AI Drafter 
TaxTMI 
TaxTMI 
2020 (2) TMI 437
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....akesh Kumar, DR, Shri Nitopal Choudhary, Advocate- for the respondent Custom Appeal No. 52009 of 2018, 52197 of 2018, 52272 of 2018, 52274 of 2018, 52406 of 2018, 52430 of 2018, 52507 of 2018, 52537 of 2018, 52667 of 2018, 52668 of 2018, 52696 of 2018, 52747 of 2018, 52748 of 2018, 53082 of 2018, 53157 of 2018, 53159 of 2018, 53238 of 2018, 53406 of 2018, 53423 of 2018, 53424 of 2018, 53425 of 2018 with C/Cross/51310/2018, 53426 of 2018, 53427 of 2018, 53428 of 2018, 53461 of 2018, 53462 of 2018, 53658 of 2018, 53670 of 2018, 50459 of 2019, 52151 of 2019 M/s Mercedes Benz India Private Limited, M/s O.A. Associates, Pashupati Acrylon Limited, M/s Wadhwani Commodities Trading Pvt. Ltd., M/s Ramniklal S. Gosalia & Co., Jaquar & Company Private Limited, M/s M. Jiju Silk Mills, M/s K.J.V. Alloys Conductors Pvt. Ltd., M/s BNS Import Export, Shri S.J Patel, Shri Prabir Ghosh, M/s Aroma Chemical Agencies India Pvt. Ltd., Visakha Wire Ropes Limited, Shri Paresh K. Daftary, Shri Jyoti Biswas, Shri Tushar Umarshi Kothari, M/s K.J. Inc., M/s Park Impex, M/s Icon Fibers & Fabrics Pvt. Ltd., M/s Adya Incorporation, Shri Shammi Chanana Versus Commissioner of Customs, Delhi, Additional Direc....
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....xemption against such TRAs and DEPB merits rejection as none can be permitted to capitalize gain out of fraudulent activity and fake/forged/fabricated documents . 7 C/52537/2018 K J V Alloys Conductors Pvt Ltd vs C.C PATPARGANJ 07.01.2016 (Elite Traders) 16.04.2018 (PPG) Aug-Sept. 2011 29.14 L 29.14 L DEPB(3) Yes Nagpur ICD 8 C/52667/2018 BNS Import Export vs CC New Delhi (ICD TKD ) 19.03.2015 (Perfect Export) 06.07.2018 (PPG) Feb-Mar. 2010 4.52 L 4.52 L DEPB(1) Yes Kandla 9 C/52668/2018 S J Patel vs C C New Delhi (ICD TKD) 05.10.2015 01.06.2018 (PPG) 2009 Penalty 67 L (under section 114AA) NA N.A. N.A The Appellant is properitor of the firm namely M/s BNS Export Import in whose name DFIA was issued based on fake/forged/fabricated export documents. The DFIA has been cancelled ab initio by DGFT. 10 C/52696/2018 Ramnikal S Gosalia & Co vs C. C PATPARGANJ 26.11.2015 (Royal Enternational) 25.07.2018 (PPG) Mar-May 2011 42.39 L 42.39 L DEPB(9) Yes Nhava Sheva Appellants-Importers bought forged TRA alongwith DEPBs issued based on forged/fake export documents....
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....J vs Sh.S.J. Patel 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 66.07L Penalties u/s 114AA 67 lacs NA N.A. N.A. In these appeals, Revenue prayed for remand of the cases to weed out factual inadvertant errors. Some Paras of the Impugned Order mention use of TRAs for imprt clearnces whereas TRAs were not issued in these cases. 19 C/53424/2018 C. C . Patparganj NJ vs Sh. Paresh Daftary 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 67 lacs NA No 20 C/53425/2018 C. C . Patparganj NJ vs Sh. Jyoti Biswas 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 67 lacs NA No 21 C/53426/2018 C. C . Patparganj NJ vs Sh Tushar Umarshi kothari 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 67 lacs NA No 22 C/53427/2018 C. C . Patparganj NJ vs M/s Wadhwani Commodities Trading 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 66.07 L NA ....
