TaxTMI 
TaxTMI 
2022 (11) TMI 869
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.... the penalty of Rs. 1,00,000 under section 114AA imposed on him. 2. The undisputed facts of the case are that Nidhi is in the business of importing and trading paper based articles. It imported goods under 29 Bills of Entry using various duty free licenses issued by the Directorate General of Foreign Trade (DGFT) to various persons under various export promotion schemes such as Duty Free Import Authorisation (DFIA), Focus Product Scheme (FPS) Focus Market Scheme (FMS), Village and Khadi Gramodyog Yojna (VKGUY) and Duty Entitlement Passbook (DEPB). These licences/scrips are transferable and after the exporter fulfils its export obligations under the licence, it can sell them to anyone else who can then import goods against the licence/scrip duty free. Usually, the licences/scrips are sold at a discount, say, at 95% of the value of the duty exemption available under the licence. For imports under each of the schemes under which the licences/scrips are issued by DGFT, there is a corresponding exemption notification under the Customs Act. Thus, when the licence issued by the DGFT is produced before the customs for clearance, appropriate value is debited from the licence/scrip and go....
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.... (ii) I do not order confiscation of the impugned goods. (iii) I impose a penalty of Rs. 57,14,129/- (Rupees Fifty Seven Lakh Fourteen Thousand One Hundred and Twenty Nine only) under Section 114A of the Customs Act, 1962 on M/s Nidhi Enterprises, the Noticee No. 1. (iv) I do not impose penalty under Section 112(a)(ii) of the Customs Act, 1962, on M/s Nidhi Enterprises, the Noticee No. 1. (v) I do not impose any penalty under Section 114AA of the Customs Act, 1962 on M/s Nidhi Enterprises. (vi) I impose a penalty of Rs. 10,00,000/- (Rupees Ten Lakh only) under Section 112(a)(ii) of the Customs Act, 1962 on Shri Sudarshan Kumar Jain, Noticee No. 2 and Partner in M/s Nidhi Enterprises. (vii) I impose a penalty of Rs.1,00,000/- (Rupees One Lakh only) under Section 114AA of the Customs Act, 1962, on Shri Sudarshan Kumar Jain, Noticee No. 2 and Partner in M/s Nidhi Enterprises. (viii) I impose a penalty of Rs. 50,00,000/- (Rupees Fifty Lakh only) under Section 112(b)(ii) of the Customs Act, 1962, on Sh. Sharafat Hussain, 'G' Card holder of M/s Kirti Cargo. (ix) I impose a penalty of Rs. 2,00,00,000/- (Rupees Two cror....
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....cam and they may have benefitted from it. g) The Customs EDI system is a completely secure system access to which is protected by UserID (known as SSOID) and password for each official and therefore the scam could not have taken place without the connivance of the officers. No investigation has been carried out regarding the role of the officers. h) Thus, the SCN was pre-mature as the role of the officers was not investigated. i) In respect of five Bills of Entry, the scrips which were used fully covered the imports even if the illegally enhanced value in the system is ignored. The demand must be dropped to that extent. This resulted in an error in quantification to the extent of Rs. 16,58,705/-. j) Extended period of limitation was wrongly invoked as there was no fraud, mis-statement or suppression on the part of the appellants. k) No penalty should have been imposed on the appellant - Nidhi as it had imported goods in good faith. l) The partner in a firm and the firm are not separate entities and hence, no separate penalty should have been imposed on Jain, partner of Nidhi since a penalty has already been imposed on Nidhi. ....
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....egistrations with other Ports, registration of non-existent Licenses, registration with enhanced value, etc. vi) Shri Jain, partner of Nidhi accepted that he had bought these licenses not from the exporter directly but through Shri Sharafat Hussain who would use the scrips to pay duty. He had not given any authorisation either to M/s Zealous International owned by Sh Hussian or even to the Custom House Agent M/s Kirti Cargo for clearance of goods through customs. He had accepted that it was mistake on his part to rely on Shri Hussain. vii) Jain also confirmed that they never had a copy of the licences/scripts which were utilised for payment of Customs Import duty, let alone verified them. The debit Notes/tax invoices issued by Shri Sharafat Hussain also do not mention which DEPB/FPS/FMS licences were sold to Nidhi. All these prove that Nidhi had not even taken the basic care of finding which licence/scrip it had purchased and whether the licence covers its duty liability or not and in which Bill of Entry it has used the licence to pay duty. A bonafide buyer should follow the concept of Caveat Emptor (i.e., Buyer Beware). viii) As an importer, Nidhi could ....
