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Sumit Wool Processors India Pistons Ltd And Others Versus Commissioner of Customs (Import) / (Export) Nheva Sheva/Mumbai/Delhi-III /Tuticorin/Kandla

2015 (10) TMI 329 - CESTAT MUMBAI

Over valuation of export goods - merchant exporters inflated the FOB value of their exports significantly and obtained the DEPB Scrips/DFIA Licenses against such exports. - duty benefits under Notifications 40/2006 and 89/2005 are sought to be denied - The demand of duty has been confirmed against the importers i.e. transferees of the scrips under Section 28 alongwith confirmation of penalties under Section 28AB. Penalties have also been imposed on the exporters and importers under Section 112/1 .....

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benefit of exemption of duty is claimed by the person who is not Duty Entitlement Passbook Holder, such benefit shall be permissible only against specific amount of credit transferred by the DEPB holders. - in terms of the notifications there is no failure on the part of transferees availing duty benefits under these scheme.

Procedure for transferability of the License/material imported against such scrips. - Held that:- authorities themselves are also responsible to the extent of no .....

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in the present cases has not rendered the transaction between the original license holders and the transferees void ab-inito but rendered it voidable at the instance of the party (in this case importer) defrauded and transaction continues to be valid until the party defrauded has decided to avoid it.

In the present case the licences/scrips were transferred to the appellant importers who had no knowledge of the misrepresentation by the exporters in obtaining them. The Bills of Entry w .....

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on behalf of the importer also. In such cases too, the question of demanding duty to the extent of amount already deposited does not arise. In cases where the importer bought the goods on High Sea sales basis, misrepresentation of their part has not been proved. In any case we have stated in paras above that the transferees in cases of all appeals had no knowledge of mis-representation by the exporters.

The confiscation of goods imported by the appellants who are transferees of the l .....

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achin Chitnis, Adv., Shri. Nirav Manikar, Adv., Shri H G Dharmadhikari, Adv., Shri V S Sejpal, Adv., Shri Meetika Baghel, Adv., Shri H R Shetty, Adv., Shri Paresh Vyas, Asstt. Manager for Century Enka Ltd., T Vishwanathan, Adv., Shri Sushant Murthy, Adv. and A K Prabhakar For the Respondent : Shri V K Singh, Special Counsel Appeal Nos. C/184/12-MUM C/213/12-MUM C/224/12-MUM C/227/12-MUM C/228/12-MUM C/229/12-MUM C/230/12-MUM C/231/12-MUM C/233/12-MUM C/235/12-MUM C/236/12-MUM C/241/12-MUM C/242/ .....

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C/669/12-MUM C/683/12-MUM C/686/12-MUM C/687/12-MUM C/689/12-MUM C/690/12-MUM C/692/12-MUM C/696/12-MUM C/701/12-MUM C/705/12-MUM C/706/12-MUM C/707/12-MUM C/708/12-MUM C/734/12-MUM C/85411/13-MUM C/85413/13-MUM C/85410/13-MUM C/85415/13-MUM C/85416/13-MUM C/85417/13-MUM C/85418/13-MUM C/87732/13-MUM C/87985/13-MUM C/87731/13-MUM ARAWALI ENTERPRISES JIL PACK CELLO HOME PRODUCTS BHILOSA INDUSTRIES PVT LTD WIMPLAST LTD SHIVAKRITI IMPEX PREETY ENTERPRISES LUCKY TRANSPORT DEEP TRANSPORT RAMANAND KE .....

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L (I) LTD JAQUAR & COMPANY PVT LTD GURU SYNTHETICS PVT LTD BLUEBIRD CREATIONS PVT LTD RAMANAND KEDARNATH INTERNATIONAL D V WOOLEN MILLS BELL TEXTILES PVT LTD DAMODAR THREADS LTD KHEMI FILAMENTS LTD VALLABH INDUSTRIES SHRI SAI SIDDHI ENTERPRISES MELITHA IMPEX PARMANAND JOSHI SANJAY KUMAR AGARWAL VARUN INTERNATIONAL NRC INDUSTRIES LTD CHOKHANI PHARMA VAT PREETY ENTERPRISES DELHI INTERNATIONAL AIRPORT PVT LTD JAI SHREE IMPEX JMD OILS PVT LTD SHRI SAI SIDHI ENTERPRISES WARREN TRADING PVT LTD BOS .....