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.... augment foreign trade by the genuine importer/exporter. The neutralisation of the various duties suffered at the time of import are provided by way of grant of duty credit against the export products. 4.1 Duty Entitlement Passbook Scheme - Under DEPB scheme, the exporter can apply for duty credit from the office of the jurisdictional Director General of Foreign Trade (DGFT), for a particular port of export. The duty credit is available for exports at specified rate for raw material, intermediates, components, parts and packing material etc. In terms of the Policy, DEPB scrips/license are freely transferrable and such scrips are permitted to be utilised for duty free import at the specified port, which is the port of export. If the DEPB scrips are required to be utilised at other ports than the port of export, it is allowed under Telegraphic Release Advise (TRA) facility as per the Notification No. 97/2009-Cus. dated 11 September, 2009 as amended. In this scheme, the importers are entitled to discharge the duty liability through debits against the DEPB scrips, under the notification as referred above. 4.2 Focus Product Scheme (FPS): This scheme, in terms of Chapter 3.15.1 of ....
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....d in Appendix 37A of Handbook of Procedure, Vol-I shall be entitled for duty credit scrip equivalent to 5% of Foot on Board (FOB) value of export in free foreign exchange for exports made from 27.8.2009 for some agriculture products and fruits as listed in table of Appendix-37A of the HPB and shall be entitled to additional duty credit scrip equivalent to 2% of FOB value of export; over and above the 5% or 3% reduced rate of VKGUY entitlement as per para 3.13.3; (b) DGFT has issued Trade Notice No. 8/AM-12 dated 27.3.2012 for operationalisation of para 3.11.3 of HPB, Vol-I, 2009-2014 which is as under: "Duty credit scrip including a split shall be issued with a single port of registration which shall be port of export. After the issue of duty credit scrip but before registration with customs, the applicant can change the port of registration from RA (Regional Authority) concerned. Before registration, authorities shall verify the genuineness of duty credit script from the RA concerned only EDI system of message exchange put in place". 4.6 However, an applicant may use duty credit scrip for imports from other ports including ICD/LCS etc. after obtaining Transfer....
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....d the extent the duty entitlement in DEPB book/scrip shown, so as to facilitate the relevant DEPB scrips. The Custom House/Custom ICD/Custom Station which issues the TRA in respect of the DEPB scrip are also required to maintain a record of such TRAs issued for the purpose of monitoring and keeping check of the total imports being affected under the over all value limit of such license/scrip. 4.8 As far as the facility of issuing the TRA in respect of EDI enabled ports is concerned, it is computerised and through system controlled message exchange between the port of export and port of import. In case of non-EDI ports, TRA is issued manually as per the procedure prescribed in the various circulars referred to above. The holder of the DEPB scrip or other entitled scrips, is required to make an application before the competent authority at port of registration (which is the port of export) that is required to follow the guidelines for issue of the TRA to other Customs Stations/Ports/Airports. The TRA is required to be produced by the importer before the Assistant Commissioner/Deputy Commissioner of the Customs station/port etc who after verification and confirmation permits the ut....
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....at port of registration. The above procedure shall be applicable only in respect of EDI enabled ports. In case of exports through non-EDI ports, the port of registration shall be the port of exports. 3. DGFT, Mumbai vide Trade Notice No. 8/AM12 dated 27.03.2012 has issued clarification with regard to change of port of registration of Duty Credit Scrip. The DOR has also issued Customs Notification No. 95/2009 (duty exemption under VKGUY) and 92/2009 (duty exemption under FPS) both dated 11.09.2009 to that effect." 5. The Directorate of Revenue Intelligence, Kolkata, Zonal Unit (hereinafter referred to as "DRI KZU") received information about a syndicate of unscrupulous persons based in West Bengal who in association with some exporters/brokers of licenses/scrips from other parts of the country were involved in preparing fake export documents on the basis which they were getting various duty credit licenses, such as, DEPB/FPS/DFIA/VKGUY etc. from different offices of Director General of Foreign Trade (DGFT). The intelligence further indicated that in such fake export documents, exports were being shown through one of the non-EDI Land Customs Stations (LCS) namely, Ghojada....
