TaxTMI 
TaxTMI 
2014 (11) TMI 527
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....al, M/s. Nippon Bearings Pvt. Ltd., M/s. M.M. Corporation, M/s. Nippon Bearings (India), M/s. S.N.M. Enterprises, M/s. Devanti Overseas and a few other firms under the cover of duplicate Advance Licence No. 0111434, dated 22-11-1999 issued in the name of M/s. Amrit Laxmi Machine Works, Mumbai and transferred in the name of these firms. The duplicate licence was issued against the original licence No. 0314593, dated 28-11-1996 which permitted duty free import of 248 pieces of bearings totally valued at approx. Rs. 9 lakhs within the overall value limits of Rs. 50,05,468/- allowed for duty free import and the said licencee had discharged the export obligation in February, 1997. The duplicate licence was issued on the ground that the original licence was lost/misplaced. The duplicate licence application sought enhancement of quantity and value of the raw materials/components and the duplicate licence was issued on 22-11-1999 with an enhanced value of Rs. 1,91,33,433/- and the quantity of import items as per the list attached therein, included 4248 pieces of bearings as against the 248 pieces originally endorsed while the export product remained the same and the export obligation was s....
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....icular specifications but the total quantity was maintained at 248 pieces and the value limit remained unchanged. The condition of non-transferability was retained. The licence was re-validated upto 21-5-1999. (3) A duplicate licence No. 0111434, dated 22-11-1999 was issued against the original licence said to have been lost for a value of Rs. 50,05,468/- and the limiting factors for quantity and value were maintained. However in the list attached to the said duplicate licence, the quantity of bearings eligible for import was shown as 4248 nos. and the value as Rs. 1,91,33,433/- vide list attested on 8-12-1999. The licence was re-validated up to 21-11-1999 with transferability and with the endorsement that the total validity of the licence will not exceed beyond 36 months from the date of issue of original licence. That is, the said duplicate licence was valid only upto 21-11-1999, one day prior to the issue of the duplicate licence. The enhancement in value of the licence was made on 9-12-1999, after the issue of the duplicate licence and after the expiry of the original validity of the licence. (4) The said duplicate licence w....
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....equired for manufacture of export product is permitted to be imported duty free under Notification No. 149/95-Cus., dated 19-9-1995 as amended. Further the import licence had already been utilized for 248 pieces of bearing in May, 1999 itself and there was no balance quantity of bearings available for importation duty free. The licence carried only a balance face value for utilisation for Rs. 13,97,029/-. The licence had also expired on 21-5-1999. However re-validation of the licence was sought on 13-10-1999 on mis-representation of facts and after expiry of the licence on 21-5-1999. (8) The issuance of the licence as duplicate licence and revalidation was obtained by misrepresentation of facts with regard to delay in completion of DEEC audit and non-availability of raw material as per requirement. Further the list of items were also sought to be modified fraudulently. Any licence which is not a true replica of the original licence cannot be called a duplicate licence. The duplicate licence bears the endorsement as duplicate issued against the original licence. Therefore, the duplicate licence cannot exceed in scope than those given in the original licenc....
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....1999 which was received by Shri Shanti Lal Doshi on behalf of the latter firm. Subsequently, a Chartered Engineers Certificate given by Shri J.A. Bharwada was received by the licence holder and on 16-4-1999, the licence holder wrote to the D.G.F.T. for endorsement of the same as transferable licence. (e) Subsequent to the MOU, the amendment sheet No. 5, dated 11-5-1999 was obtained from D.G.F.T. by Shri Ashwin Mehta of Nippon Bearings and Shri Shantilal Doshi based on a Chartered Engineer's certificate issued by Shri J.A. Bharwada. The said Chartered Engineer could not be located at the given address suggesting the bogus nature of the certificate. The said certificate was showing use of 248 pcs. of bearings in the export product; however the series nos. of the bearings differed from the original list of bearings attached to the licence. Shri Ashwin Mehta got the amendment incorporated from the office of D.G.F.T. using the services of one Shri Shailesh Doshi (whose address and whereabouts could not be given by Mr. Mehta). Thus Mr. Ashwin Mehta got the amendment sheet No. 5, dated 11-5-1999 by producing a fraudulent Chartered Engineer's certificate dated 5-....