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CUSTOMS (IMPORT)/(EXPORT) NHEVA SHEVA/MUMBAI/DELHI-III/TUTICORIN/KANDLA ORDER Per P S Pruthi These appeals arises from Order-in-Originals No. 83/2011/CAC/CC/BKS dated 23/12/2011, OIO no. 09/2012/CAC/CC/BKS dated 27/2/2012, OIO no. 15/2012/CAC/CC/BKS dated 22/3/2012 and OIO No. 16/2012/CAC/CC/BKS dated 28/3/2012 passed by the Commissioner of Customs, New Custom House, Mumbai and OIA no. 672 to 679 (Adj. Export) 2012/JNCH/EXP-95 to 102 dated 14/11/2012 passed by Commissioner of Customs (Appeals), .....

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adhuri Impex Pvt. Ltd., Madhuri Synthetics, M/s. Mahavir Syntetics, M/s. Laxminath Exports who are all merchant exporters inflated the FOB value of their exports significantly and obtained the DEPB Scrips/DFIA Licenses against such exports. The DEPB scrips were sold to various transferees on the basis of endorsement of transferability by the DGFT. Appellants in the present appeals are such transferees of the DEPB scrips, DFIA licenses and Focus Market scrips. The transferees imported the goods a .....

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he transferees/importers of the DEPB/DFIA documents. The impugned orders have been passed holding the goods exported and imported liable to confiscation. The demand of duty has been confirmed against the importers i.e. transferees of the scrips under Section 28 alongwith confirmation of penalties under Section 28AB. Penalties have also been imposed on the exporters and importers under Section 112/114A. When the matter was investigated and referred to the licencing authority, the Joint DGFT cance .....

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ansferable by the licensing authority. Further, the exports effected by the original licenses and against which exports the licenses are granted, are duly verified by the Customs by an endorsement made to that effect on the shipping bills. That apart at the time of exports, the Shipping Bills have been duly assessed by the proper officer of customs. (ii) After the licenses were endorsed as transferable by the licensing authority, the appellants had acquired the same for valuable consideration an .....

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ation/falsification of records and the licensing authority on being informed by DRI, had suspended the licenses. The licenses have subsequently been cancelled ab-initio. The suspension and cancellation of the licenses have taken place much after the import and clearance of the goods there under. (iv) It is a settled law that even a license obtained by fraud or mis-representation of facts is only voidable and not void ab-initio. It is good in law until it is voided. Thus even a license obtained b .....

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Commercial Company Ltd vs. CC - 1983 (13) ELT 1342. (SC) (b) UOI vs. Sampat Raj Dugar - 1992 (58) ELT 163 (SC) (c) CC vs. Sneha Sales Corporation - 2000 (121) ELT 577 (SC) (d) Chemi Colour Agency and another vs. CC IE - 1987 (30) ELT 175. (e) M. Lallubhai & Co v Collector 1989 (43) ELT 127: (f) K. Uttamlal (Exports) Pvt. Ltd. vs. Union of India - 1990 (46) ELT 527. (g) Kantilal Manilal and Company versus Union of India - 1994 (69) ELT 240 (h) Wearon Exports Private Limited vs. Union of Indi .....

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narayan Jwalaprasad - 2014 (306) ELT 592 (Guj) (v) Since a license obtained by fraud / mis-representation is only voidable and not void it follows that if before it is avoided a third party acquires such license bona fide for value and without notice of the fraud, the rights of such third party are protected. It is a settled law that if the seller of the goods had acquired the same under a voidable transaction (as distinguished from void) and such seller sells such goods to an innocent buyer who .....

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Bhatai [2013 (295) ELT 739] to state that as per law laid down by the Hon'ble Supreme Court DEPB scrips are goods, therefore in terms of Section 29 of the Sale of Goods Act, where the seller of the goods has obtained the same under contract which is voidable under Section 19 of the Contract Act but the contract has not been rescinded, the buyer acquire goods title to the goods if he buys them in good faith. (vii) Ld. Counsel states that even in cases where DEPB are obtained by submitting for .....

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hen the licenses are obtained by submitting forged documents, rights of bonafide transferees for value are protected. He cited Wearon Exports Ltd. Vs. UOI [2004 (163) ELT 149] and CC Vs. Jupiter Exports [2007 (213) ELT 641]. And the decisions of Jurisdictional High Court should be preferred. (viii) Only condition of the relevant notification which applies to the transferee is that the license should have been made transferable and other conditions of the Notification do not apply to the transfer .....