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....ation revealed that none of these export documents had been ever tendered or registered at Barasat Custom Division, which indicated that all these documents, on the strength of which export had been stated to be made while obtaining the duty free license, were forged and fabricated. 7. Enquiry from the various banks also revealed that in nine out of ten cases, the BRCs were fake and fabricated. The BRC particulars in respect of export under other two licenses were not available and the foreign remittance was received only in one such export indicating the possibility of export proceed realisation through non-banking channel as no exports had actually taken place. These licenses, which were procured on fake and forged export documents, were utilised at various ports for the clearance of duty free import by the various importers. But in most of these cases the imports were made after availing the TRA facility, which were also forged as it emerged from the investigations by the DRI. In cases where TRA was not required, the port of export was got changed by the office of DGFT contrary to the Foreign Trade Policy and procedure. 8. The DRI also took up the matter with the concerned....
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....one Tushar Kothari of Mumbai; (vi) That he knew Deshraj Gulati of Delhi as both of them dealt with trading of licenses. He was associated with Gulati and he arranged fake document including RA and TRA for exporters namely Satyam Overseas, Kabir Impex and Sai International under instructions of Kothari; (vii) That he associated himself with illegal activities of arranging fake export documents for monetary gains. After arranging the fake export documents, he used to forward the same to various exporters/persons including D.R. Gulati through one Tushar Umarshi Kothari who used to obtain import licenses from DGFT on the basis of such fake export documents provided by him. Tushar Kothari was aware of the fact that such licenses were fraudulently obtained from DGFT on the basis of fake export documents through Md. Fahim Zada; (viii) That he arranged the fake export document through his agent at Ghjojadanga LCS/Petrapole LCS through Jyoti Biswas, who used to prepare fake export documents including invoices, packing lists, bills of export etc and got them fraudulently stamped and signed as if by the Customs Officers of the Ghojadanga LCS. Thereafter, to use forg....
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.... Import-Export, Faridabad Mr. Sanjeev Arora 14. Zen Overseas, Surat Mr. Fahim A. Zada 11. Paresh Daftary admitted that he had fraudulently prepared about 125 shipping bills which were used for obtaining approximately 62 DEPB license and 14 DFIA licnese and also a few other licenses. The estimated value of these fraudulently obtained duty free licenses was approximately Rs. 20 crores and he received Rs. 1 crore as his share from the profit so earned of this and he paid Rs. 60 lakhs to Jyoti Biswas. 12. Des Raj Gulati, in his statement dated 4.7.2013, accepted that he was known to Paresh Daftary since the last 15 years and used to facilitate his illegal activity of export/import through Ghojadanga/Petrapole LCS. He also accepted that he had dealt with various types of licenses, namely DEPB/DFIA etc. and also arranged exports of M/s Satyam Overseas (prop. Kamal Sharma), M/s Kabir Impex. (Prop Rajeev Moolchand Sharma) and M/s Sai international (prop. Devendra Sharma) and Paresh Daftary used to process the export document through his associates who also knew firm Khodiar Exim, which according to him, was raised by Paresh Daftary. 13. In his statement, Prabir Bhaduri....
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....toms Vs. Leader Valves Ltd. - 2007 (218) ELT 349 (P&H) maintained by the Hon'ble Supreme Court in 2008 (227) ELT A29 (SC); (f) Sanjay Sanwarmal Agarwal Vs. Union of India - 2004 (169) ELT 261 (Bom); (g) Hico Enterprises Vs. Commissioner of Customs, Mumbai - 2005 (189) ELT 135 (Tri.-LB) affirmed by Hon'ble Supreme Court in Commissioner of Customs, Bombay Vs. Hico Enterprises - 2008 (228) ELT 161 (SC); (h) Commissioner of Customs, Amritsar, Vs. Ajay Kumar & Co. - 2009 (238) ELT 387 (SC); (i) Sumit Woollen Processors - 2015-TIOL-2090-CESTAT-MUM; (j) Commissioner of Customs (Import) Vs. Coromandal Fertilizers Ltd. - 2018 (12) TMI 734-Bombay High Court; (k) TVS Motor Company Ltd. Vs. CC, Chennai - 2018 (1) TMI 775-CESTAT-Chennai; (l) CC, Visakhapatnam Vs. Acalmar Oils & Fats Ltd. - 2018 (8) TMI 1533; (m) Unique Trading Company Vs. CC - 2018-TIOL-3772-CESTAT-MUM. (vi) It is held by the Supreme Court/High Court/Tribunal that once the licence is validly issued by the DGFT, then the import cannot be rendered illegal even if the license has been subsequently cancelled, if there is no fraud or collusion on the pa....