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....signatures of Shri N.K. Brahmachari of the licence holder's firm and after signature, the same were returned to Sri Mehta for submission to D.G.F.T. (k) On 18th August, 1999, an agreement was signed by M/s. Ankit International with M/s. Amrit Laxmi Machine Works for the sale of the advance licence wherein the balance value available for importation was Rs. 17,03,052/-. (l) On 25-9-1999, Shri Mehta lodged an FIR with the Police authorities reporting loss of original advance licence No. 030014593, dated 22-11-1996 along with DEEC book and at that point of time the licence had not been made transferable. (m) On 27-9-1999, Mr. Ashwin Mehta sent a draft letter to M/s. Amrit Laxmi Machine Works addressed to Jt. D.G.F.T. for issue of a duplicate licence and the said application after obtaining signature from the latter, was submitted to office of Jt. D.G.F.T. Further in response to D.G.F.T.'s letter dated 18-11-1999, M/s. Amrit Laxmi Machine Works vide letter dated 29-11-1999 informed payment particulars of duty and CVD along with interest. However, all the above payments were made by Shri Ashwin Mehta and Shri Man....
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....l, in December, 1999, furnished another Certificate, backdating them as 28th February, 1997 and 1st March, 1997, for a quantity of 4248 nos. of bearings and for a totally different serial nos. than those certified in 1996. In other words, the Chartered Engineers certificate submitted to the licence authorities for enhancing the quantity and nature of the bearings was a manipulated one and the manipulation was managed by Shri Ashwin Mehta and the broker Mr. Ashok Jhaveri. 2.4 On completion of investigation, a show cause notice dated 21st June, 2000, was issued proposing to, - (i) confiscate 1042 nos. of bearings seized (out of 1137 nos. imported) and hold 95 nos. of bearings not seized as liable to confiscation under the provisions of [Section] 111(d) of the Customs Act, 1962 read with Foreign Trade (Development & Regulation) Act, as also under Sections 111(m) and 111(o) of the said Customs Act; (ii) demand differential duty totaling Rs. 65,78,106/- from M/s. Shalin Enterprises, Nippon Bearings P. Ltd., Hiral Overseas, Naman Enterprises, Devanti Overseas, Ankit International and M/s. Amrit Laxmi Machine Works under the pr....
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.... 8521, dated 20-12-1999 78 331887 8776, dated 20-12-1999 90 395567 8722, dated 20-12-1999 52 346444 8659, dated 20-12-1999 12 109495 8525, dated 20-12-1999 62 221234 10788, dated 28-12-1999 156 632638 10783, dated 28-12-1999 192 843875 10772, dated 28-12-1999 96 314135 10765, dated 28-12-1999 54 215857 Crystal Overseas 8768, dated 20-12-1999 36 203685 10769, dated 28-12-1999 100 440399 10771, dated 28-12-1999 50 220200 Shravan Enterprises 10773, dated 28-12-1999 75 417835 10789, dated 28-12-1999 50 220200 2033 9752540 2.6 A show cause notice dated 26th July, 2000 was issued to the importers, CHA, original licence holder and other persons connected with the transactions in respect of the above 29 bills of entry proposing to :- (1) Confiscate the bearings under importation under the provisions of Section 111(d) of the Customs Act, 1962 read with the Foreign Trade (Development ....
