Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (2) TMI 387 - CESTAT CHENNAI

2016 (2) TMI 387 - CESTAT CHENNAI - TMI - Demand of duty - Import of fake / forged DEPB licences - Appellant purchased the DEPB licneces from the market - Levy of interest and penalty - Held that:- The Hon'ble Apex court has clearly laid down and discussed the issue what is "Fraud" and "Caveat Emptor" and clearly held that buyer has no remedy against the seller and takes all risks of defect and clearly held that appellant, buyer of the licence has to establish that he made enquiry and took requi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

preme Court judgement is per incurium is not acceptable.

The goods were cleared by the appellant by forged/fake DEPB licences and forged TRAs - Demand of duty confirmed - though penalty waived - Decided against the appellant. - Appeal No. C/85/2007 - Dated:- 11-6-2015 - R. Periasami, Member (T) And P. K. Choudhary, Member (J) For the Appellant : Mr Karthik Sundaram, Adv For the Respondent : Ms Indira Sisupal, AC (AR) ORDER Per R Periasami The appellant filed appeal against Commissione .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

7 of paper book) is reproduced below as under:- S.No. TRA No.& Date DEPB Licence No. & Date Name of the Licence Holder Credit Amount of License (Rs.) Bill of Entry No. & Date where credit used 1. 043/04-05 dt. 8.4.2004 0610006778/5/06/00 dt. 27.1.2004 Lex Boots, Kanpur 1700846 337281 dated 15.4.2004 2. 042/04-05 dt. 8.4.2004 0610006696/2/06/00 dt. 12.1.2004 Mirza Tanners Ltd., Kanpur 1039593 3. 044/04-05 dt. 8.4.2004 0610006862/3/06/00 dt. 12.2.2004 Talat Leather Pvt. Ltd., Kanpur 10 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nners Ltd., Kanpur 1020780 9. 108/04-05 dt. 26.4.2004 0610006694/2/06/00 dt. 12.1.2004 Euro Footwear Ltd., Kanpur 725623 The above DEPB licences were purchased from the open market through brokers M/s. R.Somanathan & Co. The results of investigation revealed that all the 9 DEPB licences and the corresponding TRAs were forged and obtained and the benefit of notification has been fraudulently availed by the appellant. The goods were cleared under fake licenses and liable for confiscation. Acco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t. 28.9.2005 this Tribunal set aside the order and remanded to the adjudicating authority with a direction to give reasonable opportunity to the party for cross examination of the witnesses. 3. The adjudicating authority passed the de novo adjudication order dt. 30.11.2006 which is impugned in this appeal held that all the DEPB licences produced by the appellants for clearance of the goods are fake and confirmed the duty of ₹ 95,29,591/- under Section 28 (1) of the Customs Act along with i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Tribunal's decision in the case of Aafloat Textiles (India) Pvt. Ltd. Vs CC - 2006 (201) ELT 39 (Tri.-Mumbai) and Tribunal's Larger Bench decision in Hico Enterprises Vs CC Mumbai - 2005 (189) ELT 135 (Tri.-LB). The Revenue filed ROM application in May 2009 against this order and the Tribunal vide MISC Order No.25/2010 dt. 11.1.2010 held that the case law relied upon by this Bench in the case of Aafloat Textiles (I) P. Ltd. (supra) was overruled by the Hon'ble Supreme Court in th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

