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2016 (2) TMI 538 - CESTAT CHENNAI

2016 (2) TMI 538 - CESTAT CHENNAI - 2016 (336) E.L.T. 562 (Tri. - Chennai) - Import of goods against fake, forged and fabricated DEPB scrips - That caused huge loss of Revenue for which the appellant was called upon to explain the reason why he shall not be penalized under law - Held that:- Result of investigation remained unchallenged. Appellant acted mala fide and to the detriment of interest of Revenue. Ill will of the appellant came to record. Entire pleading of the appellant is ill-founded. .....

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ed by investigation were so believable, that lent credence to the case of Revenue. Genesis of the case compels to irresistibly conclude that Revenue has very successfully proved its case and oblique motive of the appellant enriched him at the cost of Revenue. Therefore all the appeals are liable to be dismissed. That is ordered accordingly. - Decided against the appellants. - Regarding serious lapse of the Officers of Customs and DRI - Held that:- The wheels of Justice may appear to grind sl .....

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Judicial Member And Hon ble Shri R. Periasami, Technical Member For the Appellant : Shri Hari Radhakrishnan, Advocate For the Respondent : Shri B. Balamurugan, AC (AR) ORDER Per D. N. Panda In pursuance of the direction of the Hon ble High court of Madras in CMA No. 421/2013 disposed on 7.3.2013, this batch of 12 appeals was taken up. Hon ble court noticing that the appellant was not heard by the Tribunal at the time of passing Final Order No. 701 767/2012 dated 14.6.2012, set aside that part o .....

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idence involved in such appeals including the law applicable equally to all such appeals. 2. Appeal registered as No. C/146/2002although arose out of the same cause and evidence as is involved in the above batch of appeals, that could not be listed pending search of that record by Registry. Registry, upon tracing that record, shall list the same issuing appropriate notice for hearing. 3. It was alleged by investigation that the Appellant stationed in Delhi at the address: No.1598, Main Bazar, Pa .....

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upon to explain the reason why he shall not be penalized under law. Following due process of law, adjudications were made and penalty of different descriptions were levied on the appellant u/s 112(a) of the Customs Act, 1962 by different adjudication orders as depicted in the Table below holding him guilty. Against such adjudications, appellant came in appeal before Tribunal: S. No Appeal No. Order-in-Original No. Penalty (Rs.) 1. C/182/08 6933/07 dt. 26.11.2007 12,00,000/- 2. C/183/08 6934/07 .....

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lement Pass Book (DEPB) is a scheme formulated under Para 7.43 of the Hand Book of Procedure of EXIM Policy 1997-2002 and Para 4.3 of Hand Book of Procedure of EXIM Policy 2002-2007 issued under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992, to facilitate and augment foreign trade by genuine importers neutralizing the incidence of Customs duty on the import content of the export product. 4.2 Under the above scheme, DEPB scrips are issued by DGFT to an exporter against g .....

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llowed to avail the benefit of Nilrate of Special Additional Duty (SAD) under Notification No.23/02-Cus dated 1.3.2002. BACK GROUND OF THE CASES 5.1 Subsequent to the impugned imports made through different Bill of Entries at the Chennai Port using the impugned TRAs and DEPB scrips as mentioned in different adjudication orders, it was noticed by Investigation that certain TRAs mentioned therein used by the importers for clearance of the imports were false, fake, forged and fabricated and the DEP .....

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d in the TRAs although were claimed to have been registered at the Jawaharlal Nehru Customs House, Nhava Sheva, Mumbai, were not at all lawfully transferred by the owners thereof to the importers of Chennai and even the scrips mentioned in some of the TRAs differed with the scrips registered at the above port of export. 5.3 Search was made to premises of Sri Sashi Prakash Lohiaand his statement was recorded by investigation u/s 108 of Customs Act, 1962 on 17.11.2004. That revealed that he was th .....

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t he was trading in REP/DEPB scrips in the name of M/s. Sashi Trading Corporation from No.83, NSC Bose Road, Chennai 600 001and closing that concern, he started Pankaj Impex in the year 1996. He had also another firm in the name of M/s. Prabha International with his wife as Proprietrix thereof. He was also using his brother-in-laws concern viz. PI Trading Corporation to trade the DEPB scrips. He got IE code for both firms and was purchasing DEPB scrips from the appellant. 5.5 Investigation gathe .....