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....jected the CIF value declared and enhanced the same to US $ 2670.20, US $ 32832 and US $ 4299.90 respectively under the provisions of Section 14 of the said Customs Act read with the Customs Valuation Rules on the basis of the price list for the said bearings prevailing at the time of importation. He further denied the benefit of Notification No. 31/97 on all the 2033 nos. of bearings and ordered that the goods be assessed to duty on merits. He imposed varying penalties under Sections 112(a) and 112(b) on the noticees except four of them on whom he imposed varying penalties under Section 112(a) alone. He dropped the penal action against Shri J.K. Vakharia. 2.9 It is against these orders that the appellants are before us. 3. The ld. Counsel for M/s. Nippon Bearings Pvt. Ltd. and other importers involved in the matter made the following submissions :- (1) All the imports in respect of which demands have been made vide order dated 31-5-2004 is concerned, the same were made prior to suspension of Advance Licence No. 03014593. As regards the demand confirmed vide order dated 29-6-2004 is concerned, out of 18 bills of entry, only 4 bills of entr....
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....transferability should not be extended the benefit of the said licence, the ld. Counsel submits in Circular No. 31/1997-98, dated 31-7-1997 it has been clarified that in a case where licence has been endorsed with transferability, the validity gets extended for a period of 6 months from the date of endorsement. Even otherwise Para 4.15 of HOP 1997-02, clarifies that where the date of expiry of a licence falls on a day before the last of the month, the licence shall be deemed to be valid for the whole of the month. (5) Ld. Counsel argues that validity of the import licence should be decided with reference to the date of shipment/dispatch of the goods from the supplying country and not the date of arrival of the goods at an Indian port. Para 15.5 of the policy provides that in case the goods are exported by sea, it is the date of Bill of lading which is to be taken as relevant date. In all the imports made in the instant case, the Bill of Lading is much prior to November 30, 1999 and consequently all imports were within the validity period of the licence and were eligible for benefit of the same. (6) The goods being eligible for b....
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....r. Brahmachari trusted Mr. Mehta and Mr. Vora and in good faith acted as per their instructions only because of the MOU. It is also submitted that the appellant and Mr. Brahmachari requested for cross-examination of the persons involved in the scheme of enhancing the value of the licence but the same was denied by the adjudicating authority. In view of the above the ld. Counsel submits that the appeals of M/s. Amrit Laxmi Machine Works and Mr. Brahmachari be allowed by setting aside the penalties imposed on them. 3.2 The ld. Advocate for the CHA firm M/s. East West Freight Carriers Pvt. Ltd. and its director Shri S.A.K. Colombowala makes the following submissions. The CHA or is director were not concerned with obtaining of original or duplicate advance licence. They had acted in the capacity of Customs House Agent for clearance of the goods after obtaining valid IEC code and authorizations from the importers and all the declarations relating to imports were made by the concerned importer (which was attached to the bills of entry) for whom they had undertaken the clearance work. After completing the customs formalities, the imported goods were handed over to the respective t....
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.... to the appellant as they were not heard before passing of the order and no intimation for personal hearing was received by them by the authority who adjudicated the matter finally. As innocent transferee, the appellant's case is covered by the decisions in Goodluck Industries [1999 (108) E.L.T. 818], Hico Enterprises [2005 (189) E.L.T. 135], Ajay Kumar and Co. [2009 (238) E.L.T. 387], Sanjay Sanwarmal Agarwal [2004 (169) E.L.T. 261]. Accordingly it is prayed that the appeal be allowed with consequential reliefs. 4. The ld. AR appearing for Revenue made the following submissions :- 4.1 This is a case of 'fraud'. Original licence was issued for 248 nos. of bearings of specified description for a total value of Rs. 50,05,468/-. Amend sheet No. 5, dated 11-5-1999 was obtained by Sri Ashwin Mehta by producing a fraudulent certificate dated 5-5-1999 issued by the Chartered Engineer Mr. J.A. Bharwada and the said certificate was obtained by Shri Shailesh Doshi. Bearings either having series nos. shown in the original list or the ones having the sr. shown in the amendment sheet only could have been used in the export product and not both of them. 4.2 Though after i....