importing raw materials since 1998 and they used DEPB licences for payment of customs duty. All these DEPB licences were purchased in the open market through various brokers including M/s. R. Somanathan & Co. They are using the services of their broker M/s.R. Somanathan & Co. from 2003 onwards. The department has alleged that 9 DEPB licences as tabulated above were purchased through broker M/s.R. Somanathan & Co. and most of the transactions were through telephones regarding the avai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n the present case they purchased the licences including brokerage paid at a rate between 94.5% and 95.25%. He submits that all the licences were originated from Kanpur. The DGFT Kanpur had issued the said licences and the Commissioner of Customs, Kanpur issued the TRAs and the same was received by Customs, Tuticorin. They were made aware of the forged licences vide Asst. Commissioner (SIIB) letter dt. 14.9.2004 (Ref.Page No.307 of the PB). Immediately on receipt of the letter dt. 14.9.04, they .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n confirmed the Customs duty. 5.1 He relied Tribunal's order dt.28.9.2005 wherein the Tribunal has categorically directed to allow cross-examination of the persons by the appellant. He submits that they specifically requested for cross-examination. He refers to para 4.02 and 4.03 of the order wherein the adjudicating authority expressed his inability and the appellants had agreed to waive cross-examination and to hear the case on merits. 5.2 Appellant also relied on Tribunal's final orde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d the Larger Bench decision of the Tribunal [2005 (189) ELT 135 (Tri.-LB)] . He further submits that Supreme Court's order in the case of Hico Enterprises was passed by Three Judges Bench whereas the Apex Court's order in the case of Aafloat Textiles comprised of Two Judges Bench. He submits that there are two Apex court orders on the identical issue. He submits that Judgement rendered by Three Judges Bench will prevail over Two Judges Bench. In this regard, he relied on State of U.P. Vs .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pany. As it is a pure transaction between licence broker and the company on principle to principle basis there is no fraud or forgery and it can be established only after cross-examining of the persons concerned. In this regard, he relied on Tribunal's decision in the case of BANCO Aluminium Ltd. Vs CCE - Vadodara - 2005 (181) ELT 110 (Tri.-Mumbai). For invoking limitation, he relied on Supreme Court decision in the case of Kaur & Singh Vs CCE New Delhi - 1997 (94) ELT 289 (SC). He submi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nnai Vs Flemingo (DFS) Pvt. Ltd. He also submits that Hon'ble Supreme Court's decision in Aafloat Textiles (India) Pvt. Ltd. (supra) is distinguishable as the apex court has not discussed as to how forgery has to be proved in a criminal case. He submits that above Supreme Court judgement is per incurium and applicable only to that case whereas the Supreme Court judgement in the case of CC (Imports), Bombay Vs Hico Enterprises (supra) is applicable to the present case. 5.5 He submits that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ces. She refers to transferror's laws as at pages 142, 144, 145. She submits that these TRAs were delivered at Paras International (Ref. Page 147) and relied on statement dt. 14.9.2004 (at pages 260 to 262) of Mr. V.Ramakrishna Rao. They have filed FIR only on 18.10.2004 which is an afterthought after deposing statement before customs authorities. She further submits that appellants have seen the original copies of licences, therefore question of cross examination is not relevant. Once the t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

46 (SC) wherein the Supreme Courtheld that extended period is invocable in the case of fraud and forgery of licence. 2) CC Vs Candid Enterprises - 2001 (130) ELT 404 (SC) 3) Sharman Woollen Mills Ltd. Vs CC Amritsar 2011 (263) ELT 136 (Tri.-Del.) 4) Commissioner Vs CESTAT Chennai 2009 (240) ELT 166 (Mad.) 5) Gaur Impex Vs Commissioner 2010 (249) ELT A28 (SC) 6.1 She further submits that Supreme Court decision in the case of Hico Enterprises (supra) has not discussed the Chengalvaraya and Ashok L .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s-examination of witnesses is still maintained and they never waived the cross examination. Regarding percentage of payment of brokerages, the discounts was in the range between 94% and 95% which is well within limit. He further countered that entire TRA mechanism is between one customs to another customs there is no role of any outsider. He also stated that both Supreme Court's decision in TISCO and Sharman Woollen Mills (supra) stand overruled by the 2 Judge Bench. However, Three Judge Ben .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ort relates to April 2004 and we find in the impugned order the Commissioner of Customs, Tuticorin has dealt the issue in detail in respect of each licence and the modus operandi of forgery of the said DEPB licences and also forgery of TRAs masterminded by the licence brokers. The impugned de novo order dt. 30.11.2006 was passed only against the present appellant M/s.DCW Ltd. whereas we find in the original order No.26/2005 dt. 3.5.2005 the adjudicating authority confirmed the demand against app .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ught out in the SCN we find that use of 9 DEPB forged licences has been established beyond doubt. The licensing authority, Jt. DGFT, Kanpur has clearly confirmed that these 9 licences were not issued by the Jt. DGFT. Similarly, it is established that the corresponding TRAs were not issued by the Kanpur Customs Commissionerate. Therefore, fraud and forgery of DEPB licences and TRAs have been established. 10. Appellant mainly contended that they were under bonafide belief that licences were origin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

findings at para 5.6 to 5.10 that JDGFT in his official capacity have verified and certified that the said DEPB licences were not issued by Jt.DGFT. Similarly Customs officials have also confirmed that they have not issued the TRAs in their official capacity and they are not beneficiaries of licences. Therefore, we do not find any justification with the appellant's contention on this issue. 11. On merits, we find that appellant's only plea is that they have been regularly procuring the D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oker who indulged in fraud and forging of DEPB licences and supplied to various other brokers. On perusal of the statement of B.R. Chandran, we find that he categorically deposed that he already knew that the said DEPB licences which were to be arranged by Mr. Sankaran through Mr. Mohd. Korsi were fake and forged at the time of obtaining the licence. He also deposed that this fact was already known to V.Sankaran of M/s.R.Somanathan & Co. before purchase of the said licences. 12. On perusal o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