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.... (iii) Blue Water Foods & Exports Ltd. Vs. Commissioner of Customs (Cochin) - 2010 (251) ELT 305 (Tri.-Bang.). (x) Section 29 of the Sales of Goods Act, 1933 provides that the DEPB license/scrips are 'goods' and subject to Sales Tax when brought and sold. The Supreme Court has held that REP and import licenses are transferrable and have to be treated as 'goods' in Vikas Sales Corportion Vs. CCT - 1996 (4) SCC 433. Accordingly, the appellant importers have attained a good title to the scrips/license and the same would not be invalid in the hands of the importers who would be bona fide purchasers of the goods. (xi) The appellants have received Telegraphic Release Advice (TRA) on a bona fide belief that they were genuine and they had not played any active role in procuring TRAs which was the responsibility of their brokers; (xii) In Mercedes Benz Appeal the broker, SJ Impex was supposed to arrange for TRAs from the port of export in terms of the sales contract. Both the DEPB scrips and TRA were validly procured and handed over to them by the broker. (xiii) The appellants, therefore had no reason to indulge in forgery of TRA as the DEPB scrips sold....
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....jurisdiction to issue show cause notice under Section 28 of the Customs Act. Reliance was placed on M/s Mangali Impex Ltd. Vs. Union of India - 2016 (335) ELT 605 (Del.). Though, the said decision has been stayed, but it continues to be a binding precedent unless and until the order is reversed or set aside by the appropriate forum, for which the reliance has been placed on the following judgements; (i) Niranjan Chatterjee and Ors. Vs. State of West Bengal and Ors.- 2007 (3) CHN 683; (ii) Abdul Rahiman Vs. The District Collector, Malappuram & Another - 2009 SCC Online Ker 4358. (xvi) As the duty demand is contested to be not sustainable, there is no question of levy of interest and imposition of penalty in view of decision of Supreme Court in Prathibha Processors Vs. Union of India - 1996 (86) ELT 12 (SC); (xvii) The penalty under Section 114A of the Act can be imposed in cases where duty has not been paid or short paid by reason of collusion or wilful mis-statement or suppression of fact, which is not the case in the present proceedings. Therefore, the demand against the appellant is not sustainable. This apart they were bona fide purchaser and ....
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.... (Port), Kolkata - 2008-TIOL-777-CESTAT-Kol; (22) Golden Tools International Vs. Joint DGFT, Ludhiana - 2006 (199) ELT 213 (P&H); (23) Commissioner of Customs Vs. Candid Enterprises - 2001 (130) ELT 404 (SC); (24) M/s Kamala Metachem Vs. Commissioner of Customs (Port), Kolkata - 2007-TIOL-2247-CESTAT-KOL. 19. In addition, learned Departmental Representative also submitted that in these cases, the exports have been made through non EDI port and licenses were made transferrable by the DGFT Control Trade Notice No. 8/AM/12 dated 27.3.2012, which restricts transferability of port of registration in the licenses to non EDI ports wherein the port of registration is only port of exports. It is, accordingly, impressed upon that the licenses, which have been transferred by the DGFT, are contrary to the Circular dated 27.3.2012. 20. These transferees of licenses have also knowingly circumvented the provisions of issue of Transfer Release Advise (TRA) in case of DEPB cases in terms of the various circulars issued by the Department and Prabir Ghosh has not only forged the export documents but had also forged TRA by forging the signatures of Custom officers post....