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....nd the duplicate licence was obtained fraudulently by producing false CE certificates to D.G.F.T. and by creating "front companies" for the purpose. Thus the said licence is not voidable but void abinitio. 4.7 The ld. AR relies, inter alia, on the following judgments in support of his above contention - (1) Denocil Crop Protection Ltd. v. CC (Exp) cited supra; (2) Apar Ltd. v. CC (Exp) vide Final order No. A/229-232/11/CSTB/C-1, dated 12-5-2011 [2012 (276) E.L.T. 534 (Tribunal)]; (3) Friends Trading Co. v. UOI [2010 (254) E.L.T. 652 (P&H)] upheld by Hon'ble Apex Court [2010 (258) E.L.T. A72 (S.C.)]; (4) Golden Tools International v. Jt. D.G.F.T. [2006 (199) E.L.T. 213 (P & H)]; (5) ICI India v. CC (Port), Calcutta [2005 (184) E.L.T. 339 (Cal.)] upheld by Hon'ble Apex Court in 2005 (187) E.L.T. A31 (S.C.); (6) Munjal Showa Ltd. v. CCE, Faridabad [2009 (246) E.L.T. 18 (P&H)]. 4.8 Ld. AR refers to the admissions made by Shri Ashwin Mehta in statement recorded under Section 108 of the Customs Act as per which Shri Mehta informed M/s. Amrit Laxmi that the bearings listed in their licence had no market value and hence it would have to be amended. Accordingly MOU dated 12-....
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....rtificates dated 1-3-1997 and 28-2-1997, without verification, at the behest of Mr. Mehta which were actually used on 5-4-1999 by Shri Mehta. 4.15 Shri Colombowalla has admitted that all the front companies involved in the transaction were managed by Mr. Vora and Mr. Mehta and was aware of the fraud. 4.16 Finally, the ld. AR submits that the goods are liable to confiscation under the provisions of Section 111(d) (for violation of Exim Policy), 111(m) (for wrong declaration of bearings in the DEEC book and Advance Licence) and 111(o) for violation of conditions stipulated in Notification Nos. 149/95 and 31/97. 4.17 He also relies on the judgment in Om Prakash Bhatia case. Accordingly the ld. AR strongly pleads for upholding the impugned order. 5. In their rebuttal to the ld. AR's submissions, the ld. Counsel for the appellant importers submits that the decisions relied upon by the ld. AR for revenue were dealing with cases where forgery was involved in respect of documents submitted for obtaining the licence. None of the said decisions related to dealing with licences obtained by misrepresentation of facts before the Licensing authorities. Therefore t....
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....204 1 UCP 210 1 UCP 217 1 22312 1 22318 1 22330 2 22340 1 23044 44 23052 62 23056 80 23060 31 23064 23 Total 248 The amendment further stated - "There is no change in total quantity of bearings allowed and in the total CIF value of the licence. Individual CIF value restriction shown against each import item stands deleted. Import will be made within the quantity mentioned against each import item and within the overall CIF value of the licence". The above amendment was obtained on the basis of a Chartered Engineer's certificate dated 5-5-1999 issued by Mr. J.R. Bharwada who stated the above bearings or equivalent of these have been used in the exports shipment of machines vide shipping bill No. 718767, dated 13-2-1997, 726529 dated 28-2-1997 and 818856 dated 28-2-1997. 6.6 Vide letter dated 13th May, 1999, M/s. Amrit Laxmi Machine Works had requested Sahar ACC customs for release of 160 nos. of bearings [23052 - 62 nos + 23044 - 44 nos. + 23064 - 23 nos. + 2306....
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.... holder may transfer : (a) The licence in full, if no imports have been made; (b) The licence in part, excluding the quantity and value of imports already made; and (c) The materials or the balance thereof already imported. (ii) Upon endorsement of transferability, issue of duplicate licence, enhancement in the CIF value or amendments including re-validation shall not be allowed. (iii) Upon endorsement of transferability, a duty free licence shall be valid for the balance period of its validity or for a period of six months, whichever is later. However, licences submitted for endorsement of transferability after 30 months of the issuance of the licence shall have a validity upto a maximum period of 36 months from the date of issuance." 6.9 In the instant case, it is on record that the original licence was lost in September, 1999. Hence the said licence could not have been handed over for endorsement of transferability. Only the duplicate licence could have been handed over for transferability and the same could have been done only after its issuance, that is, on or after 22-11-1....
