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2015 (11) TMI 1024 - CESTAT AHMEDABAD

2015 (11) TMI 1024 - CESTAT AHMEDABAD - TMI - Duty demand - Fraudulent DEPB Benefit availed by the seller of DEPB - Appellant which is a SEZ Unit, purchased DEPB scrips on payment of valuable consideration and it was valid document at time of import. - Invocation of extended period of limitation - Held that:- DEPB scrip/licence had been issued by the DGFT, against the export of goods, produced by the exporter. The appellants purchased DEPB scrips on payment of valuable consideration and it was v .....

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ired to be protected - demand of duty for the extended period of limitation cannot be sustained and therefore, the imposition of penalty would not be warranted - Decided in favour of assessee. - Appeal No : C/157,182-192,204-206,247,273-278,283-285,297, 299-313, 317-318,328-332, 334-336,339,347-351,363/2007 - Order No. 11440-11497/2015 - Dated:- 13-8-2015 - MR. P.K. DAS, MEMBER (JUDICIAL) AND Mr. P.M, SALEEM, MEMBER (TECHNICAL) Petitioners : M/s Max Brass, M/s Sonal Plastic Industries, M/s Darsa .....

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Ltd., M/s Nabha Steels Ltd., M/s Amritvarsha Ispat Pvt.Ltd., M/s R.S. Steels, M/s Charu Steels Ltd., M/s Bansal Alloys & Metals Ltd., M/s A. Kumar & Brothers, M/s Sanskriti International, M/s AVG Enterprise, M/s Shyam Timbers Pvt.Ltd., M/s M.K. Wood India Pvt.Ltd., M/s Mukesh Kumar & Co., Shri Liluram Gajanand, M/s Antao Balaji Ltd, M/s Oswal Lumbers Pvt.Ltd., Shri Amritlal Nareshkumar, M/s B.T. Steels Ltd., M/s J.S. Khalsa Steels Pvt.Ltd., M/s Aryan Steels, M/s Vallabh Steels Ltd., .....

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Nainawati, Ms. Dimple Gohil, Uday Joshi, Vishal Agarwal, P.V. Sheth, V. Ansurkar, J. C. Patel, V.K. Jain, Ms. Shilpa Balani, Vikas Diophode, AdvocateS For the Respondent : Shri J, Nair, Authorised Representative ORDER Per: P.K. Das These appeals are arising out of a common order, and therefore, all are taken up together for disposal. 2. The relevant facts of the case in brief are that M/s. Trisuns Chemical Industry Ltd. (in short M/s. Trisuns), an unit set up in Kandla Special Economic Zone, wa .....

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r, storage and export of Castor Oil with an intention to earn various export incentives like DEPB credit, which are not available to a unit set up in a Special Economic Zone. It is also found that the M/s. Trisuns manipulated/forged bills of lading etc. to claim export to Russia under Debt Repayment Trade Agreement between India and Russia, while the goods were actually exported to destinations other than Russia. 3. A Show Cause Notice dated 27.07.2004 was issued, proposing demand of duty on var .....

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PB credit on the basis of DEPB Scrips fraudulently obtained by M/s. Trisuns. By the impugned order, the Adjudicating Authority confirmed the demand of duty alongwith interest and imposed penalties on M/s Trisuns on various issues. It has also confirmed the demand of duty equal to DEPB credit alongwith interest and imposed penalty of equal amount of duty against the importers (i.e. the appellants herein). 4. Heard both sides and perused the case reocords. 5. It is submitted by the appellants that .....

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tative on behalf of the Revenue submitted Written Submission alongwith case laws and the matter was heard on 30.06.2015 and 13.08.2015. It was contended by the Revenue in the Written Submission that DEPB licenses were cancelled ab initio by the Development Commissioner, Kandla Special Economic Zone, Gandhidham vide Order-in-Original No. 01/2009-10 dated 28.01.2010. Thus, it is clear that while passing the impugned adjudication order dated 30.03.2007, DEPB licenses/scrips on the basis of which th .....

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the goods were cleared from the DTA Unit. As the DEPB licenses were obtained by the M/s. Trisuns, fraudulently, the appellants are not entitled to import duty free material on the basis of the said DEPB scrips. In the Show Cause Notice dated 27.07.2004, it was proposed demand of duty alongwith interest and to impose penalty on the appellants amongst others. Both the sides placed various decisions in their favour on merits as well as on limitation. We find that, the matter may be decided without .....

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ment of duties, interest, etc. (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, (a)) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year; (b) in any other case, within six months, from the relevant date, serve notice on the person c .....