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....xporter. On the other hand, it is contention of the Department that the entire activities of export and TRA has been manipulated by the exporters. As these licenses have been cancelled or are in the process of cancellation, the license are void ab initio and the duty liability with interest and penalty has been rightly imposed. 25. The bona fide of imports which were made under the various export promotion schemes under Chapter 3 and 4 of the Exim Policy has to be examined. The schemes have already been discussed in the preceding paragraphs. The importers purchased these licenses, which were transferrable from the license brokers. After the purchase of license, the importers did not apply for the issue to Telegraphic Release Advice (TRA) from the port of Registration (POR) as was required to be obtained the TRAs from the brokers. Not only that, they also failed to ascertain the veracity of such TRAs from the Port of Registration. Thus, the due diligent that was required to be exhibited by the importer was not carried out. 26. The entire racket has been carefully planned and executed by Paresh Daftary, Prabir Ghosh and Jyoti Biswas. These three persons circumvented all the law....
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....ssued inadvertently, irregularly or contrary to rules, fraudulently or through misleading statement on the part of the importer concerned; or (ii) when it is found that the licensee has not complied with any (ii) one or more of the conditions subject to which the licence may have been issued. (iii) SCHEDULE Clauses Licencing authority Cancelling authority Clause (xiii) Any officer authorizes by the Central Government. Chief Controller of Imports and/or Govt. of India." (iv) This order, therefore, authorised the Government of India or the Chief Controller of Imports to cancel such licences and make them ineffective. The specified authority has not cancelled the licence issued in this case on the ground that the condition has been infringed. We need not consider the question whether the Chief Controller of Imports or the Government of India, as the case may be, can cancel a licence after the term of the licence has expired, for no such cancellation has been made in this case. 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....
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....ulently which were subsequently transferred to the transferee. It was held that since the goods had been imported under a valid license, the duty liability would not accrue on the transferee. Paragraph 36 and 37 of the judgement are reproduced as under: "36. It is true that legal fraud vitiates everything even judgments and orders of the Court, but the question is: as to what extent this concept can be imported in commercial transactions, where question of transfer of properties is life and soul of trade. In a mercantile transactions, as well as in those connected with real properties, the general rule undoubtedly is, that a person cannot transfer to another a right which he does not himself possesses. The rule of caveat emptor spells out two exceptions to the rule, one in cases for encouragement of commerce such as sales in market overt, and other to the transfer of negotiable instruments. Take for example, if the seller has endorsed and delivered to the buyer the Bill of Leading or any other documents of title to the goods and the buyer has endorsed and delivered it to his sub buyer, then the sub buyer, provided he has taken the document in good faith, as well as for val....
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.... In this behalf, we are reminded of the observation of Kings Bench in the case of Master v. Miller. 4 T.R. 320. [See English Report Vol. 100 pg. 1042] made by Justice Buller, J. while dealing with the case arising out of contract : "I hold that in this case there is no fraud either express or implied: and that, as the plaintiffs have proved that they gave a valuable consideration for the bill, and that it was endorsed to them by those through whose hands it passed, their case is open to no objection whatever. But I will suppose for a moment, though the case does not warrant it, that Wilkinson and Cooke did mean a fraud; still I am of the opinion that would not affect the case between the plaintiffs and the defendants. It is a common saying in our law books, that fraud vitiates everything. I do not quarrel with the phrase, or mean in the smallest degree to impeach the various cases which have been founded on the proof of fraud. But still we must recollect that the principle which I have mentioned is always applied ad hominem. He who is guilty of fraud shall never be permitted to avail himself of it; and if a contract founded in fraud be questioned ....
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....such, it was not open for the Customs Authorities to withhold clearance thereof." 33. As the issue of forged TRA was not the issue before the Court, the case would have no application. 34. In Leader Valves Ltd., the issue was identical as the DEPB was issued by the DGFT on the basis of forged document, bank realization certificate. The appellant was not a party to the fraud and had purchased DEPB from open market under a bona fide belief that it was genuine. The appellant paid full prices and availed the benefit. Merely because at a later stage the DEPB has been found to be fabricated, the assessee could not have been deprived of the benefit. The relevant portion of the order is as under: "9. After hearing learned Counsel for the parties, we are of the considered view that this appeal is devoid of any merit. The assessee-respondent admittedly is not a party to the fraud. There are categorical finding that they had purchased DEPB from the open market in the bona fide belief of its being genuine. They had paid full price and accordingly have availed the benefit. Merely because at a later stage, the DEPB has been found to be fabricated and fake on the basis of BCER the ....