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..... Vide amendment sheet dated 11-5-1999, the number of bearings eligible for import was retained at 248 only but the serial nos. of the bearings were modified. In other words, as per the original licence read with the import list, only 248 nos. of bearings were physically incorporated in the export product and only these were eligible for duty free import under the said licence. From the records, it is seen that this quantity of bearings had already been imported by May, 1999. Therefore, as per the policy, no further bearings could have been allowed to be imported against the said licence. Therefore, endorsement made on 8-12-1999 by the licensing authority in the duplicate licence issued on 22-11-1999 allowing import of 4248 nos. of bearings was not permissible under the EXIM policy as it stood at the relevant time. Further as per para 7.3, the licence could not have been made transferable since the advance licence is subject to actual user condition and it is non-transferable even after completion of export obligation. Thus the endorsement of transferability made vide amendment sheet dated 9-12-1999 was not sanctioned by law and was in complete disregard of the EXIM policy provisio....
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....t case, in the case advance licences with actual user condition, the Exim policy prohibited transferability even after discharge of export obligation. Therefore, if the licensing authority endorses transferability on such a licence, the said action seriously offends the public policy and hence the same is void ab initio. So is the case with respect to revision of list of items for import under the advance licence. Only materials which are physically incorporated in the export product or consumables used in the manufacture of export product is permitted to be imported under the advance licence. Therefore, the licensing authority cannot permit any items for import duty free under the advance licence which do not satisfy the above condition. If any such endorsement is made, the same violates the public policy and such endorsement is void ab initio. 6.17 The Hon'ble Apex Court had an occasion to examine and deal with fraud in Commissioner of Customs (Preventive) v. Aafloat Textiles P. Ltd. [2009 (235) E.L.T. 587]. The Hon'ble Apex Court made the following observations. "10. A "fraud" is an act of deliberate deception with the design of securing something by taking unfai....
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....eld; thus the entire facts were misdeclared and misrepresented and a duplicate licence was obtained. These actions on the part of the appellants in the instant case clearly satisfies the definition of "fraud" as defined by the Hon'ble Apex Court and the licence so obtained becomes void ab initio. 6.18 The purpose and object of issue of advance licence is for duty free imports, subject to actual user condition as stated in paragraph 7.3(a) of the Exim Policy. Such licences are exempted from payment of Basic customs duty, Surcharge, Additional Customs Duty, Anti-dumping duty and Safeguard duty, if any. Therefore in order to avail the benefit of advance licence, such a licence should be valid at the time of assessment of customs duty. The relevant date for determination of rate of duty and customs valuation is the date of filing of bill of entry. Therefore, at the time of filing the bill of entry, a valid Advance licence in the name of the importer should exist for availing the benefit of duty free import under the said licence. 6.19 In respect of 15 bills of entry dealt by order dated 31-5-2004, it is seen that 5 out of the 15 were filed on August, 1999 and the balanc....
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.... no valid licence in the name of the importers so as to enable them to avail the benefit of the advance licence. Therefore, in respect of all the imports made in this case, there was no valid advance licence in favour of the importers at the time of importation and therefore, the denial of benefit of exemption under Notification No. 31/97-Cus., dated 1-4-1997 was correct in law and we uphold the same. 6.21 The ld. Counsel for the appellant has strongly argued that the appellants are entitled for duty exemption inasmuch as the licence was made transferable and the licence stood cancelled only on 24-12-1999. Therefore, the imports made prior to this date are eligible for duty exemption. He has submitted that the licence in this case is only voidable and not void and has relied on a number of decisions of the Hon'ble Apex Court and Hon'ble Bombay High Court. In the Sneha Sales Corporation case decided by the Apex Court, relied upon by the ld. Counsel, it was held that in a case where the licence is obtained by mis-representation or fraud, it is not rendered non est as a result of its cancellation so as to result in the goods that were imported on the basis of the said licences....
