TaxTMI 
TaxTMI 
2025 (5) TMI 2183
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....s been imposed on the appellant in lieu of confiscation in terms of section 125 of the Customs Act. 2. The goods imported by the appellant under four Bills of Entry were cleared under the Duty Exemption Pass Book Scheme [DEPB] and, therefore, were exempted from payment of basic customs duty and additional duty of customs in terms of the Customs Notification No. 34/97-Cus. dated 07.04.1997 [the Customs Exemption Notification]. 3. A show cause notice dated 30.09.2002 was, however, issued to the appellant and 15 others under sections 28 and 124 of the Customs Act alleging that the DEPB scrips were obtained fraudulently on the basis of forged documents and were cancelled by the DGFT, Mumbai by orders passed in May/June 1999. It further stated that the benefit of the Customs Exemption Notification was availed by the appellant for clearance of goods and, therefore, these goods were cleared without payment of customs duty but the benefit of this Customs Exemption Notification would not be available to the importer as the two conditions set out in the Customs Exemption Notification were not complied with. The show cause notice, therefore, called upon the appellant to show cause as to....
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.... Amount of penalty of Relevant Section Under Customs Act, 1962. 1. M/s. Apar Ltd. Rs. 25,00,000/- 114A *****" 5. It is this portion of the order passed by the Commissioner that has been assailed in this appeal. 6. When the matter came up for hearing before a Division Bench of the Tribunal, it was noticed that though the learned counsel for the appellant placed reliance upon certain decisions to contend that the appellant cannot be held liable since the scrips were cancelled only after the imports, but the Division Bench, by order dated 08.03.2017, referred the following issue to decided by a Larger Bench of the Tribunal: "Whether a scrip, entitling imports without payment of duty, if found to be of sinister provenance, though acquired in the normal course of trade should be held against the importer for imposition of penalty." 7. However, when the matter came up before the Larger Bench of the Tribunal, the reference was returned to the Division Bench. This is how the matter is now listed before the Division Bench. 8. The following contentions have been advanced by Shri D.B. Shroff, learned senior counsel for the appellant assisted by S....
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....ed documents and so the appellant cannot be asked or required to pay customs duty. The appellant also contends that the scrips were valid at the time of export and were cancelled subsequently. 12. The DEPB is an Export Promotion Scheme conceived and implemented by the Directorate General of Foreign Trade [DGFT] in the Ministry of Commerce, Government of India. In terms of the Scheme, the exporters, based on the exports made by them, are entitled to apply to the DGFT for obtaining the DEPB scrips. The DEPB scrips are then issued by the DGFT after a process of verification of the export documents submitted by the exporter. On the strength of these scrips issued to the exporter, the exporter can import any good duty free to the extent of the value mentioned in the scrips. To operationalize the Scheme, Customs Exemption Notification was issued exempting the goods from payment of basic customs duty when imported on the strength of valid DEPB scrips. In terms of the prevailing Export Import Policy or Foreign Trade Policy provisions, the DEPB scrips are saleable/tradeable in the market for consideration. 13. The issue, therefore, that would arise for consideration is as to what will....
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....ction 167(8) of the Sea Customs Act, 1878, corresponding to section 111(d) of the Customs Act. It was submitted by the customs department that since the licence was obtained by mis representation, the licence is not valid for import and, therefore, the imported goods are liable for confiscation. The Supreme Court rejected this submission and the relevant observations are: "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. ***** 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 condit....
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....raud 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 valuable consideration, is entitled to the goods free from any right in the original seller to stop them, and thus his position is better than that of the original buyer, same is a position of sales in market-overt. Without attempting to enumerate the various rights which are assignab....
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....id 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 Court in Sampat Raj Durgar case (cited supra). Imports against replenishment Licences were permitted duty free if the importers produced an import Replenishment Licence the goods or the materials were imported into India. In the instant cases when the goods were imported into India, and even when the Bills of Entry were filed, neither were the licences suspended nor the same cancelled. In all these cases, Bills of Entry were filed by the petitioners well before the suspension and/or cancellation of the licences in question, thus the imports were made under valid licences, the goods could not be subj....