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..... Learned Counsel also submitted that in these cases licenses have not been cancelled and, therefore, the customs cannot object to the utilisation of these licenses placing reliance on the decision in Marmo Classic Vs. Commissioner of Customs - 2002 (143) ELT 153 (Tri.-Mumbai), which was maintained by the Supreme Court in 2003 (152) ELT A85(SC), Blue Water Foods & Exports Pvt. Ltd. Vs. Commissioner of Customs - 2010 (251) ELT 305 (Tri.-Bang.) and Honda Cars India Ltd. Vs. CC, ICD, PPG, Delhi - 2017 (12) TMI 245-CESTAT, New Delhi. 38. In this regard, we find that learned Departmental Representative has submitted a letter received from DRI that most of these licenses except, a few, have been cancelled by various offices of the DGFT and, therefore the submission made by the learned Counsel by placing reliance on these decisions is no help. Further, it is apparent from the Exim Policy and also HBP, that these FPS cannot be utilized at other ports in case where the exports have been made through Non-EDI port. The change of port of Registration (Export-port) is thus contrary to the Exim Policy and HB of procedure by the DGFT office. 39. The Representative of the Department has reli....
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....gainst such scripts obtained fraudutantly. This conclusion drawn is based on several quoted case laws of Apex Court and High Courts of Kolkata & Punjab & Haryana. The ratio laid down by Calcutta High Court in the case of ICI India Ltd. v. C.C. (Port), Calcutta [2005 (184) E.L.T. 334] is squarely applicable to the facts of the present appeal. This order of the Calcutta High Court has also been affirmed by Apex Court as reported at 2005 (187) E.L.T. A31 (S.C.) where invocation of extended period was also justified. Jurisdictional Calcutta High Court in the case of ICI India Ltd. v. CC (Port), Calcutta (supra) held as follows : "2. Relying on the judgment of the learned CEGAT in Appeal No. C/358/2000-NB(D), dated 26th September, 2002 [2003 (151) E.L.T. 336 (T)] Dr. Pal contends that there is a finding that there was no collusion on the part of the appellant. Therefore, according to him, if no fraud or collusion is found on the part of the appellant, in that event, the appellant would be entitled to the benefit of the DEPB licences/scrips. Relying on the decision in United India Insurance Company v. Lehru, (2003) 3SCC 338, Dr. Pal contends that it is just not possible for the ....
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.... circumstances, one may defend his case that one may not be liable for collusion or fraud and exposed to other penalties therefor, but still then one would be liable to pay the duty and interest and for other statutory consequences which one cannot avoid." 9.1 A script obtained from the Licensing authority fraudulently cannot give licence to any transferee to avail any Customs duty exemption. Fraud in common parlance means dishonest dealing, deceit or cheating etc. It makes no difference whether fraud is committed by outrightly forging of documents or by willful misdeclaration/misrepresentation. A fraud is a fraud and there are no categories of mild frauds and severe frauds in taxation matters. Further in a recent case of Tata Iron & Steel Co. Ltd. v. C.C., Mumbai [2015 (319) E.L.T. 546 (S.C.)] on the issue of applicability of extended period in such cases it has been held by Apex Court as follows : "[Order] - The only question in the present appeals is as to whether the customs authorities could invoke the provisions of proviso to Section 28 of the Customs Act, 1962, to avail the benefit of extended period of limitation. 2. In the facts of the present ca....
