TaxTMI 
TaxTMI 
2025 (5) TMI 1043
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....t, 1962 the Customs Act with applicable interest and penalties under section 114A and 114AA of the Customs Act. 2. Customs Appeal No. 50243 of 2020 has been filed by Shri Jinender Kumar Jain Jinender Jain, partner of M/s Raja Ram and Company to assail that portion of the order dated 18.11.2019 passed by the Principal Commissioner that imposes a penalty upon Jinender Jain under section 112(b)(ii) of the Customs Act. 3. Raja Ram and Company is engaged in the import and trading of paper and paper articles. Intelligence was gathered that some persons gained illegal access to the Electronic Data Interchange EDI systems of the Indian Customs and tampered with details at the Inland Container Depot, Tughlakabad Port of Duty Free Scrips issued by the Directorate General of Foreign Trade DGFT. These Duty Free Scrips were found to have been utilised for payment of import duties by certain importers for import of paper and paper articles. Investigation also revealed that these Scrips were used by various importers by using the services of one common customs broker namely, "M/s Kirti Cargo" for filing the Bills of Entry for clearance of the import consignments. It was also found that the ....
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.... scrip and its date in the Bill of Entry but the registration number and its date reflected in the Bill of Entry were not in respect of the said scrip. It was for a scrip which was registered in the system fraudulently by changing the last few digits of the scrip, reflected in the Bill of Entry and which was not issued by the DGFT at all. Since, it is the registration number of the scrip which is picked by the EDI system, duty got debited from that fictitious scrip and not from the scrip which appeared in the Bill of Entry. Hence, duty in the Bill of Entry was not debited from a legitimate scrip. (ii). In some cases, they gave the particulars of a scrip and its date in the Bill of Entry but the registration number and its date reflected in the Bill of Entry were not in respect of the said scrip. It was for a scrip which was registered in the system fraudulently by changing the date of the scrip, reflected in the Bill of Entry and which was not issued by the DGFT at all. Since, it is the registration number of the scrip which is picked by the EDI system, duty got debited from that fictitious scrip and not from the scrip which appeared in the Bill of Entry. Hence, duty in th....
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....o the tune of Rs. 65,42,549/- (Rs. Sixty Five Lakh Forty Two Thousand Five Hundred and Forty Nine Only). The acts of omission and commission on the part of the importer as discussed under aforesaid paras resulted in short payment/ non-payment of large amount of revenue to the exchequer. They were working under self- assessment and the onus to pay proper duties/taxes/Government dues was on them. Intentional non disclosure of the entire facts known to the importer resulted in contravention of various provisions of the Customs Act, 1962 (as amended) as discussed above. Thus, it appears that the importer breached the trust the Department had reposed in them in the era of self assessment. These facts would not have come to the notice of the department if no investigation had been conducted. Therefore, it appears that Section 28(4) of the Customs Act, 1962 (as amended) for demand and recovery of Customs duty from the importer invoking the extended period, is applicable in this case." xxxxxxxxx 23. And whereas, Sh. Jinender Kumar Jain, who was the Partner in the assessee firm and was actively involved in day to day activities of the assessee firm did not exercise due dil....
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....orter has not disputed these facts and has mainly contended about their non-involvement in the said act of fraud and forgery/manipulation of scrips and has tried to shift the blame and responsibility on their agent and Customs officers. Thus, it is evident that the duty has been admittedly debited through manipulated/forged and ineligible scrips, which could not have been used for payment of duty. Since the instrument through which the duty was debited was void at the time of registration in the Customs system, as has been brought out in the SCN, any debit of duty from such scrip can, at no cost, be considered payment of Customs duty due on such imports. It is a settled law that no benefit could be claimed through an instrument which was void ab-initio and thus the duty paid through such scrips is non- est. Therefore, the duty has been short paid to that extent." 8. Regarding the invocation of the extended period of limitation, the Principal Commissioner has observed as follows: "37.1 In the instant case the duty has been evaded by forgery and fraud, as discussed above, where Sh. Sharafat Hussain and Sh. Vinod Kumar Pathror had a major role. It has been admitted by the ....
