TMI Blog2014 (3) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant acquired non est, unlawful and illegitimate DEPB scrip from market without causing enquiry with the issuing authority thereof to avoid evil consequence of fraud. 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. - Decided against the assessee and in favor of revenue. - Appeal No. 619-620 of 2006-Cus and Appeal No. 1 and 72 of 2007 - FO 58350-58353/2013 - Dated:- 21-10-2013 - Mrs. Archana Wadhwa and Shri Mathew John, JJ. For the Appellant : Shri Amit Jain, Advocate For the Respondent : Shri K.K. Jaiswal, SDR JUDGEMENT Per Mathew John: There are four appeals being decided in this Appeal. Two are filed by the importer and two are filed by Revenue. All the four Appeal arise from the same impugned order. The adjudication order confirmed the duty demanded and imposed redemption fine and penalty. In appeal Commissioner (Appeals) upheld the duty demanded but set aside fine and penalty. Both sides are aggrieved about the order of Commissioner (Appeals) and have filed these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraud or misrepresentation only renders a licence voidable and it becomes inoperative before it is cancelled. In the present case the licences were cancelled by order dated December 18, 1986 after the goods had been imported and cleared. The Tribunal was, therefore, right in holding that the import of the goods was not in contravention of the provisions of Import and Export Order, 1955 and Import and Export (Control) Act, 1947 and the goods were not liable to be confiscated on that basis under Section 111(d) of the Act. 6. The ld. Advocate further relies on 25 decisions of Tribunal, different High Courts and the Apex Court. Since the Revenue is relying on one decision of the Apex Court in this matter in the case of Friends Trading Company, I propose to list and examine only the decisions of the Apex Court cited by the Appellant which are the following: S. No. Case Law 1 East India Commercial Co. Ltd. v. CC-1983 (13) ELT 1342 (SC) 2. CC vs. Sneha Sales Corp. - 2000 (121) ELT 577 (SC) 3. CC vs. Ajay Kumar - 2009 (92) RLT 883 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uing the Advance License. The Court decided that the obligation is with transferor and not with transferee. 13. In the case of CC (Prev) Vs. Aafloat Textiles India Ltd the Apex Court held that the licenses were forged. The transferee, the importer did not make adequate enquires before buying the licenses and hence the extended period of time under section 28 was held to be applicable. The Respondents case is that he had made enquires with JDGFT and hence the extended period of time should not apply in his case. 14. The facts of the case of Larson and Toubro is very different. It is cited only to argue how the Respondent is protected from invoking extended period of time because of his bonafide belief and actions. 15. A DEPB script is similar to a cheque drawn on the Government exchequer and is transferrable by endorsement. However it is not a negotiable instrument enjoying the protection of section 120 of the Negotiable Instruments Act. So the transferee, even for bonafide consideration, cannot get a better claim than the transferor against government, the drawee. So a transferee in such transaction has to exercise the well known maxim caveat emptor, though this maxim i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I and the Tribunal s decision in the case of CCE vs. Sona Castings. I have seen the said two judgements. Whereas in the case of Friends Trading Co., there is nothing on record to show as to whether the DEPB scrips were cancelled by the DGFT authorities before or after the imports were completed, the Tribunal s decision in the case of Sona Casting has not taken note of Larger Bench decision of the Tribunal in the case Hico Enterprises vs. CCE Mumbai [2005 (189) ELT 135 (LB)] as confirmed by the Hon ble Supreme Court as reported in [2008 (228) ELT 161 (SC)]. 21. As against the above, I find that there are catena of judgements laying down that if the DEPB scrips are valid at the time of import of the goods, the transferee cannot be held liable for consequences, on subsequent cancellation of the scrips by the DGFT authorities. I would like to refer to the detailed order of the Larger Bench of the Tribunal in the case of Hico Enterprises. It stands concluded by the Larger Bench, after examining the various precedent decisions of various jurisdiction as also quasi judicial authorities that the licences issued by DGFT authorities are issued after arriving at the satisfaction of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for issuing the advance licence, with respect, may not be appropriate. The sole issue before the Larger Bench according to my understanding, was as to whether the licence, obtained without fulfilling the conditions of the notification No. 203/92 by the original licence holder can be made a ground for denying the duty free imports to the subsequent transferee of the same. As such, I am of the view that the issue in the present appeal stands fully covered by the decision of the Larger Bench of the Tribunal as confirmed by the Hon ble Supreme Court. 