AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 329
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....M C/284/12-MUM C/318/12-MUM C/322/12-MUM C/392/12-MUM C/408/12-MUM C/422/12-MUM C/427/12-MUM C/428/12-MUM C/429/12-MUM C/430/12-MUM C/432/12-MUM C/433/12-MUM C/434/12-MUM C/436/12-MUM C/442/12-MUM C/443/12-MUM C/461/12-MUM C/462/12-MUM C/464/12-MUM C/465/12-MUM C/471/12-MUM C/474/12-MUM C/475/12-MUM C/476/12-MUM C/486/12-MUM C/488/12-MUM C/489/12-MUM C/491/12-MUM C/514/12-MUM C/515/12-MUM C/517/12-MUM C/543/12-MUM C/579/12-MUM C/581/12-MUM C/583/12-MUM C/669/12-MUM C/683/12-MUM C/686/12-MUM C/687/12-MUM C/689/12-MUM C/690/12-MUM C/692/12-MUM C/696/12-MUM C/701/12-MUM C/705/12-MUM C/706/12-MUM C/707/12-MUM C/708/12-MUM C/734/12-MUM C/85411/13-MUM C/85413/13-MUM C/85410/13-MUM C/85415/13-MUM C/85416/13-MUM C/85417/13-MUM C/85418/13-MUM C/87732/13-MUM C/87985/13-MUM C/87731/13-MUM ARAWALI ENTERPRISES JIL PACK CELLO HOME PRODUCTS BHILOSA INDUSTRIES PVT LTD WIMPLAST LTD SHIVAKRITI IMPEX PREETY ENTERPRISES LUCKY TRANSPORT DEEP TRANSPORT RAMANAND KEDARNATH INTERNATIONAL CRYSTAL CROP PROTECTION PVT LTD ADITYA RAYON LAXMI TEXTILES SHREE BALAJEE TEXTILE MILLS SHRI YATIN AUDIO VISION KASYAP INTERPRISES SILVER WING INVESTMENT & TRADING CO PVT LTD RAVI ORGANICS LTD VARDHAMAN STAMPING P....
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....alue of their exports significantly and obtained the DEPB Scrips/DFIA Licenses against such exports. The DEPB scrips were sold to various transferees on the basis of endorsement of transferability by the DGFT. Appellants in the present appeals are such transferees of the DEPB scrips, DFIA licenses and Focus Market scrips. The transferees imported the goods against such scrips and availed the duty credit/exemption available under the scrips under Notifications such as 89/2005-Cus, 40/2006-Cus. The gross inflation in the FOB value of exports resulted in excess duty credit availability on the DEPB scrips. Importers/transferees who made imports under these scrips could therefore avail the credit obtained fraudulently resulting in loss of Revenue to the Government. The investigation by DRI culminated in issue of show cause notices to the exporters and the transferees/importers of the DEPB/DFIA documents. The impugned orders have been passed holding the goods exported and imported liable to confiscation. The demand of duty has been confirmed against the importers i.e. transferees of the scrips under Section 28 alongwith confirmation of penalties under Section 28AB. Penalties have also be....
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....as transferees and also when the goods were imported and cleared and the subsequent suspension or cancellation of the licenses cannot affect the imports made prior to such suspension and cancellation. Reliance was placed in this behalf on the following judgments: (a) East India Commercial Company Ltd vs. CC - 1983 (13) ELT 1342. (SC) (b) UOI vs. Sampat Raj Dugar - 1992 (58) ELT 163 (SC) (c) CC vs. Sneha Sales Corporation - 2000 (121) ELT 577 (SC) (d) Chemi Colour Agency and another vs. CC IE - 1987 (30) ELT 175. (e) M. Lallubhai & Co v Collector 1989 (43) ELT 127: (f) K. Uttamlal (Exports) Pvt. Ltd. vs. Union of India - 1990 (46) ELT 527. (g) Kantilal Manilal and Company versus Union of India - 1994 (69) ELT 240 (h) Wearon Exports Private Limited vs. Union of India - 2004 (163) ELT 149 (i) CC v Jupiter Exports - 2007 (213) ELT 641 (j) Taparia Overseas P. Ltd v UOI - 2003 (161) ELT 47 (k) Ajay Kumar & Co v CC - 2006 (205) ELT 747 upheld in 2009 (238) ELT 387. (l) CC v Patiala Castings P. Ltd - 2012 (283) ELT 269 (m) Binani Cement Ltd. Vs. CC - 2010 (259) ELT 247 uphel....
