleged ground of suppression of facts by the assessee. On these ....
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....1.5. As the demand of duty was raised within the normal period of limitation in this case, issue No.III has to be answered in the negative against the appellant. Ordered accordingly. 12.0. Issue No.IV: Whether the appellant is liable to pay interest on duty under Section 28AB of the Customs Act. 12.1. Section 28AB as it stood from the date of its enactment (28-09-1996) to the date of its amendment (11-05-2001) reads as under:- "28AB.?Interest on delayed payment of duty in special cases. - (1) Where any duty has not been levied or has been short levied or erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts, the person who is liable to pay the duty as determined under sub-section (2) of section 28, shall, in addition to the duty, be liable to pay interest at such rate not below ten per cent and not exceeding thirty per cent per annum, as is for the time being fixed by the Board, from the first day of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2) of section....
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....ctual situation, the assessee has to pay interest on the duty amount under sub-section (1) of Section 28AB as amended. However, no interest is leviable for any period prior to 11-05-2001 as sub-section (2) of Section 28AB forbids levy for past period. Accordingly, we hold that the appellant is liable to pay interest on duty under Section 28AB from 11-05-2001 to the date of payment of duty. 13.0. Issue No. V : Whether the penalty imposed on the appellant under Section 114A of the Customs Act is sustainable. 13.1. Section 114A (without the provisos thereto) reads as under: "114A. Penalty for short-levy or non-levy of duty in certain cases -Where the duty has not been levied or has not been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful misstatement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (2) of section 28 shall, also be liable to pay a penalty equal to the duty or interest so determined." ....