23. I further find that the reliance placed on the Honble Supreme Court decision in the case of CCE vs. Aafloat Textile (I) Pvt. Ltd. may not be appropriate inasmuch as the licences in that case were admittedly forged licences. The effect of the same would be as if the licence never existed in the eyes of law. In the present case, admittedly the licensces are not forged but the same stands issued by DGFT in accordance with the law and were valid at the time of import of the goods. Subsequent cancellation of the same by DGFT would not effect the appellants right to import the goods free of duty, at the time, when the licence were adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs Act, 1962. The said section lays down the normal period of limitation as also the extended period of limitation for issuing show cause notice for recovery of duty not paid, short paid or erroneously refunded. Proviso to said section is to the effect that where such non-levy, short levy etc. is by reason of collusion, or wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provision of this section shall have the effect as if for the word one year and 6 months, the words five years were substituted. Such and only such reasons as mentioned in the said proviso enables the Revenue to invoke the extended period of limitation. The duty in the present case is being demanded from the importer on the ground that licence used by him were procured by the original licence holder / seller by mis-representing facts before the DGFT authorities. There is no allegation of any mis-representation or fraud or collusion or suppression of facts on the part of the importer. The fraud committed by a third party cannot result in availability of longer period to the Revenue so as to raise the demand against the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand is being made. The Tribunal has thus upheld the view expressed by the Commissioner (Appeals). 8. In light of the aforesaid facts and circumstances of the case, it is apparent that there is no error in law committed by the Tribunal so as to warrant interference. No question of law, as proposed or otherwise, much less a substantial question of law can be said to be arising out of the impugned order of Tribunal. The appeal is accordingly dismissed. 27. Reliance can also be placed upon the decision of Hon ble Punjab and Haryana in the case of CC Amristsar vs. Vallabh Design Products [2007 (219) ELT 73 (P H)] wherein the Hon ble High Court held that show cause notice, invoking the longer period, could not be issued to the importer because the period of six months stipulated by Section 28 of the Customs Act stood already expired and the rights of the parties have been crystallised, the imports having been affected before cancellation of exports. The Hon ble Court further observed that the Revenue cannot avail the extended period because the transferee importer has not been accused of mis-representation or collusion or suppression of facts within the meaning of proviso to Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be barred by limitation. Inasmuch as in the present case as there is no allegation of suppression or mis-statement to the appellant, who is the importer of the goods, I find no reason to permit the Revenue to raise the demand by invoking the longer period of limitation. 29. Another reason for holding that the extended period would not be available to the Revenue is that Commissioner (Appeals) himself has held that no penalty is leviable on the importer. The said part of the impugned order of the appellate authority stands agreed upon by the learned Member (Technical). Once it is held that no penalty is required to be imposed on the appellants, the same reflects upon the fact of absence of any malafide intention to evade payment of duty on the part of the appellants. If that be so, the invokation of longer period, which also includes factum of malafide, cannot be permitted. In this regard I may refer to Tribunal s decision in the case of Indian Petrochemicals Corpn. Ltd. vs. CCE, Vadodara as reported in [2009 (237) ELT 317 (Tri-Ahmd)] laying down that once penalty does not stand imposed on the ground that there was no malafide on the part of the appellants, it has to be held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign trip financed by Balbir. He travelled to Dubai carrying with him 20,500 US Dollar to hand over that money to one Vinod Kumar for transferring 20,000 US Dollar to State Bank of Bikanir and Jaipur at Jalandhar keeping 500 Dollar with him. Balbir was beneficiary of that remittance to show that as Bank realisation from export. 