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....LT 149] and CC Vs. Jupiter Exports [2007 (213) ELT 641]. And the decisions of Jurisdictional High Court should be preferred. (viii) Only condition of the relevant notification which applies to the transferee is that the license should have been made transferable and other conditions of the Notification do not apply to the transferee. Therefore the benefit of Notification would be available to the transferee as held in the case of Goodluck Industries Ltd. Vs. CC [1999 (108) ELT 818]. This decision has been affirmed by the Hon'ble Supreme Court in [2000 (120) ELT A66 (SC)]. This view has also been approved by the Supreme Court in Jindal Dye Intermediate Ltd. Vs. CC [2006 (197) ELT 471 (SC)] (ix) In all the present cases, the Notice is beyond the normal period of limitation. Admittedly there is no allegation, evidence and finding of any fraud or mis-statement or willful suppression of facts on the part of the appellants and hence the larger period of limitation of 5 years prescribed in the proviso to Section 28 (1) could not be invoked against the appellants. The allegation of fraud is against the original license holder and not against the appellants. Accordingly as laid do....
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....m the original licensee-exporters. 5.1 Apart from the above submissions which all counsels subscribe to, some counsels urged the following points: (a) The SLP in the case of Friends Trading Co (supra) was dismissed in limine. The importer is not a part to the fraud so the judgement of Golden Tools (supra) will apply. (b) In case of Rathi Synthetics the imported goods were bought on High sea sale basis. Transferee had no knowledge about the fraud committed by the exporter. (c) In case of Miletha Impex it is stated that they neither received show cause notice nor opportunity of personal hearing. Therefore principles of natural justice have been violated. Further duty demanded is more than duty payable on the goods imported. (d) In case of M/s. Ineos ABS (India) it is stated that M/s. Nidhi Textiels who were one of the exporters had obtained the DEPB scrips fraudulently by falsification of records. According to Ld. Counsel, the judgment relied upon by the Ld. Special Counsel in the case of Friends Trading Company (supra) is based on different footing. This judgment distinguished the High court judgment in the case of Taparia Overseas holding that in the later judgment D....
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....ty for their wrong doing. (i) In case of Wimplast and M/s. Cello Home Products, it was contended that the exporter in this case is the person who has held himself to be the importer in terms of DEPB scheme and definition of importer under Section 2(26) of the Customs Act. He relied on Sapuja Exim Ltd. Vs. Commissioner - Customs Appeal No. 501-504 of 2006 and on Shraveni Impex (supra). It was also submitted that in the case of Friends Trading Company relied upon by the Revenue, the show cause notice was issued only to the importer for recovery of custom duty. 6. Shri. V.K. Singh, Ld. Special Counsel appearing on behalf of Revenue made following submissions. (i) The investigation clearly established that the said exporters had indulged in the act of exporting low value made ups and fabrics in the guise of high value made ups and fabrics deliberately with an intention to avail undue and illegal exports benefits under DEPB/DFIA schemes. In doing so, the exporters created fictitious/bogus records of purchase (invoices) of the goods eventually exported by them, so as to create a fictitious record of having purchased the goods from fictitious/non existing local suppliers at much ....
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....gh Court. And Hon'ble CESTAT Final Order in the case of Pee Jay International Vs. Commissioner of Customs, Amritsar. (iii) Rather than asking the legal system to allow them custom duty exemption on the DEPB Scrips obtained fraudulently and cancelled ab-inition, a more appropriate course of action for them would be to claim damages from the sellers of tainted scripts. Further as held in K.I. International Ltd. Vs. CC 2012 (282) ELT 67 (Tri-Chennai) an assessee acting in defiance of law has no right to claim innocence when he fails to exercise due care and diligence. The contention of the appellants that benefit of the DEPB scrips should not be denied to the transferees leads to a very dangerous preposition. Such a legal interpretation would encourage the fraudsters to obtain DEPB scrips or any other benefit by fraudulent means and then sell it to get away from the arms of law. (iv) It is a matter of fact that the licences acquired by the exporters fraudulently are sold at a cheaper rate and hence any prudent person who acts diligently will not acquire such licences. Therefore, the contention of the appellant that they acquired the licences bona fide is not valid and hence ....