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....her than the importer of the goods. It is also observed that proviso to Section 28AAA(1) does not absolve the actual importer from payment of duty. Further Hon'ble Apex Court in the case of Tata Iron & Steel Co. Ltd. v. C.C., Mumbai (supra) has held that extended period is available to the Revenue for demanding duty from the transferres also. State cannot be deprived of its share of duty if the same is claimed exemption by fraudulent acts of the exporters in the present proceedings. 11. In view of the above observations duty demands and interest have been correctly confirmed by the Adjudicating authority against all the appellants. However, we are of the considered opinion that penalties are not imposable upon the transferee appellants as they have no knowledge of the nature of goods used and exported by the manufacturers/exporters. Accordingly, penalties imposed upon the transferee appellants are set aside. " 40. Further, reliance was placed on Friends Trading Co., wherein it was held that where DEPB was fraudulently procured by the predecessor of appellant, the duty demand from the appellant cannot be withdrawn, as the importers who utilised these licenses had placed ....
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.... the petitioner was not bona fide. In any case, the proviso is not limited to action of an importer who comes forward to take advantage on the basis of fraudulently obtained or forged DEPB, it also covers action of the predecessor of the importer. Importer who steps into the shoes of seller of forged document does not stand on better footing and cannot be allowed to retain benefit illegally obtained. Taint attaching to the document on the basis of which benefit is taken is not washed of. Fraud or suppression continues if document is not genuine. Any other interpretation will defeat the intendment of the proviso to Section 28 and will enable fraud to be perpetuated without any remedy. Even if case of criminal liability or penality may stand on different footing, purchaser or successor of fraudulently obtained DEPB stands 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. The judgments relied upon on behalf of the petitioner are distinguishable. The matter is covered by view taken by this Court earlier which has been followed ....
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....it and instrumentality in commitment of offence of causing loss to Revenue consciously and deliberately having intimate connection to each other. Neither the importer appellants nor the conduits could demolish the evidence gathered by Revenue making enquiry from DGFT Authority. Their ill-design was unearthed by investigation. 10.2 It is established principle of law that fraud and justice do not dwell together. An assessee acting in defiance of law has no right to claim innocence when he fails to exercise due care and diligence. Failing to cause enquiry with the issuing authority of DEPB scrips/TRAs crippled the importer appellants to claim bona fide. Findings of the learned Adjudicating Authority do not appear to 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 th....
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....f Customs, Mumbai - 2012 (283) ELT 524 (Tri.-Mumbai), which also dealt with a situation pertaining to fraudulently obtained DEPB and TRA's. The Tribunal held that in such a case, demand would be sustainable against the transferee under the Customs Act along with interest and penalty. The relevant paragraphs of the order are reproduced as under: "9. Issue No. I : Whether, on account of ab initio cancellation of the DEPBs by the licensing authority, the appellant is liable to be deprived of the benefit of Notification No. 34/97-Cus., dated 7-4-1997 and consequently to pay customs duty on the goods in question: 9.1 It is not in dispute that all the DEPBs in question were cancelled ab initio by the licensing authority on the ground that the documents (SBs and BCERs) on the basis of which the DEPBs had been issued were forged and fake. One of the contentions raised by De-Nocil is to the effect that as the cancellation of DEPB licences was without notice to them, it cannot affect their right qua bona fide purchaser. But they have not shown us any provision of law which obligates the licensing authority to put transferees of DEPB licence also to notice of a proposal for ....
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....uffer from any sort of taint or other infirmity. The DEPBs were obtained on the basis of forged documents and were, therefore, vitiated by fraud. On this ground, they were cancelled ab initio by the licensing authority. In the circumstances, according to the learned JCDR, it cannot be said that the appellant used valid DEPBs for clearing the goods duty-free. Numerous judgments have been cited before us in support of the rival arguments, which we shall proceed to discuss. Case Law Cited on behalf of the appellant 9.24 All the DEPBs in question were issued, utilized and cancelled during the period of the Export & Import Policy (1-4-1997 to 31-3-2002) issued under the Foreign Trade (Development & Regulation) Act, 1992. Para 7.25 in Chapter 7 of the Policy described the DEPB scheme as follows :- "The objective of Duty Entitlement Pass Book Scheme is to neutralize the incidence of basic customs duty on the import content of the export product. The neutralization shall be provided by way of grant of duty credit against the export product. The duty credit under the scheme shall be calculated by taking into account the deemed import content of the said export pro....