34. Using above fraudulent bank remittance, DEPB scrips were obtained by M/s. Beni Exports, Jalandhar under fraud. M/s.Pee Jay International, Ludhiana was beneficiary of the said scrips as a transferee. It was admitted fact that none of the Shipping Bills, invoices, packing list as well as Bank realizations by Beni exports were credible evidence entitling it to DEPB scrips. Balbir Chand deliberately avoided investigation and left India to Canada. 35. Aforesaid material facts remained unrebutted during adjudication as well as is in appeal hearing before Tribunal as is appellant from the order referred. So also that remained uncontroverted in the course of reference hearing. It was conclusively evident from record that DEPB scrips were fraudulently obtained by M/s Beni Exports without any lawful title thereon. M/s Beni Exports having no title over the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act on record that there was no DEPB scrips in existence in the eyes of law for transfer thereof to the appellant for use against discharge of import duty by the appellant. In ICI India Limited v. CC (Port), Calcutta - 2005 (184) E.L.T. 339 (Cal.) as affirmed by Apex Court in appeal by ICI India Ltd. and reported in 2005 (187) E.L.T. A31 (S.C.) it has been held that the DEPB scrip is a negotiable instrument and is available in the market. Anyone can purchase it from the market and avail of the credit out of it. But, ultimately if that is found to be forged, fake or not acquired lawfully nor legitimate, credit cannot be derived therefrom. It is also settled principle of common law that a purchaser does not acquire better title if transferor had no title or title is ab initio void. Similarly title not acquired legitimately is also void. Therefore a purchaser of non est or ungenuine DEPB scrip fails to acquire any good title over the same being ab initio void as has been held by Hon ble High Court of Punjab Haryana in the case of Friends Trading Co. and Another v. Union of India - 2010 (254) E.L.T. 652 (P H) and affirmed by Apex Court as reported in 2010 (258) E.L.T. A72 (S.C.). Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat fraudulently obtained DEPB credits has no title on the face of law and it was also held in DIC India Ltd. v. CC - 2008 (226) E.L.T. 545 that forged and fake DEPB scrip do not confer any title on the claimant or transferee thereof who uses such ab initio void scrips. In the case of ICI India Ltd. v. CC-2009 (240) E.L.T. 290, it has been held by Tribunal that transaction based on fraud continues to be tainted by the vice and the person committing the fraud is precluded from deriving any benefit. Similar view was also expressed by Tribunal in the case of Kamala Metachem v.CC-2007-TIOL-2247 CESTAT-KOL, so also in the case of M/s.Synotex Industries v.CC - 2008-TIOL-777-CESTAT-KOL. 42. While upholding the decision of the Tribunal in the case of R.S. Trade Link v. CC, New Delhi - 2010 (255) E.L.T. 572 (Tri.-Del.), Hon ble High Court of Delhi has held in the case of Rahuljee Company Ltd. v. CC, New Delhi - 2011 (267) E.L.T. 313 (Del.) as under:- 15. We do not find any illegality in the reasoning recorded by the Tribunal in this regard which is as under :- 6.1.1. As regards the duty liability, since there is no dispute about the fact that the advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n express warranty, takes all risk to defect in the goods, unless there are circumstances beyond to mere fact of sale from which a warranty may be implied. 26. No one ought in ignorance to buy that which is the right of another. The buyer according to the maxim has to be cautious, as the risk is his and not that of the seller. 27. Whether the buyer had made any enquiry as to the genuineness of the licence within his special knowledge. He has to establish that he made enquiry and took requisite precautions to find out about the genuineness of the SIL which he was purchasing. If he has not done that, consequences have to follow. These aspects do not appear to have been considered by the CESTAT in coming to the abrupt conclusion that even if one or all the respondents had knowledge that the SIL was forged or fake that was not sufficient to hold that there was no omission of commission on his part so as to render silver or gold liable for confiscation. 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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