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....ee. The appellant have relied upon the judgments in the case of Leader Valves Ltd. and other cases to suggest that the larger period of limitation is not applicable. In this regard it is submitted that a later case of [Aafloat Textiles and Friends Trading Co. Vs. UOI - 2010 (254) ELT 652] held that purchaser of successor of fraudulently obtained DEPB stands is in the same position as his predecessor. If the extended period of limitation could be invoked against the original holder of fraudulent or forged DEPB, the same could be invoked against successor or purchaser. Similarly the penalty is liable to be imposed on the transferees as held in [Apar Ltd Vs. CC - 2012 (276) ELT 534 (Tri. - Mumbai]). (viii) Further the Hon'ble Apex Court in the case of Tata Iron & Steel Co. Ltd. Vs. Commissioner of Customs, Mumbai reported at [2015 (319) E.L.T. 545 (SC)] has held that where fraudulent misdeclaration is made by the original licence holder by deliberately suppressing the facts, made wilfully wrong declaration to the licencing authority, extended period of limitation under Section 28 is available for recovery of the duty against the appellant who is a transferee of such licence tho....
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....-Cus, dated 1-5-2006 Duty free import authorizations - Exemption to materials imported there against In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts materials imported into India against a Duty Free Import Authorisation issued in terms of paragraph 4.4.1 and 4.4.2 of the Foreign Trade Policy (hereinafter referred to as the said authorisation) from the whole of the duty of Customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty, safeguard duty and anti-dumping duty leviable thereon, respectively, under sections 3,8 and 9A of the said Customs Tariff Act, subject to the following conditions namely :- (i) that the description, value and quantity of materials imported are covered by the said authorisation and the said authorisation is produced before the proper officer of customs at the time of clearance for debit: Provided that in respect of resultant product specified in paragraph 4.55.3 of the Hand Book o....
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....udhiana, Moradabad, Nagpur, Pimpri (Pune), Pitampur (Indore), Surat, Tirupur, Varanasi, Nasik, Rudrapur (Nainital), Dighi (Pune), Vadodara, Daulatabad (Wanjarwadi and Maliwada), Waluj (Aurangabad), Anaparthy (Andhra Pradesh), Salem, Malanpur, Singanalur, Jodhpur, Kota, Udaipur, Ahmedabad, Bhiwadi, Madurai, Bhilwara, Pondicherry, Garhi Harsaru, Bhatinda, Dappar (Dera Bassi), Chheharata (Amritsar), Karur, Miraj, Rewari, Bhusawal, Jamshedpur, Surajpur, Dadri, Tuticorin, Kundli, Bhadohi, Raipur, Mandideep, Durgapur and Babarpur or through the Land Customs Station at Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva (Sonauli), Petrapole, Mahadipur, Nepalganj Road, Dawki, Agartala, Sutarkhandi, Amritsar Rail Cargo and Attari Road or Special Economic Zone as specified in the notification issued under section 76A of the Customs Act, 1962 (52 of 1962). Provided that the Commissioner of Customs may, by special order or by a Public Notice and subject to such conditions as may be specified by him, permit import and export from any other seaport/airport/inland container depot or through any land customs station; (v) that the export obligation as specified in the said authorisation (both in v....
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....ischarge of export obligation and the same shall not be transferred or sold or used for any other purpose by the said merchant exporter until the export obligation specified in condition (v) has been discharged in full. 2. After discharge of export obligation as specified in condition (v) of paragraph 1, the Regional Authority shall permit transfer of the said authorisation and/or the goods imported under it subject to such conditions as may be specified. 3. Where the materials are found defective or unfit for use, the said materials may be re-exported back to the foreign supplier within three years from the date of payment of duty on the importation thereof : Provided that at the time of re-export the materials are identified to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, as the materials which were imported. Notification No. 89/2005-Cus., dated 4-10-2005 Duty Entitlement Pass Book - Exemption to imports thereunder In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public ....
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....rat, Tirpur, Varanasi, Nasik, Rudrapur (Nainital), Dighi (Pune), Vadodara, Dulatabad (Wanjarwadi and Maliwada), Waluj (Aurgangabad), Anaparthy (Andhra Pradesh), Salem, Malanpur, Singanalur, Jodhpur, Kota, Udaipur, Ahmedabad, Bhiwadi, Madurai, Bhilwara, Pondicherry, Garhi Harsaru, Bhatinda, Dappar (Dera Bassi), Chheharata (Amritsar), Karur, Miraj, Rewari, Bhusawal, Jamshedpur, Surajpur, Dadri and Tuticorin or through the Land Customs Station at Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva (Sonauli), Petrapole and Mahadipur or Special Economic Zone as specified in the notification issued under section 76A of the Customs Act, 1962 (52 to 1962) Provided that where the expiry of the Duty Entitlement Pass Book falls before the last day of the month, such Duty Entitlement Pass Book shall be deemed to be valid till the last day of the said month : Provided further that the Commissioner of Customs may, by special order and subject to such conditions as may be specified by him, permit imports and exports from any other sea port, airport, inland container depot or through any land customs station; (v) that where the importer does not claim exemption from the additional duty of cust....
