TaxTMI 
TaxTMI 
2016 (9) TMI 774
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....he appellants were obtained by various persons fraudulently against submitting the fake/forged documents to the DGFT. Therefore the present proceeding was initiated against all the appellants, the demand was confirmed against the present appellants on the ground that the DEPB licences against which the goods were imported obtained fraudulently. Import against the invalid DEPB licences was not entitled for exemption provided under the DEPB licence, therefore, the duty forgone/debit in the DEPB licence is recoverable. Aggrieved by the Order-in-Original the appellants filed these appeals. 2. Learned Counsel for the appellants submits that the appellants have purchased the DEPB licence bonafidely from the market and paid the consideration for such purchase of DEPB licences. At the time of purchase DEPB licence was valid. It is the persons who fraudulently obtained the DEPB licence who have submitted the fake documents to the DGFT and the appellants are not parties to that act of fraud. The appellants had purchased DEPB licence which had been issued validly by the DGFT. The appellant-importer at the time of filing of Bills of ....
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....d 89/2005 are sought to be denied. It would be relevant to refer to Notification no. 40/2006-Cus dated 1/5/2006 which relates to material imported against DFIA licenses as well as Notification No. 89/2005-Cus dated 4/10/2005 which relates to the DEPB Scheme as reproduced below: Notification No. 40/2006-Cus., dated 1-5-2006 Duty free import authorisation Exemption to materials imported thereagainst 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 conditi....
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....ramatar and Vadinar or through any of the airports at Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Chennai, Srinagar, Trivandrum, Varanasi, Nagpur, Cochin, Rajasansi (Amritsar) and Lucknow (Amausi) or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauhati, Guntur, Hyderabad, Jaipur, Jallandhar, Kanpur, Ludhiana, 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 se....
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....address of the supporting manufacturer is specified in the said authorisation and the bond required to be executed by the importer in terms of condition (iii) shall be executed jointly by the merchant-exporter and the supporting manufacturer binding themselves jointly and severally to comply with the conditions specified in this notification; and (b) exempt materials are utilised in the factory of such supporting manufacturer for discharge 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. After discharge of export obligation as specified in 2. 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. Where the materials are found defective or unfit for use, 3. 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 : Provide....
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.... Chennai, Nhava Sheva, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam, Dahej, Mundhra, Nagapattinam, Okha, Bedi (including Rozi Jamnagar), Muldwarka and Porbander or through any of the airports at Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Chennai, Srinagar, Trivandrum, Varanasi, Nagpur, Cochin and Rajasansi (Amritsar) or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauhati, Guntur, Hyderabad, Jaipur, Jallandhar, Kanpur, Ludhiana, Moradabad, Nagpur, Pimpri (Pune), Pitampur (Indore), Surat, 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 sect....
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....shall be permissible only against specific amount of credit transferred by the DEPB holders. 8.2 Having noted that in terms of the notifications there is no failure on the part of transferees availing duty benefits under these schemes, we may see whether there was any failure in observing the procedure for transferability of the License/material imported against such scrips. The transferability is prescribed in para 127 of the Hand Book of Procedures. Sub para (iii) of para 127 states that : 127(i) After export obligation has been fulfilled, export proceeds realised and the BG/LUT redeemed and subject to fulfilment of other conditions as laid down in paragraph 67 of the Policy and Paragraph 126 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 balan....
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....ecision in Goodluck Industries(supra) and Jindal Dye Intermediate Ltd(supra). It was held in the former case by the Tribunal that where the license is made transferable by the licensing authority, the only condition of the relevant notification which applies to the transferee is the one which requires that the license should have been made transferable by the licensing authority. The burden of proof that export obligation has been fulfilled is to be discharged by the original licensee. 8.3 The special Ld. Counsel for Revenue stressed that in respect of licenses obtained by fraud, misrepresentation etc., benefit cannot be taken by any one, whether the transferor or transferee otherwise it would lead to a dangerous proposition and enable fraudsters to obtain DEPB scrips by fraudulent means. To this we can only comment that authorities themselves are also responsible to the extent of not having checked the fraud at the time of exports. We should not be affected in our findings only by the fact ....