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The Commissioner of Customs, Chennai (Seaport) vide his letter dated 29.8.2005 informed the investigation that the impugned TRAs in sealed cover along with the DEPB scrips were received through the CHA of the importer and registered for clearance of imports duty free. This made clear that the said TRAs were not at all received by Chennai Customs by registered post from Nhava Sheva Customs House. 5.6 On the aforesaid back drop and evidence gathered by investigation, adjudications were made holdin .....

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to penalty under law. If at all, the allegation against the appellant is proved by Revenue, his action/omissions made prior to clearance of the goods does not bring him to the fold of law for penalty following the decision of the Hon ble High Court of Gujarat in the case of Commissioner of Customs Vs. Sanjay Agarwal 2011 (269) ELT 153 (Guj.). 6.2 In spite of the right to be heard, the appellant was not at all heard by the authority below before passing the order even though on several occasions .....

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had colluded with Sri Lohiya to hatch conspiracy against Revenue divulging the details of DEPB scrips to him. Therefore, appellant is not liable to any penalty under law. Further, Sri Khan having been made scot-free, he should be brought to record for discovery of truth. 6.5 Appellant cannot be said to be mastermind of the team who made the alleged fraud following the ratio laid down in M/s. Geogeress Vs. Commissioner of Customs 2003 (151) ELT 336 [ICI India Ltd. Vs. CC, Calcutta 2003 (151) ELT .....

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hole proceeding made violating principles of natural justice is void. 6.6 The cases of the appellant have been dealt very casually and in a cursory manner without examining the evidence on record. Adjudication is therefore not sustainable. The issues raised in reply to show cause notice having been ignored by the adjudicating authority, the adjudication order suffers from legal infirmity for the violation of natural justice. 6.7 When the customs officer allowed clearance of the goods on the basi .....

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g DEPB scrips at a cheaper price, he should have been punished without the appellant being questioned. 6.10 When no incriminating evidence was found during search from the premises of the appellant there cannot be any allegation of any forgery or fabrication of DEPB scrips or TRAs against the appellant. 6.11 The DGFT being an authority to deal with any infraction of law relating to DEPB, Customs has no jurisdiction to initiate any proceeding against the appellant. Therefore, the adjudication is .....

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nity from penalty. Entire material on record speaks against him. He hatched conspiracy against Revenue. Loss of Revenue is attributable to his malafide. When he neither controverted any of the allegations made against him nor impeached the evidence gathered by Revenue to prove his case, all his appeals are liable to be dismissed. FINDINGS AND CONCLUSION BY TRIBUNAL 8.1 Heard both sides and perused records. 8.2 The issues involved in this batch of appeals is whether the DEPB scrips/TRAs used to d .....

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, imports made at the Chennai port were cleared duty free. Letter dated 9.8.2005 of Commissioner of Customs; Chennai (Sea port) is testimony of the fact of submission of TRA by CHAs in Customs House, Chennai without that being received from Navsheva Customs, Mumbai. Those were false, fake, forged and fabricated and not at all genuine for the reason that the owners of the DEPB scrips mentioned therein had never transferred the same to the importers of Chennai. Evidence on record also exhibited th .....

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ct that the said scrips were sold to some other importers as is found by learned adjudicating authority in para 17 of the adjudication order involved in Appeal No. C/177/2008.Such fact remained uncontroverted by the appellant in the course of hearing before Tribunal leading any cogent evidence. Verification of records of both the Customs House revealed serious discrepancy proving that the TRAs utilized at Chennai Port were not at all valid instruments nor genuine but were fake, forged and fabric .....

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under Section 108 of the Customs Act, 1962 to cause appearance on 28.03.05, 04.04.05, 15.04.05, 21.04.05 and 09.05.05. He did not come out with clean hands to defend him. Summonses were also issued to Shri Sashi Prakash Lohia to cause appearance on 02.12.04, 30.03.05, 25.04.05 & 27.05.05.He also avoided the same. Deliberate defiance of law made by appellant dragged him to criminal prosecution filing complaint against him under Section 174 & 175 of Indian Penal Code read with Section 108 .....

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ge by willfully or recklessly causing him to believe on falsehood. Of course, innocent misrepresentation may give reason to claim relief against fraud. In the case of Commissioner of Customs, Kandlav. Essar Oil Ltd. - 2004 (172) E.L.T. 433 (S.C.) it has been held that by fraud is meant an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill-will towards the other is immaterial. Fraud in volves two elements, deceit and injury to the deceived. .....