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.... of the Handbook of Procedures, the value based quantity based licence 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 there of already imported. (ii) No right of transferability shall accrue unless the conditions laid down in paragraph 67 of the Policy and paragraph 126 of the Handbook have been fulfilled; (iii) After redemption of the BG/LUT the licencing authority shall endorse and allow the transferability on the permissible licenses against which the imports have not been made or have been made partially. From the above, it is clear that transferability is allowed after endorsement to that effect by the licensing authority i.e. DGFT. We were shown documents which are Applications made for transfer of the license. The documents accompanying the application include shipping bills verified by the Customs authorities. We also observe that para 4.49 of the Hand Book of Procedures (2004-2009) provides that the Customs shall verify the details of export as per records before allowing import against DEPB. Thus it is seen t....
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....Co. Ltd. (supra): 35. Nor is there any legal basis for the contention that licence obtained by misrepresentation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause. (8) of Section 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable : it is good till avoided in the manner prescribed by law. On May 1, 1948, the Central Government issued an order in exercise of the power conferred on it by Section 3 of the Act to provide for licences obtained by misrepresentation, among others, and it reads : In the circumstances, we must hold that when the goods were imported, they were imported under a valid licence and therefore it is not possible to say that the goods imported were those prohibited or restricted by or under Chapter IV of the Act within the meaning of Clause (8) of Section 167 of the Sea Customs Act. In case of Sampat Raj Dugar (supra), the Hon'ble apex Court held 21. The next question is wh....
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....e law laid down by this Court in East India Commercial Company Ltd. v. Collector of Customs, Calcutta (supra) wherein this Court has said :- "Nor there is any legal basis for the contention that licence obtained by misrepresentation makes the licence honest. With the result that the goods should be deemed to have been imported without licence in contravention of the order issued under S. 3 of the Act so as to bring the case within cl. (8) of s. 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable; it is good till avoided in the manner prescribed by law." 5. In the aforementioned decision of this Court it has been clearly laid down that in a case where the licence is obtained by misrepresentation 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 and being treated as goods imported without a licence in contravention of the order passed under Section 3 of the Import and Export Act that fraud or misrepresentation only renders a licence voidable and it becomes ino....
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....gement in the case of TISCO, at the very outset the Hon'ble Court stated the question to be whether the extended period under Section 28 is applicable. The facts in the present case are at variance and the question is whether duty liability can be fixed on the transferees of the licensees. 8.4 Special Counsel then drew our attention to the case of Dow Agro Sciences India Pvt. Ltd. 2012 (283) ELT 524 (Tri. - Mumbai). He also referred to the case of Munjal Showa Ltd. Vs. Commr. Of Cus. & C. Ex. 2009 (246) ELT 18 (P&H) in which the P & H High Court held that when the documents under which exemption is claimed are found to be forged the purchaser steps into the shoes of the seller and does not acquire the better title than the seller. On this basis the Hon'ble High Court denied the benefit of DEPB credit to the importer. In the former case the Tribunal relied on the case of Munjal Showa Ltd. and the case of M/s. Friends Trading Co. Vs. Union of India. In the case of Munjal Showa Ltd. the Hon'ble High Court considered and distinguished the cases of East India Commercial Co. Ltd., Sneha Sales Corporation, Taparia Overseas Pvt. Ltd. and Leader Valves Ltd. The Hon'ble Hi....
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.... by the Customs Authorities then they neither have authority to travel beyond the scope of the Customs Act and the Import Export Policy nor could they refuse to allow duty free clearance of the petitioner's goods, admittedly, covered under the definition of import licence. 6. The contentions sought to be advanced by the petitioner are identical with the contentions which were raised in the case of Taparia Overseas v. Union of India, 2003 (161) E.L.T. 47 (Bom.) - 2002 (2) Bom. C.R. 7; wherein this Court had occasion to deal with the similar contentions and to hold that the concept that fraud vitiates everything would not apply of the cases where the transaction of transfer of licence for a value without notice of alleged fraud arising out of mercantile transaction governed by common law. It was also held that import made under the valid licence could not be subjected to levy of customs duty as such it is not open for the Customs Authorities to withhold the clearance of the imported goods. In that case, the licence was suspended after the import of goods was completed. Same is the situation in the case in hand. Under these circumstances, having heard rival parties, we ar....