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....is filed. Therefore, in order to avail the benefit of duty exemption, there should be valid advance licence in the name of the importer at the time of filing of the bill of entry. In the instant case we have already held that no such licence existed and accordingly, we reject this contention. 6.23 The next issue for consideration is whether the goods imported under the aforesaid advance licences vide 44 Bill of Entries covered by the two orders dated 31-5-2004 and 29-6-2004 and part of which was seized at Delhi on 28-12-1999 and 3-1-2000 are liable to confiscation under the provisions of Section 111(d), 111(m) and 111(o) of the Customs Act, 1962 as held by the adjudicating authority. Under Section 111(d) any goods which are imported or attempted to be imported or are brought within the Indian Customs waters for the purpose of being imported contrary to any prohibition imposed by or under this Act or any other law for the time being in force shall be liable to confiscation. Section 111(m) deals with goods which do not correspond in respect of value or any other particular with the entry made under this Act shall be liable to confiscation and 111(o) deals a situation where an....
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....of the goods as held in the above two orders. 6.24 The importers have been given option to redeem the goods by payment of fine under Section 125 of the Customs Act, 1962. While imposing the fine, the adjudicating authority has kept in mind reduction in the market value of the goods, deterioration of the quality of the goods, reduction in the rates of the duty, demurrages incurred and after taking into account these facts into consideration, he has imposed a redemption fine which is approximately 10% of the CIF value of the goods. Considering the fact that bearing is an item which fetches high premium in the market, the redemption fine imposed by the adjudicating authority in the instant case cannot be said to be unreasonable. Therefore, we uphold the redemption fine imposed by the adjudicating authority in lieu of confiscation in the above two orders. 6.25 The adjudicating authority has also confirmed the demand of differential duty amounting to Rs. 65,78,106/- in respect of the 15 bills of entry covered in order dated 31-5-2004 by denying the benefit of Notification No. 149/95, dated 19-9-1995 on the ground that the importers did not have a valid advance licence co....
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....under Section 111 or abets the doing or omission of such an act. Penalty under Section 112(b) is imposed when a person acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111. The penalty imposable in the case of dutiable goods other than prohibited goods is an amount not exceeding the duty sought to be evaded on such goods or Rs. 5,000/- whichever is greater. The penalties imposed on the various persons involved are much less than the ceiling prescribed. Since it is a case of organized racket in advance licensing scheme with an intent to evade huge amount of Customs duty by suppression and fraud, we are of the view that no leniency needs to be shown in the instant case with respect to the quantum of penalty imposed on the appellants. Accordingly, we uphold the penalties imposed on all the appellants under Sections 112(a) and 112(b) of the Customs Act, 1962. The importers (transferees of the licence) in this case very well knew that the original licence issued was a lice....
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....e entire matter is clearly established and he is liable to penalty and we hold accordingly. 6.28 As regards the liability to confiscation of the goods and consequent penalty, we rely on the decision of the Hon'ble High Court of Madras in Commissioner of Customs v. CESTAT, Chennai [2009 (240) E.L.T. 166]. The facts involved in that case was the respondent therein imported four consignment of copper scrap totally weighing 86.963 MTs in four containers and availed benefit under Notification No. 48/99-Cus., dated 29-4-1999 which permitted import duty free under the annual advance licence with actual user condition. The licence was obtained by fraud inasmuch as the appellant did not have any factory for manufacture of goods as envisaged in the licence. The respondent contested that the goods are not liable to confiscation under Section 111(o) as there is no misdeclaration in the import documents and consequently there is no liability to penalty. The adjudicating authority held the goods liable to confiscation and imposed fine and penalty. The same was challenged before the Tribunal which held that the goods are not liable to confiscation under Section 111(o) and importer not lia....