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nd finding of any fraud or mis-statement or willful suppression of facts on the part of the appellants and hence the larger period of limitation of 5 years prescribed in the proviso to Section 28 (1) could not be invoked against the appellants. The allegation of fraud is against the original license holder and not against the appellants. Accordingly as laid down in the following decisions, the larger period of limitation is not applicable against the appellants: (a) Commissioner Vs. Banani Cemen .....

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ends Trading Co v UOI - 2011 (267) ELT 33 and Apar Ltd v CC - 2012 (276) ELT 534 to hold that the larger period of limitation could be invoked against the transferee. Firstly, in the case of Friends Trading Co, there is a specific finding referred to by the High Court that the action of the transferee was not bona fide. In the present case there is no such finding. That apart the decisions in Friends Trading Co and Apar Ltd related to cases where the BRCs and Shipping Bills had been forged which .....

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s-exporters and not by the Appellants. In such circumstances, not demanding duty from the original licensees-exporters and demanding the same from the bona fide transferees would amount to placing premium on fraud and enabling the fraudsters to escape the consequences of their fraud. As laid down in Sravani Impex P. Ltd v Addl. Dir. General, DRI, Chennai - 2010 (252) ELT 19 (AP), when the DEPB scrips have been sold to third parties, the only course open to the Customs is to demand repayment of D .....

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en Tools (supra) will apply. (b) In case of Rathi Synthetics the imported goods were bought on High sea sale basis. Transferee had no knowledge about the fraud committed by the exporter. (c) In case of Miletha Impex it is stated that they neither received show cause notice nor opportunity of personal hearing. Therefore principles of natural justice have been violated. Further duty demanded is more than duty payable on the goods imported. (d) In case of M/s. Ineos ABS (India) it is stated that M/ .....

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any, DEPB scrips were obtained fraudulently on basis of forged documents. Therefore their issue gets covered by the case of Taparia Overseas. Ld Counsel also relied on the case of Tejwant. Further he added that the holder of DEPB scrips is always exporter and in terms of the Notification only the credit is transferred and not DEPB book. Therefore duty liability remains on the exporter i.e. holder of the DEPB scrips. (e) In case of Delhi International Air Ltd. (DIAL) it is submitted that show cau .....

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e identical issue of limitation of demand on transferee in the three member judgment of Apex Court of HICO Enterprises [2008 (228) ELT 161 (SC) and also case of Leader Valves. Therefore the judgment in case of Tata Iron Steel Company Ltd is per incurium. (f) In case of Hyper City Retails it is submitted that exporter M/s. Rajat Pharmaceutical has deposited the entire duty before settlement Commission. Further that the show cause notice issued to them does not impugn guilt. (g) In case of Guru Sy .....

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ments. Both these clauses applied to them and therefore the appellant is not liable to pay custom duty. It is also submitted that exporter M/s. Madhuri Synthetics had deposited an amount of ₹ 15 lacs towards duty, this act shows that it is acceptance by them that they liable to pay duty for their wrong doing. (i) In case of Wimplast and M/s. Cello Home Products, it was contended that the exporter in this case is the person who has held himself to be the importer in terms of DEPB scheme and .....

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at the said exporters had indulged in the act of exporting low value made ups and fabrics in the guise of high value made ups and fabrics deliberately with an intention to avail undue and illegal exports benefits under DEPB/DFIA schemes. In doing so, the exporters created fictitious/bogus records of purchase (invoices) of the goods eventually exported by them, so as to create a fictitious record of having purchased the goods from fictitious/non existing local suppliers at much higher values than .....

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s local suppliers by using the services of financial brokers. The entire gamut of well planned acts of commission, aimed at defrauding the Government through misuse of the DEPB/DFIA schemes, is further proven by the evidence collected during the investigation locally and at Dubai (through diplomatic sources) that the value declared by the Dubai based purchasers of the exported goods is just a fraction (average 6.7%) of the value declared by M/s. Nidhi Textiles and others at the time of export be .....

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nath Exports 9/94/AM/10/ECA 28.09.2011 25 (ii) no right or benefit can accrue from the ab-initio void scrips and no credit of duty was available to the transferee importer in terms of Notification No. 34/97-Cus. The goods imported have also been rightly held liable for confiscation since the conditions of notification 34/97 Cus have not been fulfilled and duty amount confirmed. These scrips were not est and obtained by fraud and hence the transferee cannot be allowed to be beneficiary of the fra .....

