TaxTMI 
TaxTMI 
2013 (5) TMI 383
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....aded by traders, brokers and sub-brokers to make that available to importer appellants causing detriment to the interest of Revenue for which they faced different consequences of law by the impugned orders as mentioned against each hereunder :- Arising out of Order-in-Original No. 6934/07 dt. 26-11-2007 passed by the Commissioner of Central Excise (Adjudication), Chennai S. No. Appeal No. Appellant and Respondent Status Duty (Rs.) Penalty (Rs.) 1. C/63/08 K.I. International Ltd. (formerly Kothari Impex) v. CC (Sea-Export) Chennai Importer 45,33,549/- 12,00,000/- 2. C/74/08 Sashi Prakash Lohia (Pankaj Impex) v. CC (Sea-Export) Chennai Broker/ Trader in Licence/ TRA NIL 25,00,000/- 3. C/183/08 Satish Mohan Agarwal v. CC (Sea-Export) Chennai Broker in Licence/ TRA NIL 25,00,000/- Arising out of Order-in-Original No. 6933/07 dt. 26-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Duty Penalty 4. C/19/08 Neemichand Jain v. CC (Sea-Export) Chennai Licence Dealer/ Broker NIL 3,50,000/- 5. C/73/08 Sashi Prakash Lohia (Pankaj Impex) v. CC (Sea-Export) Chennai Broker/ Trader NIL 12,00,000/- 6. C/86/08 Sri De....
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....l Systems Ltd. v. CC (Sea-Export) Chennai Importer 25,79,845/- 6,00,000/- 23. C/181/08 Satish Mohan Agarwal v. CC (Sea-Export) Chennai Broker NIL 12,50,000/- Arising out of Order-in-Original No. 6930/07 dt. 26-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Duty Penalty 24. C/70/08 Sashi Prakash Lohia v. CC (Sea-Export) Chennai Trader in licence NIL 15,00,000/- 25. C/17/08 Neemichand Jain v. CC (Sea-Export) Chennai Broker/ Dealer in licence NIL 3,00,000/- 26. C/85/08 M.K. Oil Corporation v. CC (Sea-Export) Chennai Importer 29,83,127/- 7,50,000/- 27. C/179/08 Satish Mohan Agarwal v. CC (Sea-Export) Chennai Broker NIL 15,00,000/- Arising out of Order-in-Original No. 6931/07 dt. 26-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Duty Penalty 28. C/400/07 C. Mukesh Balar (Maruthi Enterprises) v. CC (Sea-Export) Chennai Broker/ Trader in Licence NIL 2,00,000/- 29. C/401/07 Suresh Kumar Jain (PS-Q Corpn. India) v. CC (Sea-Export) Chennai Broker NIL 2,00,000/- 30. C/402/07 Suresh (Raksha Exports) v. CC (Sea-Export) Chennai Broker/ Trader NIL 2,00,000/-....
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....Export) Chennai Broker/ Commission Agent NIL 5,00,000/- Arising out of Order-in-Original No. 6944/07 dt. 30-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Duty Penalty 48. C/409/07 Suresh (Raksha Exports) v. CC (Sea-Export) Chennai Broker NIL 70,000/- 49. C/410/07 Ashok Kumar (Anmol Exports/Ashok Impex) v. CC (Sea-Export) Chennai Trader/Broker NIL 70,000/- 50. C/75/08 S.P. Lohia (Prop. Pankaj Impex) v. CC (Sea-Export) Chennai Trader/Broker NIL 75,000/- 51. C/184/08 Satish Mohan Agarwal v. CC (Sea-Export) Chennai Broker NIL 75,000/- Arising out of Order-in-Original No. 6948/07 dt. 30-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Duty Penalty 52. C/396/07 Sohan Lal (Prop. Jaimaya Enterprises) v. CC (Sea-Export) Chennai Trader in Licence NIL 1,50,000/- 53. C/397/07 Ashok Kumar Jain (Anmol Exports/ Ashok Impex) v. CC (Sea-Export) Chennai Trader in Licence NIL 1,50,000/- 54. C/398/07 P. Suresh Kumar (Raksha Exports) v. CC (Sea-Export) Chennai Trader in Licence NIL 1,50,000/- 55. C/408/07 Neemichand Desariia (Ganapathy Enterprises) v. CC (Sea-Export)....