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ression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words one year and six months, the words five years were substituted. 8. On plain reading of proviso to Section 28(1) of Customs Act, 1962, it is clear that the extended period of limitation of five years would be invoked in case any duty has not been levied or has been short-levied or the interest, which has not been charged et .....

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t the appellants are importers. So, it is required to be considered as to whether the importers/appellants had committed any fraud or willful mis-statement etc., as mentioned in the proviso to Section 28 of the Act. The Adjudicating Authority observed that Bills of lading were forged to export of Russia, while the goods were delivered for other destination. The details of consignments in the shipping bills were deliberately misdeclared by M/s Trisuns and obtained DEPB on the basis of above expor .....

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ensing authority and was thus freely transferable in law. In view of the DEPB having been endorsed as Transferable, they acquired the same bonafidely for valuable consideration from M/s. Trident (India) Ltd., Ahmedabad, who were the 1st Transferee, from M/s. Trisuns. When they acquired the said DEPB licenses by transfer, as also when they imported and cleared the goods under said DEPB, the same was valid and subsisting. 9. The main contention of the Learned Authorised Representative for the Reve .....

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e various noticees (importers). The csrips were a result of fraudulent practice adopted by TCIL (B) and TCIL (Z) as already discussed in the foregoing paragraphs and as such does not give a validity to be admitted as a legal document for clearance of any imported goods. The scheme of notification 34/97-Cus is in the nature of permitting clearance of goods by debiting Duty Exemption Pass Book based on credits acquired instead of collecting cash. The DEPB as such is an instrument of payment of dut .....

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not in dispute as we find from the finding of the learned CEGAT. The only question that has been put forward, on the basis of the finding of the facts without challenging the same, is about the effect of absence of collusion on the part of the appellant, as pointed out earlier, in relation to the availability of the credit under the forged DEPB Scrips. But in the decision in United India Insurance (supra), the insured, but the Insurance Policy was not found to be forged. The question would be d .....

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f the appellant in the issue of the DEPB licence/scrips becomes absolutely immaterial and irrelevant since no credit can be derived from a forged DEPB. If the DEPB is forged, then the same is non est and therefore, there is no valid DEPB. As such no credit can be derived thereunder. In such circumstances, one may defend his case that one may not be liable for collusion or fraud and exposed to other penalties therefore, but still then one would be liable to pay the duty and interest and for other .....

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2005 filed by m/. ICI India ltd. dismissed the SLP and as such this judgement of Honble Kolkata High Court is fully applicable to the current case and would override the decisions relied upon by the importers. 10. In the case of M/s. ICI India Ltd. (supra), as heavily relied upon by the Adjudicating Authority, the document itself, on the strength whereof credit is claimed, is forged. In the present case, it is significant to note that, the appellant produced the DEPB licenses purchased from the .....

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of the Customs Act, 1962 observed that extended period cannot be invoked for mere failure to pay duty and positive evasion of duty is required for this purpose. In that case, the assesses availed the CENVAT credit on the basis of the invoices issued by the supplier, which was subsequently found forged. The Honble Gujarat High Court set-aside the demand, as extended period of limitation cannot be invoked for the reason, the original document issued by manufacturer were genuine, who became untra .....

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is a forged one or a manufactured one, it is concocted or a created one in the eye of law and it is in the eye of law a non-existent document. On the other hand, a document issued in the context of a fraud or misrepresentation, is by itself a genuine document and according to settled law, such document is, at the most, voidable and is valid till it is set aside. A transaction that takes place on the basis of such document is good one and can even give a good title to the holder in due course fo .....

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espect of a commodity manufactured or produced. As pointed out by a Division Bench of this Court in the case of Commissioner of Central Excise v. D.P. Singh reported in 2011 (270) E.L.T. 321, the judgment of the Supreme Court in the case of New India Assurance Company (supra), was distinguished, being one relating to a forged document which renders a document null and void, and as such, has no application to this type of cases. Similarly, reliance over the judgment of the Supreme Court in the ca .....

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egistered with the Revenue. Justice Arijit Pasayat who delivered the judgment of the Supreme Court in the case of Afloat (supra), in a subsequent case of Commissioner of Customs v. Ajay Kumar & Company, reported in 2009 (238) E.L.T. 387, clearly indicated that the same being not a case of forged document but one of issue of license by practising fraud, the Tribunal was right in holding that the transferee of the license should not be made liable. It may not be out of place to mention here th .....