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ntly and cancelled ab-inition, a more appropriate course of action for them would be to claim damages from the sellers of tainted scripts. Further as held in K.I. International Ltd. Vs. CC 2012 (282) ELT 67 (Tri-Chennai) an assessee acting in defiance of law has no right to claim innocence when he fails to exercise due care and diligence. The contention of the appellants that benefit of the DEPB scrips should not be denied to the transferees leads to a very dangerous preposition. Such a legal in .....

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action under the provisions of Customs Act, 1962. (v) The facts of the present case are identical to the case of M/s. Friends Trading Co. Vs. UOI - 2010 (254) ELT 652 (P&H) which has been affirmed by the Hon'ble Supreme Court in 2010 (258) ELT A 72 (SC) and C.C. V. Sona Castings - 2010 (259) ELT 693 (Tri-Del) and Pee Jay International Vs. C/C. Amritsar - 2014 (312) ELT 464 (Tri Del) wherein recovery of duty from the transferee of the licences is upheld. (vi) The case of East India Commer .....

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cancellation is issued. Since the licences have been cancelled ab-initio, the present case is clearly distinguishable from the judgments cited by the appellants. The Shipping Bills, invoices, packing lists as well as Bank realizations by the exporters were not credible evidence entitling the DEPBs since the DEPB scrips were fraudulently obtained by the exporter without any lawful title. The exporters were not having any title over the DEPB/DFIA scrips which were non est. The transferee of these .....

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ii) The only issue that remains to be examined in the present case by the Hon'ble Tribunal is invoking of extended period under Section 28 of the Customs Act, 1962 in the present case for demand of revenue loss caused to the exchequer by the fraudulent activity of the transferor by demanding duty foregone on imports made by the transferee. The appellant have relied upon the judgments in the case of Leader Valves Ltd. and other cases to suggest that the larger period of limitation is not appl .....

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d Vs. CC - 2012 (276) ELT 534 (Tri. - Mumbai]). (viii) Further the Hon'ble Apex Court in the case of Tata Iron & Steel Co. Ltd. Vs. Commissioner of Customs, Mumbai reported at [2015 (319) E.L.T. 545 (SC)] has held that where fraudulent misdeclaration is made by the original licence holder by deliberately suppressing the facts, made wilfully wrong declaration to the licencing authority, extended period of limitation under Section 28 is available for recovery of the duty against the appell .....

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#39;ble Apex Court in the case of Fedco (P) Ltd. Vs. S.N. Bilgramy - [1999 (110) ELT 92 (SC)] has held that where a licence is obtained by fraud or misrepresentation, it would be reasonable to think that the person in whose favour the licence has been obtained, cannot but be a party to the fraud or mis-representation. It was further held that it would be absolutely unreasonable that such a license obtained by fraud or misrepresentation should be allowed to continue. (xi) Hon'ble Supreme Cour .....

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ud vitiates everything is applicable to transfer of DEPB licenses as held in para 9.25 of [Dow Agro sciences India Pvt. Ltd. Vs. CC 2012 (283) ELT 524 (Tri-Mumbai)]. (xii) It is a settled principle of common law that a purchaser steps into the shoes of the seller and does not acquire better tile than the seller. This principle has also been recognized under Section 27 of the Sale of Goods Act, 1932. 7. We have given thoughtful consideration to the contentions of all Ld. Counsels representing the .....

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ed there against In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts materials imported into India against a Duty Free Import Authorisation issued in terms of paragraph 4.4.1 and 4.4.2 of the Foreign Trade Policy (hereinafter referred to as the said authorisation) from the whole of the duty of Customs leviable thereon which is specif .....

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it: Provided that in respect of resultant product specified in paragraph 4.55.3 of the Hand Book of Procedures (Vol.I) of the Foreign Trade Policy, the materials permitted in the said authorisation or a duty free import authorisation for intermediate supply, as the case may be, shall be of the same quality, technical characteristics and specifications as the materials used in the said resultant product. Provided further that in respect of the said resultant product the exporter shall give declar .....

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n the said authorisation; (iii) that the importer at the time of clearance of the imported materials executes a bond with such surety or security and in such form and for such sum as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, binding himself to pay on demand an amount equal to the duty leviable, but for the exemption contained herein, on the imported materials in respect of which the conditions specified in this notification h .....