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.... unknown of the fraud, it was the agent of the importer who committed the fraudulent act and thus caused misstatement and suppression of correct facts. This fact itself brings the case under the ambit of Section 28(4) as reproduced above." (emphasis supplied) 9. Shri Vijay Kumar, learned counsel appearing for the appellant made the following submissions: i) As Writ Petitions involving identical issues are pending before the Delhi High Court and are listed on 04.08.2025, the hearing of this appeal may be adjourned; ii) The goods were cleared under licences issued under the Export Promotion Scheme. The importers are not involved in the issue of the Duty Free Licences; iii) Licences were valid at the time of clearance of the goods and the purchasers of the licences cannot be held liable if investigation throws doubts on the licences; iv) The extended period of limitation could not have been invoked in the facts and circumstances of the case; and v) Penalties could not have been imposed upon Raja Ram and Company or Jinender Jain. 10. Shri Nagendra Yadav, learned authorised representative appearing on behalf of the department, ....
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....s that Sharafat Hussain, a „G‟ card holder of M/s Kirti Cargo was looking after the import clearance and bills were raised by him through his own companies and not through M/s Kirti Cargo. This should have drawn the attention of Raja Ram and Company and Jinender Jain but notice was not taken of this fact at all. It also transpires from the record that the importer was not even in possession of the Scrips. 15. In M/s Munjal Showa Ltd versus Commissioner of Customs And Central Excise (Delhi- IV) and M/s Friends Trading Co. versus Union of India And Ors. 2022(9) TMI 1076- Supreme Court the Supreme Court observed as follows: "8. From the judgment and order passed by the Tribunal and even from the findings recorded by the Department, it has been found that the DEPB licenses/Scripps, on which the exemption benefit was availed of by the appellant(s) (as buyers of the forged/ fake DEPB licenses/Scripps) were found to be forged one and it was found that the DEPB licenses/Scripps were not issued at all. A fraud was played and the exemption benefit was availed on such forged/fake DEPB licenses/Scrips. 9. In that view of the matter and on the principle that fra....
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....t 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 counsel that since it had not committed the fraud the extended period of limitation has been wrongly invoked by the Department in the show cause notice. xxxxx 21. The first question to be answered is that whether in a case where forged or manipulated scrips or licences have been used for clearance of goods and there is no evidence that the fraud was committed by the importer, demand can been raised for the duty on the importer and if so whether extended period of limitation can also be invoked. This issue is no longer res integra and it has been settled by the Supreme Court in M/s Munjal Showa Ltd. Vs. Commissioner of Customs And Central Excise (Delhi-IV) And M/s Friends Trading Co. Vs. Union of India And Ors. 2022 (9) TMT 1076-Supreme Court. The Supreme Court was seized of a matter where forge/fake DEPB licences/scrips were used to pay duty on imported goods. After completing investigation, show cause notices ....
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....y. Even if one buys a car from another one would at least check the registration number of the car, make, model, etc. In the present case, none of purchase invoices produced by the appellant even indicate the licence or scrip which the appellant bought. The invoices show that the appellant bought the benefit of exemption which is not transferable and it had not bought the licences/scrips which were transferable. For this reason, the appellant neither received physical licences/scrips nor has it produced at the time of claiming the benefit of the exemption. Effectively, so far as the appellant 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." (emphasis supplied) 18. In M/s Bimal Paper Pvt. Ltd. and Shri Praveen Kumar Jain, Director v....
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....ppellant had not done this. Further, the appellant has not even purchased any license/scrip but only purchased the benefit of the exemption notification and this benefit is not transferable. The benefit of the exemption notification is available to a person to whom the licence is either issued or is transferred neither is the case of the appellant. 23. It is a well settled legal principal that fraud vitiates everything and nobody can profit from the fraud whether or not the fraud itself was committed by that person. In this case, the fraud of forging and manipulating the license was done by Sharafat and Vinod Kumar Pathror and not by the appellant. It is for this reason, the FIR filed by the Department with the Economic Offences Wing of the Police also does not include the appellant as a suspect. However, the benefit of the exemption under the license is not available on the strength of a fraudulent licence and the appellant is liable to pay the duty. 24. In the case of Nidhi Enterprises, this Tribunal held that the buyer of the licenses has to fulfill the requirement of Caveat Emptor. The appellant in this case has not even remotely fulfilled its obligat....