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M/s Deep Exports Versus CC, New Delhi

2016 (4) TMI 99 - CESTAT NEW DELHI

Bonafideness of appellant in buying and utilising the REP licences issued - Obtained on the basis of fabricated forged documents by others - Whether or not the appellant has a knowledge of fraud by which the licence was obtained from the licensing authority by the transferer - held that:- the REP licences transferred were genuine documents issued by the competent authority. Even if the appellants had made any enquiry with the DGFT themselves as the issuing authority at the time of purchase or ut .....

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giving forged documents to obtain such REP licences. - Demand of duty from the transferers - 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 dema .....

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on. 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 Shyam Exports, New Delhi. After investigation it was revealed that the said REP licenses were obtained on the basis of forged bank realisation certificates and exports shipping bills. These licenses have been used for import of about 350 k .....

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y. The present appellant was one of the noticees with reference to import of gold covered by 21 REP licenses valued at ₹ 5,17,06,898/-. The duty involved which was not paid on the basis of such REP licenses is ₹ 2,38,14,129/-. The case was adjudicated by the Commissioner vide order dated 13.08.2004. In respect of the present appellant he held that the goods (gold) imported against 21 REP licenses are liable to confiscation under Section 111(o) of the Customs Act, 1962; confirmed dema .....

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2. Pursuant to the above said remand directions, the Commissioner again adjudicated the case vide the impugned order dated 30.03.2009. The directions of the Tribunal while remanding the matter for fresh adjudication as contained in the final order dated 18.07.2006 are as below: Thus, the weight of authorities cited seems to be leaning towards the proposition that imports made before the cancellation of a licence even on the ground of fraud would be considered to be imports made under a valid li .....

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en 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 fraudulen .....

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ch material before deciding whether the purchase or rights under a REP licence was done bonafide or it was dubiously contrived, or whether the transferee was in any manner aware of the licence having been fraudulently obtained . 3. We find that the issue narrows down to the bonafideness of appellant in buying and utilising the REP licences which were obtained based on fabricated forged documents by others. In other words the Tribunal specifically directed whether a transferee has knowledge of fr .....

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to examine the present appeal against the findings in the impugned order. We have perused the impugned order carefully on this issue. Ld. Commissioner recorded the following findings to hold that the appellants had knowledge of licenses having been obtained by M/s Shivam Enterprises and M/s Shyam Exports fraudulently. (a) The debit notes issued by the transferers of REP licences did not indicate the premium rate or amount and the delivery challans under which gold bars were delivered bears no s .....

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otes raised either by M/s Shivam Enterprises or M/s Shyam Exporters there is a mention of about payment of premium in gold. (e) As per the sales bill the appellant have paid 8% premium for the 21 REP licenses by 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 to .....

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bit 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 Courier was also evidenced. (c) The appellant had duly recorded all the transactions relating to sale invoices for t .....

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etc. have also been stamped by the appellants. (d) The gold was delivered by the appellants employees to Sh. Kulbhusan Sethi who admitted receipt of gold and hence there can be no question about delivery of gold for premium amount. (e) There is no unusual practice in these transactions as the primary documents of the delivery challan is the sales invoices which in the present case is authentic and genuine. The debit notes can easily be substantiated by the books of accounts. (f) Regarding the .....

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old to Sh. Vinay Sethi was not disputed. By way of precaution the appellant added the name of M/s Shyam Exports in the bill. The appellants did not have a direct dealing with either M/s Shyam Exports or M/s Shivam Enterprises. The gold was intended to be sent to Sh. Kulbhusan Sethi and hence as per his instructions are consigned the name of M/s Sonam Overseas. (h) Payment of premium for REP licence in gold is not against any legal provisions. The appellants dealt with Sh. Kulbhusan Sethi and as .....

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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 f .....

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rer vitiates everything and the appellant cannot claim any benefit on the basis of licences which were cancelled ab initio by the competent authority. He also relied on many decided cases with the specific reference on Tribunal s decision in Pee Jay International vs. CC, Amritsar - 2014 (312) ELT 464 (Tri. Del.) and decision of Punjab & Haryana High Court in Friends Trading Co. vs. Union of India - 2011 (267) ELT 33 (P&H). 7. We have heard both the sides carefully and examine the appeal .....

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ith the knowledge of such fraud no benefit under the licence can be recognised in favour of such transferee. It was also observed by the Tribunal that such a knowledge of fraud would be a question of fact, even if there is no direct evidence for demonstrating such knowledge about the fraud, inference can be drawn on the basis of reliable material which is strong enough to attribute the knowledge of fraud. 8. Thus, we are not to decide the wider issue of the effect of subsequent cancellation of s .....

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t had knowledge of licence having been obtained by the transferers fraudulently is based on three fold observations: (a) Low premium has been paid and that too in gold; (b) Debit notes did not mention premium rate and there is no endorsement of receipt by the consignees for receipt of gold; and (c) There is no evidence 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 o .....

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nal 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% respective .....

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ot mentioning the premium rate and not signed by the consignee the appellants explained the position that the transactions are through their commission agent and all the sales invoices of gold towards commission has been correctly captured in all records and admitted by the commission agent as well as the person with whom the commission agent dealt with. Further, the appellants filed a detailed Chartered Accountant certificate on 15.07.2011 as per the order dated 18.05.2011 of the Tribunal. In t .....

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commission agent had made any enquiry about the transferers. We find that the REP licences transferred were genuine documents issued by the competent authority. Even if the appellants had made any enquiry with the DGFT themselves as the issuing authority at the time of purchase or utilisation for import of gold, there is no way the validity of REP licence could have been put to question. This is clear from the fact that the fraudulent submission of forged bank document/ shipping bills by the or .....

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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. Limit .....

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ce 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 imported, they were imported under a valid licence and therefore it is not possible to say that the goods imported where those prohibited or .....

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entation or fraud does not make it non est as a result of its cancellation. As per Section 3 of the Import and Export Act misrepresentation or fraud renders a licence voidable. When the goods were imported and cleared before such cancellation, contravention of import cannot be alleged. 13. Ld. AR relied on the decision of Honble Punjab & Haryana High Court in Friends Trading Co. vs. Union of India - 2011 (267) ELT 33 (P&H) to contend that the appellant cannot escape the liability in vie .....

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