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attinam, Okha, Bedi (including Rozi-Jamnagar), Muldwarka, Porbander, Dharamatar and Vadinar or through any of the airports at Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Chennai, Srinagar, Trivandrum, Varanasi, Nagpur, Cochin, Rajasansi (Amritsar) and Lucknow (Amausi) or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauhati, Guntur, Hyderabad, Jaipur, Jallandhar, Kanpur, Ludhiana, Moradabad, Nagpur, Pimp .....

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through the Land Customs Station at Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva (Sonauli), Petrapole, Mahadipur, Nepalganj Road, Dawki, Agartala, Sutarkhandi, Amritsar Rail Cargo and Attari Road or Special Economic Zone as specified in the notification issued under section 76A of the Customs Act, 1962 (52 of 1962). Provided that the Commissioner of Customs may, by special order or by a Public Notice and subject to such conditions as may be specified by him, permit import and export from any .....

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n materials used in the manufacture of resultant product) or sub-rule 2 of rule 19 of the Central Excise Rules, 2002 or CENVAT credit under CENVAT credit rules, 2004 in respect of materials imported/procured against the said authorisation has not been availed : Provided that an Advance Intermediate authorisation holder shall discharge export obligation by supplying the resultant products to the exporter in terms of paragraph 4.1.3 (ii) of the Policy; (vi) that the importer produces evidence of d .....

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arge of export obligation, before the export obligation under the said authorisation has been discharged in full; (viii) that where the Bond filed under condition (iii) against the said authorisation has not been redeemed by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, the unutilised material may be transferred to any other manufacturer for processing under actual user condition after complying the central excise procedure relating to job work; (ix .....

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supporting manufacturer for discharge of export obligation and the same shall not be transferred or sold or used for any other purpose by the said merchant exporter until the export obligation specified in condition (v) has been discharged in full. 2. After discharge of export obligation as specified in condition (v) of paragraph 1, the Regional Authority shall permit transfer of the said authorisation and/or the goods imported under it subject to such conditions as may be specified. 3. Where th .....

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ption to imports thereunder In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of description specified in column (2) of the Table below, when imported into India,- (a) from so much of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as is in excess of the amount calcul .....

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e Foreign Trade Policy; (ii) that the importer has been permitted credit entries in the said Duty Entitlement Pass Book by the Licensing Authority at the rates notified by the Government of India in the Ministry of Commerce and Industry for the products exported; (iii) that the said Duty Entitlement Pass Book is produced before the proper officer of Customs for debit of the duties leviable on the goods, but for exemption contained herein : Provided that exemption from duty shall not be admissibl .....

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a, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam, Dahej, Mundhra, Nagapattinam, Okha, Bedi (including Rozi - Jamnagar), Muldwarka and Porbander or through any of the airports at Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Chennai, Srinagar, Trivandrum, Varanasi, Nagpur, Cochin and Rajasansi (Amritsar) or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauhati, Guntur, Hyderabad, Jaipur, Jallandhar, Ka .....

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Customs Station at Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva (Sonauli), Petrapole and Mahadipur or Special Economic Zone as specified in the notification issued under section 76A of the Customs Act, 1962 (52 to 1962) Provided that where the expiry of the Duty Entitlement Pass Book falls before the last day of the month, such Duty Entitlement Pass Book shall be deemed to be valid till the last day of the said month : Provided further that the Commissioner of Customs may, by special order and .....

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er shall be entitled to avail the drawback or CENVAT credit of additional duty lveiable under section 3 of the said Customs Tariff Act against the amount debited in the said Duty Entitlement Pass Book; (vii) that where benefit of exemption from duty is claimed by a person, who is not a Duty Entitlement Pass Book holder, such benefit shall be permissible only against specific amount of credit, not being a provisional credit, transferred by a Duty Entitlement Pass Book holder to such person. 2. Th .....

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fit will be allowed only if the Certificate bears endorsement of transferability by the Licensing Authority. Similarly in the second notification 89/2005-Cus relating to DEPB, the only condition relevant to the importer is condition No. (vii) which states that where benefit of exemption of duty is claimed by the person who is not Duty Entitlement Passbook Holder, such benefit shall be permissible only against specific amount of credit transferred by the DEPB holders. 8.2 Having noted that in ter .....

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nt of other conditions as laid down in paragraph 67 of the Policy and Paragraph 126 of the Handbook of Procedures, the value based quantity based licence holder may transfer:- (a) The licence in full if no imports have been made; (b) The licence in part excluding the quantity and value of imports already made; and (c) The materials or the balance there of already imported. (ii) No right of transferability shall accrue unless the conditions laid down in paragraph 67 of the Policy and paragraph 12 .....