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....annot be accepted. xiii) Therefore, the demand of duty invoking extended period of limitation along with interest must be sustained in this case. Similarly, the penalties imposed on Nidhi and Jain also need to be upheld. xiv) Imports under the Focus Product Scheme (FPS) are exempted by Notification No. 92 /2009 - Customs dated 11.09.2009. This exemption is available subject to some conditions including that said scrip is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods, but for this exemption. xv) Similarly, imports under the Focus Market Scheme (FMS) are exempted by Notification No. 93 /2009 - Customs dated 11.09.2009. This exemption is available subject to some conditions including that said scrip is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods, but for this exemption. xvi) The Central Board of Excise and Customs (Board) issued circular no. 05/2010- Customs dated 16.03.2010 regarding Verification of genuineness, of duty credit scrips issued under Chapter 3 of FTP, before registration. Paragraph 2(e) of this....
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....e instructions issued at the Commissionerate level by Standing Order No. 2/2012 issued by the office of Commissioner of Customs, ICD TKD N Delhi dated 03.02.2012 also provides the mechanism for original license to be presented before Customs Authorities for any amendment/ manual debit/ manual registration. xxii) Standing Order No. 02 /2015 dated 02/11/2015 issued by the Commissioner of Customs ICD TKD Export, in continuation of previous practice a detailed procedure has been outlined to be followed for verification and registration of scrips under chapter3 of the FTP Reward/incentive Schemes of FTP 2009-14 like FPS, FMS, VKGUY, SFIS and assessment of BOEs under GP VII where duty is sought to be paid through use of theses Scrips. As per Para (a) of the said Order the Original Scrip issued by DGFT including its Annexure along with one photocopy and copies of BRCs shall be presented with Application in prescribed Format to the EA/TA in License section by License holder or his authorised representative. xxiii) Standing Order No 04/16 dated 30.05.2016 issued by The Commissioner of Customs ICD TKD (Export) as per Para(i) has also provided such mechanisms for verificatio....
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....art of the Appellants in the issue of DEPB Licenses becomes absolutely immaterial and irrelevant since no credit can be derived from a forged DEPB Licenses/Scrips. 10. On the appellant's submission that the SCN was premature as the role of the officers in the case was not investigated, learned authorised representative submitted that the role, if any, of the officers in this fraud is being investigated by the Central Bureau of Investigation (CBI) under relevant laws and the present appeal under the Customs Act is only with respect to the duty, interest and penalties on the importer. 11. On the appellant's submission that the SCN was issued without jurisdiction as it has been issued by the Commissioner of Customs (Export) ICD, Tughalkabad, Delhi and it has been adjudicated by Commissioner of Customs (Exports) Air Cargo Export, New Custom House, New Delhi, learned authorised representative submits that ICD, Tughlakabad had only one Commissioner until Notification No. 77/2014-Customs (NT) dated 16th September 2014 was issued by the Government of India, inter alia, creating a separate Commissioner (Export) in ICD Tughlakabad. Commissioner (Export), ICD, Tughlakabad was, among oth....
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....hich licence or scrip, if any, it had purchased. The invoices which it received from firms of Shri Sharafat Hussain also did not indicate which scrip or licence was being sold. 15. Nidhi imported goods and asked Shri Sharafat Hussain to clear the goods by filing the Bills of Entry and paid a percentage of the duty chargeable to Shri Sharafat Hussain. Shri Sharafat Hussain, in turn, used fake or forged or manipulated licences/scrips to pay duty online and clear the goods. Of the 29 Bills of Entry in respect of 7 Bills of Entry the value of the licences was wrongly entered to a higher amount by Shri Sharafat Hussain along with Shri Vinod Pathror in the Customs EDI system and they were used to pay the duty. In respect of the remaining Bills of Entry, the licences did not exist at all or were registered multiple times. The fact that these frauds happened is undisputed. The submission of the learned counsel for the appellant is that since it had not committed the fraud and it had paid a percentage of the value of duty payable to Shri Sharafat Hussain it should not be required to pay the duty again and, therefore, the demand is not sustainable. It is also the contention of the learned....
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....2017. By Notification No. 91/2018-Cus (NT) dated 5.11.2018 the Central Government has delegated the powers to the Chief Commissioner to assign the work of adjudication to any other Commissioner in his zone. Accordingly, order No. 1/2018 dated 15.11.2018 was issued by the Chief Commissioner of Customs (Delhi Zone) assigning the SCN herein to Commissioner of Customs (Export), Air Cargo, New Delhi who adjudicated and passed the impugned order. Therefore, the submission of the learned counsel for the appellant on the question of jurisdiction is misplaced. The judgment in Cannon India Limited was with respect to the jurisdiction of the officers of the Directorate of Revenue Intelligence (DRI) to issue SCN under Section 28 of the Act. In this case, the SCN was issued by the jurisdictional Commissioner of Customs. This power of assigning any SCN for adjudication has been delegated to the Zonal Chief Commissioner by the Government. The Zonal Chief Commissioner had assigned this SCN to the Commissioner of Customs (Export), Air Cargo, New Delhi who passed the impugned order. We, therefore, find that the SCN was issued and the impugned order was passed by an officer who had the jurisdiction. ....