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.... The fact that the contract has been induced by fraud does not make the contract void, or prevent the property passing, but merely gives the party defrauded the right on discovering the fraud to elect whether he shall continue to treat the contract as binding or disaffirm the contract and resume the property. If it can be shown that "the party defrauded" has at any time after knowledge of the fraud either by express words or by unequivocal acts affirmed the contract, "his election is determined for ever. The party defrauded may keep the question open so long as he does nothing to affirm the contract." The question always is, has the person on whom the fraud has been practised, having notice of the fraud, elected not to avoid the contract, or, has he elected to avoid it? or, has he made no election? As long as he has made no election he retains the right to determine it either way, subject to this that if in the interval whilst he is deliberating, an innocent third party has acquired an interest in the property, or if in consequence of his delay the position even of the wrongdoer is affected, he will lose his right to rescind." .......................................................
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....ore the suspension and/or cancellation of the licences in question, thus the imports were made under valid licences, the goods could not be subjected to levy of customs duty in the peculiar facts and circumstances of the cases in hand. We also note that in the case of Hico Enterprises Vs. Commissioner - C/1345/2002-Mum the Larger Bench decided in a similar case that - "Thus, in view of the aforesaid discussion, we are of the considered opinion that the principles evolved in the case of Goodluck Industries and upheld by Apex Court and followed subsequently in other case, is to be made applicable to the case on hand, since it is based on sound principle of law. Consequently, we uphold he contentions raised by the appellants while negating the contentions raised by the Department. Therefore, the legal maxim LEX NON COGIT AD IMPOSSIBILIA can be invoked and benefit of the same be given to the transferee of the licence for claiming exemption under the Notification. The transferee cannot be called upon to fulfil the condition (v)(a) of the Notification No. 203/92-Cus. It is the original licencee, who has to satisfy the above referred condition, but not the transferee of the li....
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....onable claim because the customs authorities might not recognise the credit therein and the transferee would have to commence action against them in the Court of law. In our opinion, the transfer of D.E.P.B. credit confers upon the transferee a right which is choate and perfected and exercisable immediately. 24. The Apex Court in Delhi Cloth & General Mills Co. v. Harnam Singh ,. A.I.R. 1995 S.C. 590, was pleased to hold that a 'debt' is property. It is a chose in action and is heritable and assignable and it is treated as property in India under the Transfer of Property Act. In the very same judgment the Apex Court ruled that it is necessary, however, to bear in mind that, under modern conditions, chose in action arising out of contract have two aspects: (i) as property and (ii) as involving a contractual obligation for performance. The property aspect is relevant for purpose of assignment, administration, taxation and the like, the contractual aspect for performance. Therefore, in our view, the credit entry in the D.E.P.B. cannot be described as an "actionable claim"................................................................... .........................................
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.... an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to contract, whose consent was caused by fraud or misrepresentation, may if he thinks fit, insist that the contract shall be performed, and that he shall be put on the position in which he would hav been if the representation made had been true. Exception: if such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless is not voidable, if the party whose consent was as caused had the means of discovering the truth with ordinary diligence. 19-A. Power to set aside contract induced by undue influence - When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the court may seem just. Therefore transfer of DEPB scrips in the present cases will governed by the provisions of the statute....
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....efore two issues arose before the Hon'ble Apex Court; the first issue was whether cancellation is a reasonable restriction on exercise of fundamental rights. Hon'ble Court held that " We are therefore of opinion that the provisions that license may be cancelled, if it is found, after giving a reasonable opportunity to the licensee to be heard, to have been obtained by fraud or misrepresentation is a reasonable restriction in the interest of the general public on the exercise of the fundamental right of citizen guaranteed under Article 19(1)(f) and (g) of the Constitution. The cancellation being under a valid law there can be no question of any right under Article 31 of the Constitution having been infringed". Secondly the issue was whether the cancellation could have been done without allowing inspection of records. The court held that the order of cancellation was made in utter disregard of principles of natural justice, without expressing opinion on merits. This judgment has no bearing on the facts of the present case before us. In that case there was no situation of transfer of licenses. The Apex Court never considered whether duty liability can be fixed on the transfere....
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....rinciple and cannot be justified by the terms of the relevant provisions. A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute. So far as the order shows, no argument was addressed to the Court on the question or not whether any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a PG NO 939 pavement squatter. Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12 th edn. Explains the concept of sub silentio at p. 153 in these words: "A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B....