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include shipping bills verified by the Customs authorities. We also observe that para 4.49 of the Hand Book of Procedures (2004-2009) provides that the Customs shall verify the details of export as per records before allowing import against DEPB. Thus it is seen that Customs are supposed to have verified the value of exports on the application for transfer of license as well as when they allowed import against the DEPB. We find that the goods in question are goods which are traded frequently; i .....

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en over valued, were allowed to be exported by the customs officers without pointing any discrepancies in the value and thereafter DGFT allowed transfer of the license on the basis of such documents. The plea of the appellants is that they cannot be held responsible when the procedure for transfer involves only the transferor, Customs and DGFT. We agree with this contention. This contention is supported by the Supreme Court decision in Goodluck Industries (supra) and Jindal Dye Intermediate Ltd .....

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btained by fraud, misrepresentation etc., benefit canot be taken by any one, whether the transferor or transferee otherwise it would lead to a dangerous proposition and enable fraudsters to obtain DEPB scrips by fraudulent means. To this we can only comment that authorities themselves are also responsible to the extent of not having checked the fraud at the time of exports. We should not be affected in our findings only by the fact that grant of benefit to transferees will encourage fraudsters. .....

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ction 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. On May 1, 1948, the Central Government issued an order in exercise of the power conferred on it by Section 3 of the Act to provide for licences obtained by misrepresentation, among others, and it reads : In the circumstances, we must hold that when the goods were imp .....

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e only provisions relied upon by the appellants are Clauses (d) and (o) in Section 111 of the Customs Act which we have set out hereinabove. In our opinion none of these clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition imposed either by the Customs Act or any other law for the time being in force. No such prohibition can be pleaded in this case since on the date of the import the said goods were covered by a valid import licence. T .....

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he period is not so prescribed, within a reasonable period. It, therefore, cannot be said that the said goods were liable to be confiscated on the date of their import under Clause (o). Finally the Supreme Court held in the case of Sneha Sales Corporation, by referring to its own decision in East India Commercial Company (supra), as follows: In his order the Collector has taken note of the fact that by order dated December 18, 1986 passed by the Deputy Chief Controller of Imports and Exports und .....

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the provisions of Import and Export (Control) Act and the goods were liable to be confiscated under Section 111(d) of the Act- We are unable to accept this contention of the learned counsel in view of the law laid down by this Court in East India Commercial Company Ltd. v. Collector of Customs, Calcutta (supra) wherein this Court has said :- "Nor there is any legal basis for the contention that licence obtained by misrepresentation makes the licence honest. With the result that the goods s .....

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is obtained by misrepresentation or fraud it is not rendered non est as a result of its cancellation so as to result in the goods that were imported on the basis of the said licences and being treated as goods imported without a licence in contravention of the order passed under Section 3 of the Import and Export Act that 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 De .....

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ated, it of about violation of post import condition. And in Sneha Sales Corporation (supra) the issue was of permitting import and not of authorising exemption from duty. He stressed that the Supreme Court judgments do not bar the issue of raising demand notices under Section 28 in such cases. He relied on the Apex Court judgement in the case of Tata Iron and Steel Co (supra). We do appreciate the manner in which judgments in the case of East India Commercial Co and Sneha Sales Corporation have .....

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endered only voidable. The decision in the case of East India Commercial Company held that license is good till avoided. If we were to agree with the contention that licenses is operative for importability but could not used for availing the duty benefit in term of Notifications cited, it would clearly lead to a contradictory interpretation of the Hon'ble Supreme Court judgments. A valid License is valid for all Purposes. The only condition in the notifications which grant duty benefits as f .....

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and the question is whether duty liability can be fixed on the transferees of the licensees. 8.4 Special Counsel then drew our attention to the case of Dow Agro Sciences India Pvt. Ltd. 2012 (283) ELT 524 (Tri. - Mumbai). He also referred to the case of Munjal Showa Ltd. Vs. Commr. Of Cus. & C. Ex. 2009 (246) ELT 18 (P&H) in which the P & H High Court held that when the documents under which exemption is claimed are found to be forged the purchaser steps into the shoes of the seller .....