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....sion of Tribunal. 3. Duty Entitlement Pass Book (DEPB) and Telegraphic Release Advice Scheme 3.1 Duty Entitlement Pass Book (DEPB) is a scheme formulated under Para 7.43 of the Handbook of Procedure of EXIM Policy 1997-2002 and Para 4.3 of Handbook of Procedure of EXIM Policy 2002-2007 by the Government of India issued under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992, with a view to facilitate and augment foreign trade by genuine importers. The object of the said scheme is to neutralize the incidence of Customs duty on the import content of the export product. The neutralization is provided by way of grant of duty credit against the export products. 3.2 Under the DEPB scheme, an exporter may apply for credit with the DGFT at the port of export. The credit shall be available against such export products and at such rates as may be specified for import of raw materials, intermediates, components, parts, packaging material etc. According to the Policy, the DEPB scrips issued against genuine exports are freely transferable and such scrips are permitted to be utilized to make import at the port specified therein, which is the port of expo....
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....cence. 5. Conduits trading in fake, false, forged and fabricate 5.1 Shri Sashi Prakash Lohia, Proprietor of M/s. Pankaj Impex was found to be main conduit in trading the false, forged, fake and fabricated TRAs with DEPB scrips mentioned therein in Chennai getting that from Satish Mohan Agarwal from Delhi having his address No. 1598, Main Bazar, Paharganj, New Delhi 110 055. Therefore, his statement u/s 108 of Customs Act, 1962 was recorded on 17-11-2004 which revealed the story of investigation. He stated that he was trading in DEPB scrips in the name of M/s. Pankaj Impex having office at No. 1, 6th floor, Alsa Towers, P.M. Road, Kilpauk, Chennai-10 and also trading in REP/DEPB licence in the name of M/s. Sashi Trading Corporation from No. 83, NSC Bose Road, Chennai 600 001. After closing down the business activity of Sashi Trading Corporation, he started Pankaj Impex in the year 1996 and with his wife as Proprietrix, he started another firm in the name of M/s. Prabha International. He got IE code for both firms and was purchasing DEPB scrips from Satish Agarwal of New Delhi, which were given to him at lower values. Shri Satish Agarwal was also selling him DEPB scrips u....
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....3-05, 25-4-05 & 27-5-05. But they did not respond to the same. Therefore, complaint under Section 174 & 175 of Indian Penal Code read with Section 108 of the Customs Act, 1962 was filed in the Court of learned Additional Chief Metropolitan Magistrate Court, Economic Offence-I, Egmore and they were exposed to criminal prosecution. 6. Summary of arguments on behalf of Appellants Learned counsels appearing on behalf of Appellants summarily argued as under : (1) The DEPB scrips/TRAs were genuine and the appellants being buyers thereof for proper consideration cannot be faulted and they are not liable to penal consequences of law. (2) The DEPB scrips/TRAs acquired were utilised for discharge of customs duty on the genuine imports for which that cannot be questioned when Customs clearances were allowed at the time of import. So also negligence of Customs Authorities to detect discrepancy in the scrips and TRAs shall not make appellants liable to penal consequences. (3) When the DEPB scrips/TRAs were rightly issued by the port of registration, that cannot be questioned and benefit thereof cannot be denied nor questioned for n....
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....to the conduct of the former either by words or letter. 8.3 It has been held by Apex Court in the case of Commissioner of Customs, Kandla v. Essar Oil Ltd. - 2004 (172) E.L.T. 433 (S.C.) that by "fraud" is meant an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill-will towards the other is immaterial. The expression "fraud" involves two elements, deceit and injury to the deceived. Undue advantage obtained by the deceiver, will almost always call loss or detriment to the deceived. Similarly a "fraud" is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. (See S.P. Changalvaraya Naidu v. Jagannath [1994 (1) SCC 1]. 8.4 In a leading English case i.e. Derry and Ors. v. Peek (1886-90) All ER-1 what constitutes "fraud" was described thus : (All ER p. 22 B-C) "fraud" is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false". This aspect of t....