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.... 9. In that view of the matter and on the principle that fraud vitiates everything and such forged/fake DEPB licenses/Scripps are void ab initio, it cannot be said that the Department acted illegally in invoking the extended period of limitation. In the facts and circumstances, the Department was absolutely justified in invoking the extended period of limitation. 10. It is also required to be noted that the moment, the appellant(s) was/were informed about the fake DEPB licenses, immediately they paid the Customs Duty, may be under protest. The Customs Duty was paid under protest to avoid any further coercive action. Be that as it may, the fact remains that the DEPB licenses/Scripps on which the exemption was availed by the appellant(s) was/were found to be forged one and, therefore, there shall be a duty liability and the same has been rightly confirmed by the Department, which has been rightly confirmed by the Tribunal as well as the High Court. 11. Now, so far as the submission on behalf of the buyer(s) - appellant(s) relying upon the decision of this Court in the case of Aafloat Textiles India Private Limited and Ors. (supra) is concerned, whether the b....
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....h the corresponding paragraphs of the Foreign Trade Policy and also spell out the conditions subject to which the exemption notification is available. For instance, Notification No. 92/2009-Cus. dated 11.09.2009 provided exemption from duty when the goods are imported into India against a duty credit scrips issued under the Focus Product Scheme (FPS) subject to some conditions. Condition No. 2 states "that the said scrip is produced before the proper officer of customs at the time of clearance for debit of the duties leviable from the goods but for this exemption." Similarly exemption Notification No. 95/2009-Cus. exempts goods imported against a duty credit scrip issued under the Vishesh Krishi and Gram Udyog Yojana (VKGUY) as per paragraphs 3.1 and 3.2 of Foreign Trade Policy. Condition No. 1 of this exempts reads; "that the scrip has been issued to an exporter of products specified in paragraphs 3.13.2 of the Foreign Trade Policy by the Licensing Authority or Regional Authority and it is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods." 25. Similarly Notification No. 93/2009-Cus. exempts the goods imported a....
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....ences must be produced. Learned authorized representative for the Revenue submits that only in 2019 when a mechanism online verification of the scrips/licences was introduced, the requirement of physical scrips or licences done away with. 27. In this particular case, undisputedly the appellant has not only NOT produced the scrips or licenses for verification or debit at the time of clearance of the goods, but it was, in fact, oblivious of which licences or scrip, if any, was purchased by it. The appellant had only paid percentage of the duty payable to Shri Sharafat Hussain who in turn, used this forged or value enhanced scrips to clear the goods. There is no evidence of the transfer of scrips to the appellant and certainly there is no evidence whatsoever that the scrips/licences have been produced for physical verification before the proper officer at the time of clearance of goods. 28. The question which needs to be answered is what has actually been purchased by the appellant from Shri Sharafat Hussain's firm in these cases if it had not purchased the licences/scrips. None of the invoices produced before us indicate any licence/scrip. They mention only the Bill of Entry nu....
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.... demand of interest is concerned, interest under Section 28AA follows from the demand under Section 28 of the Customs Act. As we have held that the duty is payable the interest liability follows. 31. Insofar as the imposition of penalty is concerned, it is the contention of the learned counsel for the appellant that it was a bonafide buyer of duty free scrips and, therefore, no penalties must be imposed upon it. It is also the contention of the learned counsel for the appellant that since the scam would not have been possible without involvement of some customs officers, the show cause notice is premature because the role of such officers has not been investigated. As far as the role of the officers in the matter is concerned, learned authorized representative submits that the matter has been sent to the CBI who are investigating the matter. We find that in respect of the appellant only duty, interest, fine and penalty are relevant in this case but if any officers are involved, it will be a much more serious matter which will have to be investigated with respect to the violations of other laws such as Prevention of Corruption Act also. Investigation in this regard has been hande....
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....nt is concerned instead of paying duty to Government exchequer it had paid a percentage of the amount equivalent to the duty to the firms of Shri Sharafat Hussain. Shri Sharafat Hussain, in turn, used manipulated/forged licences to clear the Bills of Entry. In our considered view, this does not even remotely meet the requirement of caveat emptor. Under these circumstances, we find no reason to hold that the appellant was a genuine buyer of licences/scrips and had purchased them in good faith. 35. Penalty of an amount equal to the duty not paid was imposed on Nidhi under section 114A. This is a mandatory penalty imposable when a demand invoking extended period of limitation and since we have upheld the confirmation of the demand invoking extended period of limitation, we also uphold the imposition of penalty under section 114A. 36. Penalty of Rs.10,00,000 under section 112(a) (ii) and penalty of Rs. 1,00,000 under section 114AA were imposed on Jain, partner of Nidhi. The fifth proviso to section 114A reads as follows: Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114. 37. Penalty under sec....