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9;ble High Court took the view that the judgment in the case of Sneha Sales Corporation and East India Commercial Co. Ltd. dealt with the confiscation and not with the payment of duty. We may examine these contentions of Ld. Spl. Counsel. As regards the case of Dow Agro Sciences India Ltd., we find that the DEPB was obtained as a result of a racket involving forgery of export documents which is not so in the present case. Secondly, we also note that the Hon'ble Member who delivered the judgm .....

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the appeals at hand. In those cases also the Licenses were cancelled ab-initio after the transferee had utilized them for import. We also note that the observation of the Hon'ble Tribunal decision in the case of Dow Agro Sciences India Pvt. Ltd. (supra) at para 9.25 stating that "the case of Sneha Sales Corporation is also similarly distinguishable" does not hold good because in the case of Binani Cement Ltd the Hon'ble High Court of Gujarat has relied on Sneha Sales Corporati .....

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orporation would apply only to the issue of importability of goods does not hold good in the face of the Hon'ble High Court of Bombay decision in the case of Sanjay Sanwarmal Agarwal Vs. Union of India. It was held herein that : "5. Learned counsel for the petitioner contends that when the manufacturer has completed export obligation under the Advance Licence and DEEC Books have been audited and checked by the Customs Authorities then they neither have authority to travel beyond the sco .....

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ncept that fraud vitiates everything would not apply of the cases where the transaction of transfer of licence for a value without notice of alleged fraud arising out of mercantile transaction governed by common law. It was also held that import made under the valid licence could not be subjected to levy of customs duty as such it is not open for the Customs Authorities to withhold the clearance of the imported goods. In that case, the licence was suspended after the import of goods was complete .....

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a Overseas Pvt. Ltd. (Mumbai High Court) in the judgment in Dow Agro Sciences India Pvt. Ltd. The Tribunal held that the Taparia Overseas ltd. was dealing with REP Licenses whose transfer was governed by common law because the licenses were freely transferable. But that in cases where the licenses required endorsement of transferability, the concept of fraud vitiating everything will be applicable to such transactions. And that in the case of Taparia Overseas Pvt. Ltd. and Sneha Sales Corporatio .....

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by license holder by fraud were suspended after the import by the transferees. It was held therein that- "28. It is not in dispute that the above procedure was followed by all the petitioners while getting the licences transferred in their respective names. It is, therefore, clear that transfer of licence was to be governed by ordinary law. The Apex Court had an occasion to deal with one of such similar issues sought to be raised in these petitions. In the leading case of East India Co. (su .....

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;……………………………......................................... ...... The fact that the contract has been induced by fraud does not make the contract void, or prevent the property passing, but merely gives the party defrauded the right on discovering the fraud to elect whether he shall continue to treat the contract as binding or disaffirm the contract and resume the property. If it can be shown that "the party defrauded&qu .....

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n he retains the right to determine it either way, subject to this that if in the interval whilst he is deliberating, an innocent third party has acquired an interest in the property, or if in consequence of his delay the position even of the wrongdoer is affected, he will lose his right to rescind." ………………………………………………………………& .....

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ained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holders while obtaining licences. If that be so, the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions, governed by common law and not by provisions of any statute……………………&helli .....

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as 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 .....

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itioners 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 subjected to levy of customs duty in the peculiar facts and circumstances of the cases in hand. We also note that in the case of Hico Enterprises Vs. Commissioner - C/1345/2002-Mum the Larger Bench decided in a similar case that - "Thus, in view of the aforesaid discussion, we are of the considered opinion that the principles evolved in .....

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transferee cannot be called upon to fulfil the condition (v)(a) of the Notification No. 203/92-Cus. It is the original licencee, who has to satisfy the above referred condition, but not the transferee of the licence. In the result, the reference is answered accordingly". This decision was upheld by the Hon'ble Supreme Court in 2008 (228) ELT 161 (S.C.). In the present case the appellants being purchasers of Licenses for value without any notice of fraud, it has to be held that the conce .....

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iya and Sneha Sales Corporation, the two were treated as goods for pupose of sales tax laws only and situation contemplated under Sales Tax Act could not in the absence of intendment, be given effect to while applying provisions of the Act or the FT (Development & Regulation) Act. We are unable to agree with this argument. We find that transfer of REP Licenses is also in terms of the Import Export Policy. Further, we may refer to the case of Jindal Drugs ltd. Vs. State of Maharashtra [2004 ( .....