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....have been made suspiciously or under surmise but seems to have been based on cogent evidence. 10.3 When the importer appellants acquired DEPB scrips from market without being acquired from original acquirer, as an abundant caution, to avoid evil consequence of fraudulently obtained scrips, could have safeguarded their interest causing enquiry from JDGFT as to genuineness of the scrips. But that was not done. Such appellants failed to acquire title over the scrips but became beneficiary of ill got scrips. Notificational benefit was availed at the cost of public exchequer which is required to be surrendered for the undue gain made. Bona fides were not established by the appellants for which they submitted themselves to the loss of duty caused to Revenue by their act of use of DEPB scrips not acquired legitimately. 10.4 The observations of the former Lord Chief Justice of England, Sir Edward Coke, more than three centuries ago, that "fraud avoids all judicial acts, ecclesiastical or temporal", noticed by the Supreme Court in S.P. Chengalvaraya Naidu v. Jagannath, AIR 1994 SC 853, are apt for the instant case. The Apex Court has also observed that an act of deliberate decep....
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.... (244) E.L.T. 527 (Bom.) that forged licensees, in law are no licensees. The argument regarding non-applicability of Section 28AAA of Customs Act, 1962 retrospectively does not get appreciation in a fraud involving the deals of fake DEPBs/TRAs which nullifies everything and makes the importers liable to pay duty and penalty. 11. Order of Settlement Commission whether settles the dispute of litigants who were not before the commission It was plea of the appellants covered by adjudication order Nos. 6949/07 dated 30-11-2007, 6947/2007, dated 30-11-2007, 6944/07, dated 30-11-2007, 6948/2007, dated 30-11-2007, 6946/2007, dated 30-11-2007 and 7453/2007, dated 25-3-2008 that the importers covered by the said adjudications having settled their dispute before Settlement Commission and immunity from penalty and prosecution having been granted to them, the trader, broker and sub-broker appellants covered by those adjudications cannot be called upon to pay penalty out of same adjudication. Hon'ble Supreme Court in the case of S.P. Chengalvaraya Naidu v. Jagannath reported in (1994) 1 SCC 1 laid down the law that the principle of "finality of litigation" cannot be pressed to the extent ....
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.... enquired from Mumbai Customs or brought to notice of DRI or Chennai Customs. But they did not. Silence was equivalent to speech of their concealed plan to cause subterfuge to Revenue causing less of duty. 12.2 Penal provisions are enacted to suppress the evil of defrauding Revenue which is an anti-social activity adversely affecting the public revenues, the earning of foreign exchange, the financial stability and the economy of the country. Such provisions should be construed in manner which would suppress the mischief, promote their object, prevent their subtle evasion and foil their artful circumvention. Thus construed, the term fraud within the meaning of these penal provisions is wide enough to take in its fold any one or series of acts committed. Such act or acts being reasonably proximate to the clearance of imports duty free on the basis of forged documents, the trader, broker and sub-brokers of fake, false and fabricated TRAs containing DEPB scrips are liable to penalties under law. 12.3 Evidence Act does not insist on absolute proof for the simple reason that perfect proof in this imperfect world is seldom to be found. That is why under Section 3 of the Eviden....
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....erprises - 2001 (130) E.L.T. 404 (S.C.) and in the case of Delhi Development Authority v. Skipper Construction Company (P) Ltd. - AIR 1996 SC 2005. Cheating was done to claim undue claim of DEPB credit and Revenue was defrauded. 13.3 The fraud committed by the appellants void all judicial acts, ecclesiastical or temporal and the importer appellants had no title over the DEPB scrips/TRAs for which they are liable to make good of losses suffered by Revenue. Tribunal in the case of CC v. D.M. Enterprises - 2007 (213) E.L.T. 414 held that fraudulently obtained DEPB credits has no title on the face of law and it was held in DIC India Ltd. v. CC - 2008 (226) E.L.T. 545 that forged and fake DEPB credit/TRAs do not confer any title on the claimant and others who use such ab initio void credits. In the case of ICI India Ltd. v. CC - 2009 (240) E.L.T. 290, it has been held by Tribunal that transaction based on fraud continues to be tainted by the vice and the person committing the fraud is precluded from deriving any benefit. Similar view was also expressed by Tribunal in the case of Kamala Metachem v. CC - 2007-TIOL-2247- CESTAT-KOL and in the case of M/s. Synotex Industries v. CC - 2....
