TaxTMI 
TaxTMI 
2026 (9) TMI 1056
X X X X Extracts X X X X
X X X X Extracts X X X X
....ort-import bulk commodity trading and is a subsequent purchaser and transferee of DFIA Licence No. 0210100847 dated 16.05.2007. The said licence was one of 23 Duty Free Import Authorisation licences obtained by M/s. Gemini Overseas Ltd. from the Director General of Foreign Trade during 2007-08 and 2008-09, under Notification No. 40/2006-Cus dated 01.05.2006, for duty-free import of Mulberry Raw Silk of any grade, Dupion Silk Yarn, and Reeled Tassar Yarn. Of the 23 licences, 3 were endorsed transferable by the Regional Authority upon certification of fulfilment of export obligation by Gemini Overseas; Licence No. 0210100847 was one such licence, and was purchased by the appellant for Rs. 14,51,795/-, paid through proper banking channels, through Customs House Agent M/s. S.K. Saha & Co. 3. Acting on the said licence, the appellant imported Mulberry Raw Silk Yarn duty-free vide Bill of Entry No. 437910 dated 22.10.2008 at Kolkata Port, the assessable value being Rs. 74,03,414.08/- and the duty foregone being Rs. 22,87,654.95/-. 4. Subsequently, intelligence gathered by the Directorate of Revenue Intelligence indicated that Gemini Overseas had, for the purpose of discharging its ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ired to pay duty, interest and redemption fine in respect of his import, when he has no notice of any irregularity on the part of the exporter who had obtained such licence and the licence is not cancelled by the authorities?" No question relating to limitation was framed at the admission stage, nor was any such question sought to be framed by the appellant at that stage. 8. Learned Counsel appearing for the appellant submits that the DFIA licence was validly issued by the DGFT, and that any fraud or mis-declaration occurred subsequently, at the stage of certification of fulfilment of export obligation by Gemini Overseas - an event distinct from and subsequent to issuance. Relying on East India Commercial Co. Ltd., Calcutta v. Collector of Customs, Calcutta [1962 AIR 1893; 1983 (13) E.L.T. 1342 (S.C.)] and Collector of Customs, Bombay v. Sneha Sales Corporation [2000 (121) E.L.T. 577 (S.C.)], counsel submits that a licence obtained by fraud is at best voidable, not void, remains good and effective until avoided in the manner prescribed by law, and - since the licence has, on this record, never been cancelled by the issuing authority - remained a valid and subsisting instrumen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een verified on the DGFT portal, no verification available to the appellant could have revealed the fraud alleged to have occurred at the export-obligation stage. 13. Learned Counsel for the appellant submits, in opposition to the Revenue's threshold objection, that the question of limitation is a legitimate ground open to be urged in support of the appeal notwithstanding that no separate question was framed on it at admission, since it bears directly upon the validity of the very demand which the framed question puts in issue. 14. Learned Counsel appearing for the respondent submits that the fraud practised by Gemini Overseas went to the very foundation of the licence - the false declaration of the nature of goods exported in discharge of the export obligation - and that, relying on ICI India and Munjal Showa, a duty-free instrument tainted by fraud, whether by forgery or by material misrepresentation in procuring the certification necessary for its transferability, is rendered incapable in law of conferring exemption on any subsequent holder, irrespective of that holder's personal innocence. 15. Learned Counsel for the respondent submits that the absence of forma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection concerning limitation being addressed as a preliminary matter before that question is reached. 21. On the threshold objection: it is well settled that an appeal of this nature is ordinarily confined to the substantial question(s) of law formulated at the stage of admission, though the Court retains discretion, in an appropriate case, to frame or permit argument on an additional question where satisfied that one genuinely arises from the record. In the present case, it is not disputed that no question touching limitation was framed at admission, and nothing on record suggests that the appellant made any application, at any stage after admission and before final hearing, to have such a question additionally framed. In these circumstances, this Court is not persuaded to treat limitation as an independent ground available to be urged for the first time at final hearing, and declines to determine it as a substantive basis for disposal of this appeal. This Court records, however, and as a matter bearing on the overall assessment of the record rather than as a separate finding on limitation, that the Show Cause Notice, insofar as it concerns the appellant, is silent as to any al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s resolution of the question necessarily turns on an extension, by analogy, of the void/voidable principle articulated in East India Commercial and Sneha Sales, rather than on settled precedent addressing this precise fact pattern. 24. On that footing, the appellant's status as a bona fide purchaser for value without notice assumes significance. It is undisputed that the appellant purchased the licence for consideration of Rs. 14,51,795/- through proper banking channels, and CESTAT itself found, in setting aside the Section 112 penalty, that the appellant had no knowledge of the nature of the goods used and exported by Gemini Overseas or Eastern Silk Industries, a finding which stands unchallenged by the respondent in the present appeal. Applying the principle recognised in Taparia Overseas, a bona fide transferee for value without notice of the original fraud stands on a different footing from the party who perpetrated or was complicit in that fraud, and the general maxim that fraud vitiates everything does not, without more, extend to defeat the rights of such a transferee. 25. This Court does not consider the respondent's reliance on Pennar Industries to displace t....