2005 (6) TMI 187 - AT - Customs

Summary

Issues:
- Questioning the correctness of duty demand confirmed by Commissioner of Customs
- Liability of the appellants under Section 112 of the Customs Act
- Recovery of duty under Section 28 of the Customs Act

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the appellants challenging the duty demand confirmed by the Commissioner of Customs. The facts revealed that the appellants purchased DEPB scrips from M/s. Parker Industries and imported Gun Metal Scrap against the same. Subsequently, it was discovered that the transferor of the scraps, M/s. Parker Industries, had obtained the DEPB scrips through misrepresentation and fraud, leading to their cancellation. The key issue was the liability of the appellants under Section 112 of the Customs Act in this scenario.

The ld. Commissioner, while observing the case, found that there was no evidence to suggest that the appellants had purchased the DEPB scrips in a non-bona fide manner or colluded with the exporter who obtained the scrips fraudulently. Therefore, the Commissioner did not hold the appellants liable for penal action under Section 112 of the Customs Act. However, the Commissioner still ordered the recovery of duty under Section 28 of the Customs Act, which was legally challenged by the appellants.

In the judgment, reference was made to a case decided by the Hon'ble Bombay High Court, where it was held that goods imported under a license valid at the relevant time, without knowledge of fraud committed by the original license holder, could not be subjected to levy of customs duty. Drawing parallels from this precedent, the Tribunal found that the case of the appellants aligned with the principles established in the Bombay High Court case. Considering the facts and findings in favor of the appellants, the impugned order was set aside, and the appeal was allowed with consequential relief as per law.

In conclusion, the Tribunal overturned the duty demand confirmed by the Commissioner of Customs, highlighting the distinction between liability under Section 112 of the Customs Act and the recovery of duty under Section 28. The judgment emphasized the importance of bona fide transactions and the legal implications of fraudulent activities in customs matters, providing a significant precedent for similar cases in the future.