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....ud. If the principle that no one can claim any benefit under a forged document is applicable to the original allottees, it should be held that they did not earn any credit of duty on the basis of the forged & fake SBs and BCERs. If that be so, when they transferred the tainted DEPBs to the appellant, no benefit in the form of credit of duty could have passed on to the latter. 9.25 The REP licences considered by the Hon'ble High Court in Taparia Overseas case did not require the licensing authority's endorsement for transferability under the Import & Export Policy (April 1985 - March 1988) issued under the FT (D&R) Act. We have perused Chapter XIV ("Import Policy for Registered Exporters") of the Policy; para 223 provided a scheme for duty-free import of raw materials against REP licences issued against exports of specified products, and also stated that REP licences issued under the scheme would be freely transferable and would not be subject to "actual user" condition. It was laid down in para 225 that, except for certain specified cases, a licence-holder could transfer the licence in full or part in favour of any other person. Para 226 provided as under: "The tr....
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.... only be said that the transaction of transfer of the scrips was governed by provisions of the statute viz. the FT (D&R) Act and the EXIM Policy issued thereunder. The concept of fraud vitiating everything must, then, be applicable to such transaction. This concept was not applicable to the transfer of REP licences in the case of Taparia Overseas. The case of Sneha Sales Corporation is also similarly distinguishable. 9.28 The learned JCDR has argued that, as the SBs referred to in the Annexures to the DEPBs were forged, the DEPBs themselves were liable to be treated as forged. But there was no such allegation in the show-cause notices. The allegation was that the DEPBs were obtained by the original allottees by producing forged SBs and BCERs. Therefore, the Revenue cannot be heard to say that the DEPBs per se were forged. Whether a DEPB is forged is not a pure question of law to be allowed to be raised for the first time at this stage. This situation, however, cannot be decisive for the appellant. The learned counsel has contended that a DEPB issued on the basis of forged documents cannot be void ab initio but only voidable at the instance of the affected party and the sam....
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....ssed." [underlining supplied] In De-Nocil's case, the show-cause dated 5-10-2001 clearly brought out the fraud committed by the transferors of DEPBs. It was clearly alleged in the show-cause notice that the Shipping Bills and Bank Certificates of Export & Realisation on the basis of which the DEPBs had been issued by Dy. DGFT, Mumbai were all forged. It was also alleged that most of the DEPBs had been obtained by the racketeers in the name of non-existent/fictitious firms. Even the transfer letters were also allegedly fabricated. These and allied allegations were raised against the transferors of the DEPBs. The appellant would only say that they were bona fide transferees of the DEPBs without notice of the above fraud committed by the transferors. Therefore, in our view, the appellant cannot claim support from the above judgments of the Apex Court. 14.2 After considering the submissions, we have found no justification for the penalty imposed on the appellant. The show-cause notice dated 5-10-2001 had inter alia proposed a penalty on De-Nocil under Section 114A/Section 112 of the Customs Act. The adjudicating authority imposed penalty on them under Section 114A ....
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....n the meaning of proviso to Section 28 and thus, extended period of limitation could certainly be availed in the present case. 19. It is settled principle of common law that a purchaser steps into the shoes of the seller and does not acquire better title than the seller. This principle has also been recognized under Section 27 of the Sales of Goods Act, 1932. 21. Even though the word 'fraud' and "with intent to evade payment of duty" are absent in Section 28(1) of the Act, willful suppression or misstatement do find mention in proviso to Section 28 of the Act, which is clearly attracted to the present case." 46. The appeals filed by Prabir Ghosh have also been examined. Learned Counsel had submitted that the appellant was H Card holder of CHA firm, M/s IMA and may have abetted Jyoti Biswas in his fraudulent activities contrary to CHA Licensing Regulation, 2004 but the appellant only allowed his bank account to be used by Jyoti Biswas for some duty payment as he was not having a local account. The appellant has voluntarily disclosed this fact about use of his bank account during January to April where an amount of Rs. 25 lakhs had been deposited through RTGS. Th....