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.... of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not observed within the period prescribed, if any, or where the period is not so prescribed, within a reasonable period. It, therefore, cannot be said that the said goods were liable to be confiscated on the date of their import under Clause (o). Finally the Supreme Court held in the case of Sneha Sales Corporation, by referring to its own decision in East India Commercial Company(supra), as follows: In his order the Collector has taken note of the fact that by order dated December 18, 1986 passed by the Deputy Chief Controller of Imports and Exports under clause 9 of the Import and Export (Control) Order, 1955 the four import licences on the basis of which goods were imported by respondent No. 1 had been cancelled ab initio on the ground that the party had obtained the said licences by fraud and misrepresentation. The Collector held that since the licences had been cancelled ab initio by the Deputy Chief Controller of Imports and Exports there was no licence....
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....Court judgments do not bar the issue of raising demand notices under Section 28 in such cases. He relied on the Apex Court judgement in the case of Tata Iron and Steel Co (supra). We do appreciate the manner in which judgments in the case of East India Commercial Co and Sneha Sales Corporation have been attempted to be distinguished by the Ld. Spl. Counsel. At the same time we cannot agree with Special Counsel for various reasons. In the case of Sneha Sales Corporation the license had been cancelled ab-initio, which according to the Special Counsel means that only importability of the goods was in question and Supreme Court held that even though the licenses were cancelled ab-initio, they are not rendered nonest at the time of import. We note that their Lordships clearly held that license is rendered only voidable. The decision in the case of East India Commercial Company held that license is good till avoided. If we were to agree with the contention that licenses is operative for importability but could not used for availing the duty benefit in term of Notifications cited, it woul....
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....ioner of Customs, Kandla 2010 (259) ELT 247 (Tri. Ahmedad) which was affirmed by the Hon'ble High Court of Gujarat. While affirming this judgment the Honble High Court categorically recorded that the Tribunal had followed the decision of the Supreme Court in the case of Sneha Sales Corporation. In this case of Binani Cement Ltd. we note that the circumstances were similar to the appeals at hand. In those cases also the Licenses were cancelled ab-initio after the transferee had utilized them for import. We also note that the observation of the Hon'ble Tribunal decision in the case of Dow Agro Sciences India Pvt. Ltd. (supra) at para 9.25 stating that "the case of Sneha Sales Corporation is also similarly distinguishable" does not hold good because in the case of Binani Cement Ltd the Hon'ble High Court of Gujarat has relied on Sneha Sales Corporation. In our view the judgments of the jurisdictional High Court which are consistent and the judgment of the Hon'ble High Court of Gujarat cited above should prevail over the judgment of the P & H High Court in the case of Friends Trading Co. which in any case has taken a dramatically opposite view from ....
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....transfer was governed by common law because the licenses were freely transferable. But that in cases where the licenses required endorsement of transferability, the concept of fraud vitiating everything will be applicable to such transactions. And that in the case of Taparia Overseas Pvt. Ltd. and Sneha Sales Corporation, the Apex Court treated DEPB Scrips/ REP Licenses as goods for the purpose of Sales Tax Laws only. And the Court did not compare the two from the point of view that the concept of fraud vitiating everything will be applicable when the transfer of licenses is made under a statute. On the point of contention whether fraud vitiates everything we may refer to the Hon'ble High Court of Bombay decision in the case of Taparia Overseas Ltd. (supra). In that case also the import licenses obtained by license holder by fraud were suspended after the import by the transferees. It was held therein that- "28. It is not in dispute that the above procedure was followed by all the petitioners while getting the licences transferred in their respective names. It is, therefore, clear that transfer of licence was to be governed by ordinary law. The Apex Court....
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....ders while obtaining licences. If that be so, 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 above canvas, having examined the well settled, established and well recognised concept of law that the effect of fraud is not to render the transaction voidable initio but renders it voidable at the instance of the party defrauded and transaction continues valid until the party defrauded has decided to avoid it. 37. Alternatively, let us consider it from another angle assuming that licence comes to an end upon it is suspension and/or cancellation, in catena of cases, it is laid down that the date of import of goods would be the date on which the Bill of Entry was presented under section 46. This legal position is clear from the decision of the Apex Court as laid down in Union of India v. Apar Ltd. 1999 (112) E.L.T. 3 (S.C.) and Garden Silk Mills v. Union of India - 1999 (113) E.L.T. 358 (S.C.). The same is the view taken by the Apex....