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nowingly, or (ii) without belief in its truth, or (iii) recklessly and carelessly whether it be true or false [Ref : RoshanDeenv.PreetiLal [(2002) 1 SCC 100], Ram Preeti Yadavv. U.P. Board of High School and Intermediate Education [(2003) 8 SCC 311], Ram Chandra Singhs case (supra) and Ashok Leyland Ltd. v. State of T.N. and Another [(2004) 3 SCC 1]. 9.3 Suppression of a material fact would also amount to a fraud on the court [(see Gowrishankarv. Joshi Amha Shankar Family Trust, (1996) 3 SCC 310 .....

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f Revenue is to be restored back to the treasury since fraud committed against Revenue voids all judicial acts, ecclesiastical or temporal and DEPB scrips obtained playing fraud against the public authorities are non-est. So also no Court in this country can allow any benefit of fraud to be enjoyed by anybody as is held by Apex Court in the case of Chengalvaraya Naidu reported in (1994) 1 SCC I : AIR 1994 SC 853. Ram Preeti Yadavv. U.P. Board High School and Inter Mediate Education (2003) 8 SCC .....

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evenue, white collar crimes committed under absolute secrecy shall not be exonerated as has been held by Apex Court judgment in the case of K.I.Pavunnyv. AC, Cochin - 1997 (90) E.L.T. 241 (S.C.). No adjudication is barred under Section 28 of the Customs Act, 1962 if Revenue is defrauded for the reason that enactments like Customs Act, 1962, and Customs Tariff Act, 1975 are not merely taxing statutes but are also potent instruments in the hands of the Government to safeguard interest of the econo .....

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ed. 9.7 Fraud and justice do not dwell together for which penal provisions are enacted to eradicate evils of defrauding Revenue which is anti-social activity adversely affecting public revenue. Such provisions are construed in the manner which curbs the mischief, promote their object, prevent their subtle evasion and foil their artful circumvention. Thus construed, the term fraud within the meaning of these penal provisions is wide enough to take in its fold any one or series of unlawful acts co .....

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sh Lohiya and the appellant. Appellant was consciously involved in the commitment of fraud against Revenue trading with the fake, forged and fabricated TRAs. He was not at all a stranger to the commission of the offence, but a perpetrator of fraud against Revenue with a predetermined mind. Therefore, he isliable to the penal consequence u/s 112(a) of the Customs Act, 1962. 10.2 Evidence Act does not insist on absolute proof for the simple reason that perfect proof in this imperfect world is seld .....

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s not required to prove its case by mathematical precision. Thus, if circumstances establish that there is high degree of probability that a prudent man ought to act on the supposition that there was design to secure fake, false, forged or illegitimate DEPB scrips to clear imports duty free in contravention of the law or abetting to achieve such ill object, such act against public Revenue calls for penal consequence to curb such mischief. 10.3 Penal provisions are enacted to suppress the evil of .....

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. Such act or acts being reasonably proximate to the clearance of imports duty free on the basis of forged documents, the appellant as a trader, is liable to penalties under law. 11.1 It was the argument of the appellant that there was neither infraction of law made by the appellant nor Revenue proved its case for which penalty under section 112(a) of the Customs Act, 1962 is not imposable. It may be stated that Revenue need not prove its case with mathematical precision. Appellant perpetuated f .....

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Appellant also contended that he shall be benefited by the judgment of the Hon ble High Court of Gujarat in the case of Commissioner of Customs Vs. Sanjay Agarwal 2011 (269) ELT 153 (Guj.). It may be stated that the said judgment was delivered in the context of role of a broker who organized purchase of DEPB scrips by an importer. But present case is a case of seller of the fake TRAs covering the DEPB scrips mentioned therein, who knowingly sold the same malafide to defraud Revenue. Therefore a .....

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been followed when show cause notice is issued to the noticee describing the allegation, evidence relied upon to make such allegation and consequence of breach of law and reply thereon is asked for. Second such opportunity granted is through the process of hearing. Both the opportunities having been granted to the appellant, there cannot be allegation of violation of natural justice. 11.4 Appellants grievance is that the main offender is Sajid Khan who as an employee of Mumbai Customs had acces .....

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mons issued by investigation and failed to cooperate with them to discover the truth. That proved that apprehending his own guilt, he did not come out with clean hands to defend him. Learned authority below has not acted casually, or in any cursory manner to deal the appellant. He had very minutely and meticulously scrutinised the evidence and evaluated the same as well as passed a reasoned and speaking order. 11.5 Further contention of the appellant was that Shri Sashi Prakash Lohia was hostile .....

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d suggest involvement of the appellant in commitment of the offence against Revenue. 11.7 The last contention of the appellant was that DGFT is the only authority to deal with the forgery of DEPB scrips if any and Customs Authority has no power to deal with the same does not find support in law for the reason that the goods in question is confiscable under section 111 of the Customs Act, 1962 by customs authority. Once section 111 of the Customs Act, 1962 operates, section 112(a) of the said Act .....

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customs authorities cannot be denuded of their power without any express provision to the contrary. DGFT exercises its jurisdiction on the subject entrusted to it and cannot encroach over the powers of the Customs Authority. Similar to that is the judgment of Hon ble High Court of Madras in the case of Commissioner of Customs Vs. Pattu Exports Pvt. Ltd. - 2015 (317) ELT 663 (Mad.). Therefore entire defence plea of the appellant as to no power exercisable by the Customs Authority fails to stand. .....

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importers had not acquired any good title over the DEPB scrips use to discharge duty liability on import. Therefore adjudications are not time-barred following Apex Court judgment in the case of CC. v. Candid Enterprises - 2001 (130) E.L.T. 404 (S.C.). 12.2 Nothing was demonstrated by the appellant in the course of hearing that the Authority below merely acted on surmise, suspicion or imagination. Rather adjudications were made objectively on basis of cogent evidence, following due process of l .....

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Construction Company (P) Ltd - AIR 1996 (SC) 2005. The fraud committed by the appellant void all judicial acts, ecclesiastical or temporal and there was no good title over the DEPB scrips/TRAs. When the material evidence established fraud against Revenue, white collar crimes committed under absolute secrecy shall not be exonerated from penal consequence of law following Apex Court judgment in the case of K.I. Pavunny v. AC, Cochin - 1997 (90) E.L.T. 241 (S.C.). Thus, the adjudications were not .....

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which is as under:- 6.1.1.As regards the duty liability, since there is no dispute about the fact that the advance license against which duty fee imports of copper/brass scrap have been made by these importers, are forged and had never been issued by DGFT, in view of - (a) Hon ble Madras High Courts judgment in case of East West Exporters v. AC, Customs reported in 1993 (68) E.L.T. 319 (Mad.) (b)Hon ble Calcutta High Courts judgment in case of ICI India Limited v. CC, Calcutta reported in 2005 ( .....

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ion, the imports would be liable to pay the duty. 6.1.2 As regards the applicability of extended period for 6.1.2 recovery of duty under proviso to Section 28(1) of the Customs Act, 1962, the legal position on this point is now very clear in view of Hon ble Supreme Courts judgment in case of CC (P) v. Afloat Textiles (I) P. Ltd. reported in 2009 (235) E.L.T. 587 (S.C.) wherein invoking the principle of Caveat Emptor the Apex Court has held that in such cases the extended period for recovery of d .....

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ound to view the land and to enquire after and inspect the title deeds; at his peril if he does not. 25. Upon a sale of goods, the general rule with regard to their nature or quality is caveat emptor, so that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, 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 .....

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ecial 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 .....

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answered in the affirmative in favour of the Department and against the appellants. [Emphasis supplied] CONCLUSION 13.1 Enactments like Customs Act 1962, and Customs Tariff Act 1975, are not merely taxing statutes but are also potent instruments in the hands of the Government to safeguard interest of the economy. One of its measures is to prevent deceptive practices of undue claim of fiscal incentives. Evidence Act not being applicable to quasi-judicial proceeding, preponderance of probability c .....

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any means. He failed to lead any cogent evidence to rule out his role in commitment of offence against Customs and thereby did not come out with clean hands. 13.2 Result of investigation remained unchallenged. Appellant acted mala fide and to the detriment of interest of Revenue. Ill will of the appellant came to record. Entire pleading of the appellant is ill-founded. Show Cause Notice has properly brought the appellant to charge exhibiting civil and evil consequences of law granting opportunit .....

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