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efinition of an actionable claim. On the same analogy credit made in the D.E.P.B. is a crystalised debt' for realisation of which no action at law is necessary. It is a determined amount of liability accepted by the customs. No action at law for its realisation is necessary. In case of transfer of D.E.P.B. credit, it confers upon transferee the immediate right to pay customs duty. This is not an inchoate or incomplete right. It cannot be held to materialise in future because its utilisation .....

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gh ,. A.I.R. 1995 S.C. 590, was pleased to hold that a debt' is property. It is a chose in action and is heritable and assignable and it is treated as property in India under the Transfer of Property Act. In the very same judgment the Apex Court ruled that it is necessary, however, to bear in mind that, under modern conditions, chose in action arising out of contract have two aspects: (i) as property and (ii) as involving a contractual obligation for performance. The property aspect is relev .....

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s Corporation (supra) by the Delhi High Court was erroneous. In his submission, R.E.P. licence cannot be equated with the transfer of credit in the D.E.P.B. R.E.P. licence is merely a licence which grants a right to import goods, which right is transferable. Whereas, credit in the D.E.P.B. is not a licence, which merely gives right to import goods. It is an amount available to the credit of the holder to be liquidated against the payment of import duty for future imports. Therefore, in his submi .....

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m. 29. The Delhi High Court rightly relied upon the case of Vikas Sales Corporation (supra) and rightly held that D.E.P.B. credit is not an actionable claim. We concur with the view taken by the Delhi High Court and hold that the D.E.P.B. credit is liable for sales tax under the Bombay Sales Tax Act....... The same view was held by the Hon'ble Supreme Court in Vikas Sales Corporation [AIR (SC)-19960-2082/SCC-1966-4-433/JT-19965-482]. Thus it is clear that the DEPB scrips are held to be goods .....

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er's defect of title". In the present situation the contracts were voidable in terms of Sections 19 and 19A of the Contract Act reproduced below 19. Voidability of agreements without free consent- When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to contract, whose consent was caused by fraud or misrepresentation, may if he thinks fit, insist that the contra .....

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ed by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the court may seem just. Therefore transfer of DEPB scrips in the present cases will governed by the provisions of the statute, that is the Sale of Goods Act. In such a situation the Mumbai High Court decision i .....

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the appellant importers who had no knowledge of the misrepresentation by the exporters in obtaining them. The Bills of Entry were filed by the appellant importers well before the cancellation of licenses, thus imports were made under valid licenses. Therefore goods could not be subjected to levy of Customs duty for imports under Licences nor could availment of credit in DEPB scrips be denied. 8.5A The view that duty cannot be demanded from the transferees was perhaps recognised by Government wh .....

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s obtained by fraud or mis-representation, it would be reasonable to think that the person in whose favour the license has been obtained cannot but be a party to the fraud or mis-representation. We have carefully gone through the judgement. The facts were that the petitioner in this case engaged in the business of chemicals and plastics etc had obtained five import licences. The goods were imported under these licenses. Before any of the goods could be cleared the company/petitioner received a n .....

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quot; We are therefore of opinion that the provisions that license may be cancelled, if it is found, after giving a reasonable opportunity to the licensee to be heard, to have been obtained by fraud or misrepresentation is a reasonable restriction in the interest of the general public on the exercise of the fundamental right of citizen guaranteed under Article 19(1)(f) and (g) of the Constitution. The cancellation being under a valid law there can be no question of any right under Article 31 of .....

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ed on the transferee of licenses which were obtained by mis-representation by the transferor. Reliance on this judgment does not support the cases of the Revenue at all. The Reliance on the case of Ram Preeti Yadav (supra) is also misplaced. Here the issue was that a person whose result in an Intermediate Examination was withheld, being suspected of using unfair means, was at the same time issued a provisional mark sheet. The person thereafter passed his B.A. and M.A. examination, got employment .....

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Similarly, other judgment of K.I. International Ltd. (supra) is on a different platform. In this case the element beneficiaries used TRAs were was sold to them at throw away prices and did not exercise normal diligence to check the veracity of TRAs. In the present case there is no allegation that licences were sold at throw away prices. 8.7 On the reliance placed on the Apex Court judgment in the case of Tata Iron and Steel Co. Ltd. (supra) by the Spl Counsel, our attention was drawn to the conc .....

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to follow it. It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct removal of encroachments from any public place like pavement or public streets, and without any citation of authority. Accordingly, we do not propose to uphold the decision of the High Court because, it seems to us that it is wrong in principle and cannot be justified by the terms of the relevant provisions. A decision should be .....

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53 in these words: "A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his .....

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