customs cannot deny DEPB licence as they were the user of licence procured in the market through broker and in this regard, they have relied Tribunal's Larger Bench decision in the case of Hico Enterprises (supra) which was affirmed by the Hon'ble Supreme Court. The Tribunal's Larger Bench in the above case held that transferee cannot be called upon to fulfil the condition of the notification. The above case is distinguishable and not applicable in view of Hon'ble Supreme Court& .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sorcerer, Comus, who exulted in his ability to, wing me into the easy hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary "fraud" in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, "fraud& .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick. According to Halsbury's Laws of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact. Section 17 of the Indian Contract Act, 1872 defines "fraud" as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud ar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false". But "fraud" in public law is not the same as "fraud" in private law. Nor can the ingredients, which establish "fraud" in commercial transaction, be of assistance in determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawaja v. Secretary of State for Home Deptt. (1983) 1 All ER 765, that it is dangerous to introduce ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

red round abuse of power or mala fide exercise of power. It may arise due to overstepping the limits of power or defeating the provision of statute by adopting subterfuge or the power may be exercised for extraneous or irrelevant considerations. The colour of fraud in public law or administration law, as it is developing, is assuming different shades. It arises from a deception committed by disclosure of incorrect facts knowingly and deliberately to invoke exercise of power and procure an order .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

k for himself and ensures that he acquires the information necessary to avoid bad bargain. In public law the duty is not to deceive. (See Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, [1992 (1) SCC 534]. 13. In that case it was observed as follows: "Fraud and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Concise Oxford Dictionary, it has been defined as criminal deception, use of false representation to gain unjus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of the fact with knowledge that it was false. In a leading English case Derry v. Peek [(1886-90) ALL ER Rep 1: (1889) 14 AC 337 (HL)] what constitutes fraud was described thus: (All Er p. 22 B-C) Fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

varaya Naidu's case (supra). 16. "Fraud" is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. Although negligence is not fraud but it can be evidence on fraud; as observed in Ram Preeti Yadav's case (supra). 17. In Lazarus Estate Ltd. v. Beasley (1956) 1 QB 702, Lord Denning observed at pages 712 & 713, "No judgment of a Court, no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at he had no knowledge about the genuineness or otherwise of the SIL in question. 20. The maxim caveat emptor is clearly applicable to a case of this nature. As per Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edn. 2005 at page 721: Caveat emptor means "Let the purchaser beware." It is one of the settled maxims, applying to a purchaser who is bound by actual as well as constructive knowledge of any defect in the thing purchased, which is obvious, or which might have been known by pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ur L. Corbin Ed. 3d. Am. ed.1919) Applying the maxim, it was held that it is the bounden duty of the purchaser to make all such necessary enquiries and to ascertain all the facts relating to the property to be purchased prior to committing in any manner. 23. Caveat emptor, qui ignorare non debuit quod jus alienum emit . A maxim meaning "Let a purchaser beware; who ought not to be ignorant that he is purchasing the rights of another. Hob. 99; Broom; Co., Litl. 102 a: 3 Taunt, 439. 24. As the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

expressed or implied. It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all risk of defect in the goods, unless there are circumstances beyond the mere fact of sale from which a warranty may be implied. { Bottomley v. Bannister , [1932] 1 KB 458: Ward v. Hobbs , 4 App Cas 13}. (Latin for Lawyers) 26. No one ought .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 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, o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd took requisite precautions to find out the genuineness of the licence which he purchased and the apex court said that if he has not done so, the consequences had to follow. In the present case, we find that appellants have indulged in procuring the licence through licence broker Mr.Shankaran of M/s.R.Somanathan & Co. and appellant themselves admitted that they transacted the business over telephone whenever they required DEPB licence for clearance. It is evident that appellant has not tak .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt is of no consequence and it is only an afterthought to save their lapses. Therefore the apex court's decision in Aafloat Textiles case is clearly applicable to the present case and the appellant's contention that above Supreme Court judgement is per incurium is not acceptable. 13. Further, we find that Hon'ble Supreme Court in a recent decision in the case of TISCO Vs CC Mumbai (supra) on identical issue of fraud committed by the original licence holder, the Apex Court upheld the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version