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....able to transfer of REP Licenses in the case of Taparia Overseas. It was further argued that the DEPB scrips could not be equated with REP Licenses because in cases like Tapariya and Sneha Sales Corporation, the two were treated as goods for purpose of sales tax laws only and situation contemplated under Sales Tax Act could not in the absence of intendment, be given effect to while applying provisons of the Act or the FT(Development& Regulation) Act. We are unable to agree with this argument. We find that transfer of REP Licenses is also in terms of the Import Export Policy. Further, we may refer to the case of Jindal drugs Ltd. Vs. State of Maharashtra [2004(178) ELT 105(Bom). It was held therein that 23. ............ The Apex Court in the case of Jugalkishore v. Raw Cotton Co., A.I.R. 1955 S.C. 376, had occasion to consider the meaning of "actionable claim. In this judgment Apex Court ruled that a judgment debt or decree is not an actionable claim because no action is necessary to realise it. It has already been the subject of an....
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....der to be liquidated against the payment of import duty for future imports. Therefore, in his submission, reliance placed on the judgment in the case of Vikas Sales Corporation (supra) while deciding that the credit in the D.E.P.B. is goods is not correct in law. He further submitted that the Delhi High Court while deciding the case in Philco Exports (supra) and the Apex Court in the case of Vikas Sales Corporation (supra), in turn, relied upon its earlier judgment in the case of [N. Anraj v. Government of Tamil Nadu], A.I.R. 1986 S.C. 63, holding that R.E.P. licence is not an actionable claim. 29. The Delhi High Court rightly relied upon the case of Vikas Sales Corporation (supra) and rightly held that D.E.P.B. credit is not an actionable claim. We concur with the view taken by the Delhi High Court and hold that the D.E.P.B. credit is liable for sales tax under the Bombay Sales Tax Act......... The same view was held by the Honble Supreme Court in Vikas Sales Corporation[AIR(SC)-19960-2082/SCC-1996-4-433/JT-19965-482]. Thus it is clear that the DEPB scrips are held to be goods. This being the legal position, the Sale of Goods Act will apply. Section....
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.... Resultantly, applying the ratio of Taparia, we are convinced that effect of misrepresentation in the present cases has not rendered the transaction between the original license holders and the transferees void ab-inito but rendered it voidable at the instance of the party( in this case importer)defrauded and transaction continues to be valid until the party defrauded has decided to avoid it. In the present case the licences/scrips were transferred to the appellant importers who had no knowledge of the misrepresentation by the exporters in obtaining them. The Bills of Entry were filed by the appellant importers well before the cancellation of licenses, thus imports were made under valid licenses. Therefore goods could not be subjected to levy of Custom duty for imports under Licences nor could availment of credit in DEPB scrips be denied. 8.5A The view that duty cannot be demanded from the tranferees was perhaps recognised by Government when it introduced Section 28 AAA in the Customs Act with effect from 28/5/2012. Section 28AAA provides that in such case....
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....ther 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 transferee of licenses which were obtained by mis-representation by the transferor. Reliance on this judgment does not support the case of the Revenue at all. The Reliance on the case of Ram Preeti Yadav (supra) is also misplaced. Here the issue was that a person whose result in an Intermediate Examination was withheld, being suspected of using unfair means, was at the same time issued a provisional mark sheet. The person thereafter passed his B.A. and M.A. examination, got employment as a teacher. The Hon'ble Apex Court held that there is no equity....
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....ite of a PG NO 939 pavement squatter. Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th 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 was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio". In view of this judgment, we hold that the judgment cited by Spl. Counsel is per incuriam. The judgments in the case of East India Commercial Company and Sneha Sales Corporation would hold fort in the circumstances. 8.8 In view of analysis above based on judicial&....
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.... S/16-Misc.-1243/98 Gr. 7 dated 29.01.1999 130/03.10.1998 S/26-Misc-38/99 Gr.-IV dated 08.02.1999 1433/06.10.98 DRI/BZU/E/20/98/425 dated 08.07.2002 3648/09.10.98 6452/15.10.98 8149/21.10.98 11331/25.11.98 2. C/56/05 M/s Nilkamal Ltd. 3496/07.11.98 S/16-Misc.-1243/98 Gr. 7 S/10-DEPB-21/99 dated 29.01.1999 3504/07.11.98 S/16-Misc.-1243/98 Gr. 7 S/10-DEPB-23/99 dated 29.01.1999 11650/24.09.98 S/16-Misc.-1243/98 Gr. 7 S/10-DEPB-24/99 dated 29.01.1999 11660/24.09.98 S/16-Misc.-1243/98 Gr. 7 S/10-DEPB-25/99 dated 29.01.1999 11669/24.09.98 S/16-Misc.-1243/98 Gr. 7 S/10-DEPB-26/99 dated 29.01.1999 11640/24.09.98 S/16-Misc.-1243/98 Gr. 7 S/10-DEPB-27/99 dated 29.01....