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....at in such cases the extended period for recovery of duty under Section 28(1) of the Customs Act would be applicable. In this regard, paras 23, 24, 25, 26, 27, 28 and 29 of this judgment are reproduced below :- "23. Caveat emptor, qui ignorare non debuit quod jus alienum emit. A maxim meaning "Let a purchaser beware; who ought not to be ignorant that he is purchasing the rights of another. 24. As the maxim applies, with certain specific restorations, not only to the quality of, but also to the title to, land which is sold, the purchaser is generally bound to view the land and to enquire after and inspect the title deeds; at his peril if he does not. 25. Upon a sale of goods, the general rule with regard to their nature or quality is caveat emptor, so that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, expressed or implied. It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all risk to def....
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....e with clean hands. No evidence gathered by Revenue were demolished by appellants by any means. 14.2 Materials on record revealed that neither investigation nor process of investigation was challenged to be perverse. Modus operandi of all the appellants proved to be mala fide due to various dubious practices adopted and secret arrangements made by them through fake TRAs presented to Chennai customs and clearance of imports were made without genuine DEPB scrips acquired. What was apparent was not proved to be real. Chain of evidence established nexus of the persons involved to serve their ill will. Investigation brought out entire deliberate acts and omissions of appellants to the fold of law. Nexus of each other and their close proximity came to light by cogent evidence gathered by DRI during investigation and very minutely evaluated and assessed by learned Adjudicating Authority in the adjudication process. 14.3 Crystal clear factual findings of the learned Adjudicating Authority and echoing evidence on record do not demonstrate that adjudications were made suspiciously or under surmise. All pleadings of the appellants were ill-founded. Show Cause Notice properly broug....
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.... Licence Dealer/ Broker 1,75,000/- 3. C/73/08 Sashi Prakash Lohia (Pankaj Impex) v. CC (Sea-Export) Chennai Broker/ Trader 6,00,000/- Arising out of Order-in-Original No. 5659/06 dt. 21-12-2006 passed by the Commissioner of Customs (Export), Chennai S. No. Appeal No. Appellant Status Reduced Penalty (Rs.) 4. C/65/07 Sohan Lal, Prop. Jaimaya Enterprises v. CC (Sea-Export) Chennai Broker/ Trader in Licence 50,000/- 5. C/66/07 P. Suresh Kumar (Raksha Exports) v. CC (Sea-Export) Chennai Broker/ Trader in Licence 50,000/- Arising out of Order-in-Original No. 7280/08 dt. 5-3-2008 passed by the Commissioner of Customs (Seaport-Export), Chennai S. No Appeal No. Appellant Status Reduced Penalty (Rs.) 6. C/115/08 Neemichand Jain v. CC (Sea-Export) Chennai Broker/ Dealer in licence 1,50,000/- 7. C/171/08 Sashi Prakash Lohia (Prop. Pankaj Impex) v. CC (Sea - Export) Chennai Broker 2,50,000/- 8. C/209/08 Pradeep Kabra (Time Enterprises) v. CC (Sea-Export) Chennai Trader in DEPB Licence 1,00,000/- Arising out of Order-in-Original No. 6875/07 dt. 16-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Reduced Penalt....
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....r-in-Original No. 6949/07 dt. 30-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Reduced Penalty (Rs.) 24. C/20/08 Neemichand Jain v. CC (Sea-Export) Chennai Broker 30,000/- 25. C/80/08 Sashi Prakash Lohia (Pankaj Impex) v. CC (Sea-Export) Chennai Broker/ Trader in licence 32,500/- 26. C/208/2008 Pradeep Kabra (Time Enterprises) v. CC (Sea-Export) Chennai Trader in EXIM scrips 30,000/- Arising out of Order-in-Original No. 6947/07 dt. 30-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Reduced Penalty (Rs.) 27. C/16/08 Neemichand Jain v. CC (Sea-Export) Chennai Dealer/ Broker of Licence 1,75,000/- 28. C/78/08 Sashi Prakash Lohia (Prop. Pankaj Impex) v. CC (Sea-Export) Chennai Trader in DEPB Licence 2,50,000/- Arising out of Order-in-Original No. 6944/07 dt. 30-11-2007 passed by the CCE (Adjudication), Chennai S. No. Appeal No. Appellant Status Reduced Penalty (Rs.) 29. C/409/07 Suresh (Raksha Exports) v. CC (Sea-Export) Chennai Broker 35,000/- 30. C/410/07 Ashok Kumar (Anmol Exports/Ashok Impex) v. CC (Sea-Export) Chennai Trader/ Broker 35,000/- 31. C/75/08 ....