2025 (6) TMI 33 - AT - Customs

Levy of penalty u/s 112 of the Customs Act 1962 - use of forged advance licences to evade customs duty - HELD THAT - It is this part of the order imposing a penalty of Rs. 15, 00, 000/- upon the appellant that has been assailed in this appeal under section 112 of the Customs Act. It is clear from the order that forged licence was used for evasion of customs duty and the appellant abetted in obtaining the forged advance licence. The appellant in his letter dated February 07 2000 also confessed his active role/involvement in the racket. The Supreme Court in 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 while dealing with a case where a forged scrip was utilized held that exemption benefit cannot accrue on the basis of such a forged licence. There is therefore no infirmity in the impugned order. The appeal is accordingly dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

- Whether the advance licences used for clearance of copper scrap were genuine or forged.

- Whether the appellant was involved in the use of forged advance licences to evade customs duty.

- Whether the duty exemption claimed under the advance licences is valid in light of the alleged forgery.

- Whether the appellant is liable to pay the confirmed customs duty under Section 28 of the Customs Act, 1962.

- Whether confiscation of goods under Section 111(o) of the Customs Act is justified due to non-observance of licence conditions.

- Whether penalty under Section 112 of the Customs Act is warranted against the appellant for abetment of duty evasion using forged licences.

- The applicability of judicial precedents concerning forged licences and duty exemption.

2. ISSUE-WISE DETAILED ANALYSIS

Authenticity of Advance Licences and Duty Evasion

The Tribunal examined the factual matrix showing that multiple advance licences purportedly issued to various entities were used by M/s B.M. Non-Ferrous Alloys Pvt. Ltd. to clear copper scrap duty free. The licences were allegedly transferred multiple times before being used by the appellant's company. The key evidence included written confirmation from the Jurisdictional Directorate of Foreign Trade (JDFT), which stated it had not issued any of the licences in question. Additionally, representatives of the original licence holders denied issuance or transfer of such licences and challenged the genuineness of the letterheads used to show transfer.

The Tribunal relied on these findings to conclude that the licences were bogus and forged. This negated any entitlement to duty exemption under the Customs Act, as the licences were not genuine. The Tribunal applied the legal principle that duty exemption cannot be claimed on the basis of forged or invalid documents, consistent with the statutory framework under the Customs Act and established jurisprudence.

Liability for Customs Duty and Confiscation of Goods

Since the licences were forged, the Tribunal confirmed the demand of customs duty amounting to Rs. 63,71,517/- under Section 28 of the Customs Act, which empowers recovery of duty where exemption is wrongly claimed. The Tribunal further held that the goods cleared under these forged licences were liable for confiscation under Section 111(o) of the Customs Act, which deals with non-observance of conditions specified in the licence.

The Court reasoned that use of forged licences amounted to non-compliance with the conditions of the advance licence scheme, justifying confiscation. This reflects the principle that goods cleared in violation of statutory conditions are liable to be confiscated to uphold the integrity of customs laws.

Penalty Imposition under Section 112 of the Customs Act

The Tribunal considered whether the appellant was liable for penalty under Section 112 for abetment of duty evasion by using forged licences. The Commissioner's order found that the appellant, along with others, connived to evade customs duty by using forged advance licences. The appellant's own letter dated February 7, 2000, admitted active involvement in the racket, reinforcing the findings of culpability.

The Tribunal applied the legal framework under Section 112, which penalizes persons who abet or aid in evasion of customs duty. The Court rejected any possible defense of innocence or lack of knowledge, given the documented admission and corroborative evidence. The penalty of Rs. 15,00,000/- was thus upheld as justified and proportionate.

Judicial Precedents on Forged Licences and Duty Exemption

The Tribunal referred to authoritative Supreme Court decisions which held that exemption benefits cannot accrue from forged or invalid licences. The cited precedent reaffirmed the principle that customs duty exemption is contingent upon the genuineness and validity of the licence, and any forgery negates such benefit. This precedent was applied to reinforce the Tribunal's conclusion that the appellant could not claim exemption and was liable for duty and penalty.

Absence of Appellant's Representation and Decision on Merits

Despite the appellant's absence during hearing, the Tribunal proceeded to decide the appeal on merits based on the record and submissions of the Department. This is consistent with procedural norms allowing adjudication in default when the appellant fails to appear, especially when evidence and findings are cogent and uncontroverted.

3. SIGNIFICANT HOLDINGS

- "From the report of JDFT and the statements of representatives of M/s Vinipa Exports, M/s Oriental Containers, M/s Supriya Chemicals and M/s Star Trading, it is clear that advance licences in question are not genuine. These are bogus and forged licences, which were used by M/s B.M. Non-ferrous Alloys Pvt. Ltd. to import the copper scrap without payment of duty."

- "Since in this case the party availed the exemption of goods against the conditions mentioned in the advance licence and advance licence in question to be found in bogus and forged, I hold it as non-observance of the conditions and accordingly, goods are liable for confiscation under Section 111(o) of the Customs Act and M/s B.M. Non-ferrous Alloys Pvt. Ltd. is liable for penalty under Section 114A of Customs Act and Mr. Anil Goel is liable to penalty under Section 112 of the Customs Act."

- "From the above, it is clear that... have connived along with Anil Goel Collectively and in their individual capacity and aided and abetted in the attempted evasion of customs duty Rs. 63,71,517/-. They have also abetted in obtaining and using the forged and bogus advance licence knowing fully that the goods were actually not permitted against said licences to be cleared duty free."

- The Court affirmed the principle that "exemption benefit cannot accrue on the basis of such a forged licence."

- The final determination was dismissal of the appeal, confirmation of the duty demand under Section 28, confiscation of goods under Section 111(o), and imposition of penalty under Section 112 of the Customs Act on the appellant for abetment in using forged advance licences to evade customs duty.