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....EPB which was obtained by M/s. Parker Industries and obviously the notice was also to be issued to them alone. We are further of the view that notice under Section 28 of the Customs Act could not be issued to the assessee-respondent because a period of six months stipulated by Section 28 of the Customs Act stood already expired and the rights of the parties had been crystallized. The revenue cannot avail the extended period because the assessee-respondent could not be accused of mis representation, collusion or suppression of facts within the meaning of proviso postulated by Section 28 of the Customs Act. Therefore, there is no merit in this appeal." (emphasis supplied) 23. The Special Leave Petition filed by the department against the aforesaid judgment of the Punjab and Haryana High Court was dismissed by the Supreme Court on 10.03.2008 and the decision is reported in 2008 (227) E.L.T. A29 (S.C.) [Commissioner of Customs vs. Leader Valves Ltd.]. 24. This view was reiterated by the Punjab and Haryana High Court in Commissioner of Customs, Amritsar vs. Vallabh Design Products [2007 (219) E.L.T. 73 (P & H)] and the observations are: "9. After hearing learned Counse....
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....d 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." (emphasis supplied) 29. The judgment of the Supreme Court in Commissioner of Customs (Preventive) vs. Aafloat Textiles (I) P. Ltd. [2009 (235) E.L.T. 587 (S.C.)] deals with a case of import of goods on the strength of forged Special Import Licence which was never issued by DGFT. It is taking in consideration this fact that the Supreme Court held: "28. As noted above, SILs were not genuine documents and were forged. Since fraud was involved, in the eye of law such documents had no existence. Since the documents have been established to be forged or fake, obviously fraud was involved and that was sufficient to extend the period of limitation." 30. The judgment of the Punjab and Haryana High Court in Friends Trading Co. vs. Union of India [2011 (267) E.L.T. 33 (P&H)] and the decision of the Tribunal in Mercedes Benz India Private Ltd. and others vs. Commissioner of Customs, Delhi [(2022) 1 Centax 328 (Tri.-Del.)] are also on the same lines in as much as in these cases also, the DEPB scrips a....
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....as unearthed much later by the detailed enquiry of the officers. We find the original authority extensively quoted and relied on the decision of Hon'ble Supreme Court in CC (Prev.) v. Aafloat Textiles (I) P. Ltd. - 2009 (235) E.L.T. 587 (S.C.). We have perused the said decision. The Hon'ble Supreme Court in that case was dealing with a Special Import Licence (SIL) which was forged and was never issued by the DGFT. The signature and security seal of the authority was forged. Now in the present case, the REP licences were issued by the competent authority and as such were genuine documents. However, the original parties/exporters made fraudulent representation by giving forged documents to obtain such REP licences. As such there is a clear difference in facts between the case decided by the Hon'ble Supreme Court and the present case. In this connection, we may refer to the decision of the Hon'ble Supreme Court in East India Commercial Co. Limited - 2002-TIOL-138-SC = 1983 (13) E.L.T. 1342 (S.C.), it was held as under: "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 shoul....
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....rged licences. The licences have been issued by Competent Authority and were valid till they were cancelled by the competent authority. They were not forged licences. Various case laws examined indicate that the consequences of bona fide buyer using a forged licence or bona fide buyer using a genuine licence but obtained on submission of fabricated or forged documents by the transferors vary. 14. Tribunal in CC v. Patiala Castings Pvt. Ltd. - 2012 (283) E.L.T. 269 examined this issue and held that in the absence of evidence that the transferee have not acted bona fide or was aware of the fraud committed by the original holder of licence, duty cannot be recovered from them. 15. In a recent case while disposing of a large batch of appeals the Mumbai Bench of the Tribunal reported as 2015-TIOL-2090-CESTAT MUM = 2015 (324) E.L.T. A127 (Tribunal), examined the whole gamut of case laws relevant to the issue and held that duty cannot be demanded from the transferors as in such situation where the licences were genuine but obtained by fraudulent representation they can be made only voidable and imports which happen prior to the cancellation cannot be held as improper. The....
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....nd the proviso to section 28(1) of the Customs Act was not invoked now needs to be examined. Elaborating this submission, learned senior counsel pointed out that though the thirteen Bills of Entry were filed during the period July 1998 to November 1998, but the show cause notice that was issued on 30.09.2002 does not contain any reason for invoking the extended period of limitation of five years contemplated under the proviso to section 28(1) of the Customs Act. Learned senior counsel also pointed out that the order passed by the Commissioner also does not contain reasons for invoking the extended period of limitation. 37. To examine this issue, it would be appropriate to reproduce section 28(1) of the Customs Act, as it stood at the relevant time, and it is as follows: "28. Notice for payment of duties, interest, etc. - (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, - (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution ....