TMI Blog2016 (4) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... sferers - Held that:- by examining the judgment of Mumbai Tribunal in the case of Sumit Wool Processors Vs. CC [2015 (10) TMI 329 - CESTAT MUMBAI], the duty cannot be demanded from the transferers, where the licences were genuine but obtained by fraudulent representation, they can be made only voidable and imports which happen prior to the cancellation cannot be held as improper. Therefore, duty cannot be demanded. - Decided in favour of appellant - Customs Appeal No. 424 of 2009 - Final Order No. 51043 / 2016 - Dated:- 22-3-2016 - MS. ARCHANA WADHWA, MEMBER (JUDICIAL) AND SH. B. RAVICHANDRAN, MEMBER (TECHNICAL) For the Petitioner : Shri Somnath Shukla, Advocate For the Respondent : Shri Amresh Jain Sh. Gajraj Singh, DRs ORDER PER: B. RAVICHANDRAN: The present appeal is against order dated 30.03.2009 of Commissioner of Customs (Import and General), New Delhi. This is in second round of litigation. The brief facts of the case are that based on certain information investigations were conducted by the officers of Customs regarding 62 Replenishment Licenses (REP) issued by the DGFT, New Delhi to two firms namely M/s Shivam Enterprises, New Delhi and M/s S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferee is in any way associated with such fraud or knowingly accepts the licence or purchases the licence with the knowledge of such fraud, no benefit under the licence can be recognized in favour of such transferee, who has notice of fraud, because such a transferee cannot be considered to be a bonafide purchaser without notice of fraud, even assuming for the sake of argument, that such equitable principle may be extended in favour of such bonafide transferee. Whether a transferee in such cases has knowledge of fraud by which the licence was obtained from the licensing authority by the transferor, would be a question of fact, which would depend upon the material which is adduced before the adjudicating authority. Even when there is no direct evidence for demonstrating such knowledge about fraud or the licence having been fraudulently obtained, inference can be drawn on the basis of reliable material which is strong enough to attribute the knowledge of fraud. When the party takes up such a plea of bona fide purchaser for value without notice of fraud in obtaining REP licence, it will be such party that will have to prove its assertion by showing the bonafide nature of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of gold bars. The appellant have paid premium of 9% to other transferer. (f) The appellant had not made any enquiry about the transferer who obtained REP licenses by fraudulent means. Based on the above observations the original authority concluded that low payment of premium that too in gold clearly indicate that the appellant had knowledge of licences having been obtained fraudulently. The appellants contested the above findings pointwise: (a) For using five REP licenses M/s Shivam Enterprises have issued two different debit notes addressed to the appellant specifically mentioned in the licence number and the amount of licence. The said debit notes were stamped and signed by the proprietor. For four REP licence of M/s Shyam Exports similar details were available in the debit note which was signed and stamped by the proprietor. (b) For payment of premium of 8.64% for five licenses of M/s Shivam Enterprises and 8.51% for four licenses of M/s Shyam Exporters there is a clear corroboration by way of statements of Sh. Kulbhusan Sethi, Agent, and Sh. Hashmukh Gadecha, Partner of the appellant firm. The delivery of gold for the premium amount through DHL Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he range of 8.51% to 8.93% and not 8% as recorded by the Commissioner in his order. These are negotiated rates. The Commissioner erred in calculating the premium by comparing quantities of gold at a different date at different rates. The premium rate was calculated by the Commissioner is on the date of import and he compared it with date of debit notes. Such calculation was incorrect as the rates of gold varies on a day-to-day basis and quantities purchased earlier cannot be compared with future dates. Further, such comparison should not be made based on gold locally sold. (j) The appellants purchased these licences from Sh. Kulbhusan Sethi, who duly enquired about the licence before purchasing the gold. 5. During the course of hearing, apart from elaborating on each of the above points, ld. Counsel for the appellants submitted compilation of decided cases to support his view that the bonafide buyer of freely transferable licence is not liable for any adverse consequences, in case if later it was found that the licences were obtained by presentation of forged documents by fraudulent means. 6. Ld. AR elaborated on the findings of the original authority as already summar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on record as to either the appellant or their commission agent (Shri Kulbhusan Sethi) had made an enquiry about M/s Shyam Exports and M/s Shivam Enterprises. 9. We find each one of these observations have been duly contested and explained by the appellant. Regarding the commission being low we find the quantification of percentage of commission itself was contested as incorrect. Apparently, the commission amount being given in the form of gold the rate of gold applicable during the relevant time should be adopted. The appellants have categorically stated that the commission paid by them in respect of these 21 licences were in the range of 8.51% to 8.93% whereas the original authority stated that to be 8%. We find the import made by the appellant based on the applicable rate relevant during the time is to adopted to arrive at the percentage of commission. Further, we also take note that the appellants have purchased such REP licences from others during the relevant time with a premium rate ranging from 8.2% to 9%. Three licences were bought in February/ March 1989 from M/s D.S. Exports and M/s K. B. Jhaveri Exports with a premium rate of 8.2% and 8.1% respectively. Even othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SIL) which was forged and was never issued by the DGFT. The signature and security seal of the authority was forged. Now in the present case, the REP licences were issued by the competent authority and as such were genuine documents. However, the original parties/ exporters made fraudulent representation by giving forged documents to obtain such REP licences. As such there is a clear difference in facts between the case decided by the Hon ble Supreme Court and the present case. In this connection, we may refer to the decision of the Hon ble Supreme Court in East India Commercial Co. Limited - 2002-TIOL-138-SC, it was held as under: 35. Nor is there any legal basis for the contention that licence obtained by misrepresentation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause (8) of Section 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 ..... 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