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our above finding that if the original document is issued even by practising fraud, a holder in due course for valuable consideration unless shown to be a party to a fraud, cannot be proceeded with by taking aid of a larger period of limitation as indicated in Section 11A(1) of the Act. It is now settled law that Section 11A(1) is applicable when there is positive evasion of duty and mere failure to pay duty does not render larger period applicable. In the case before us, it is not the case of .....

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, Chandigarh, reported in 2009 (235) E.L.T. 577. 13. We thus find substance in the contention of Mr. Parikh that in the case before us, in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied, and thus, even if the original document was assumed to be issued by practising fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the cas .....

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nst the export of goods, produced by the exporter. The appellants purchased DEPB scrips on payment of valuable consideration and it was valid document at time of import. There is neither any allegation nor evidence that the appellants were aware of the fraud committed by the exporter M/s. Trisuns. The goods were imported in the year 2000 and DEPB scrip was cancelled only on 28.01.2010. DEPB scrips issued by DGFT is itself genuine, at the time of import and valid till it is set-aside transaction .....

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rred on sale and a DEPB scrip actually issued by the DGFT, though on the basis of forged documents provided or false declaration made by the exporter, which is like a voidable contract. The two categories of DEPB scrips cannot be equated. In the former case, where the DEPB scrip, being forged/fabricated, is ab initio void, the judgment of Apex Court in case of Aafloat Textile Industries reported in 2009 (235) E.L.T. 587 (S.C.) will apply and duty can be demanded even from the transferee who had .....

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and duty can not be recovered from the transferee if before the cancellation of the DEPB scrips duty free imports had been made by the transferee and there is no evidence showing that the transferee had not acted bona fide or was aware of the fraud committed by the original holder of the DEPB scrip. 8. Under the law of the contracts when a contract between two parties has been entered into by fraud or mis-representation on the part of one party and for this reason, the contract is a voidable con .....

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), principles of law of contract apply to the issue of import licence, the above mentioned principle would apply to the present case also and unless it is proved that the respondent in this case, who obtained the licence on transfer/purchase basis from M/s. ATM International, had knowledge about licence having been obtained by M/s. ATM by fraud, the duty cannot be demanded from them, when at the time of import, the licence was a valid licence and had not been cancelled. In this case, there is ne .....

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ed by the Collector regarding confiscation of the goods as well as the imposition of penalty. As regards confiscation under Section 111(d) of the Act the submission of the learned counsel is that since the licences have been cancelled by Deputy Chief Controller of Imports and Exports ab initio the Collector was right in holding that there was no valid authorisation for the import of the goods and goods have been imported in contravention of the provisions of the Import (Control) Order, 1955 read .....

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ued under S. 3 of the Act so as to bring the case within cl. (8) of s. 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. 5. In the aforementioned decision of this Court it has been clearly laid down that in a case where the licence is obtained by misrepresentation or fraud it is not rendered non est as a result of its canc .....

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ight 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. (a) Commissioner of Customs, Amritsar vs. Gopi Chand Krishan Kumar Bhatia 2013 (295) E.L.T. 739 (Tri. Del.) has been held as under:- 8. In the background of the facts that - (a) DEPB scrip/licence had been actually issued by DGFT, though agai .....

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ain stipulated export performance is like an agreement in the nature of grant and when the DEPB scrip has been issued against forged papers produced or misrepresentation by the Exporter, the agreement would be a voidable agreement and the DEPB scrip would be valid till it is cancelled; (ii) in terms of Apex Court s judgment in case of Vikas Sale Corporation reported in [1996] 102 STC 106 and judgment of Honble Delhi High Court in case of Philco Exports v. STO reported in (2001) 124 STC - 503 (C .....

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e treated as having good title to the DEPB scrip; (iv) it is the above principle which has been followed by the Apex Court in case of East India Commercial reported in 1983 (13) E.L.T. 1342 (S.C.) (para 35) and by the Tribunal in the case of Hico Enterprises v. C.C., Mumbai (supra) (paras 30 and 31); and (v) the cases like this case, where a DEPB scrip actually issued by DGFT, though obtained by fraud by the Exporter, is used by a bona fide transferee who had no knowledge about the fraud committ .....

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(Tri. Ahmd) it has been held that in the case of subsequent cancellation of DEPB License, such cancellation made when license have already utilized and executed and hence became non est. Such, licence will not have any effect on merits already made on the basis of such licence, which are valid at the time of import and the benefit of the exemption Notification cannot be denied. This decision of the Tribunal was upheld by the Hon ble Supreme Court by Judgement dated 27.02.2009 in Special Leave t .....

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