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TMI Blog2020 (2) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Custom Appeal No. 52009 of 2018, 52197 of 2018, 52272 of 2018, 52274 of 2018, 52406 of 2018, 52430 of 2018, 52507 of 2018, 52537 of 2018, 52667 of 2018, 52668 of 2018, 52696 of 2018, 52747 of 2018, 52748 of 2018, 53082 of 2018, 53157 of 2018, 53159 of 2018, 53238 of 2018, 53406 of 2018, 53423 of 2018, 53424 of 2018, 53425 of 2018 with C/Cross/51310/2018, 53426 of 2018, 53427 of 2018, 53428 of 2018, 53461 of 2018, 53462 of 2018, 53658 of 2018, 53670 of 2018, 50459 of 2019, 52151 of 2019 M/s Mercedes Benz India Private Limited, M/s O.A. Associates, Pashupati Acrylon Limited, M/s Wadhwani Commodities Trading Pvt. Ltd., M/s Ramniklal S. Gosalia & Co., Jaquar & Company Private Limited, M/s M. Jiju Silk Mills, M/s K.J.V. Alloys Conductors Pvt. Ltd., M/s BNS Import Export, Shri S.J Patel, Shri Prabir Ghosh, M/s Aroma Chemical Agencies India Pvt. Ltd., Visakha Wire Ropes Limited, Shri Paresh K. Daftary, Shri Jyoti Biswas, Shri Tushar Umarshi Kothari, M/s K.J. Inc., M/s Park Impex, M/s Icon Fibers & Fabrics Pvt. Ltd., M/s Adya Incorporation, Shri Shammi Chanana Versus Commissioner of Customs, Delhi, Additional Director General (Adjudication), New Delhi, Directorate of Revenue (Intellig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 C/52537/2018 K J V Alloys Conductors Pvt Ltd vs C.C PATPARGANJ 07.01.2016 (Elite Traders) 16.04.2018 (PPG) Aug-Sept. 2011 29.14 L 29.14 L DEPB(3) Yes Nagpur ICD 8 C/52667/2018 BNS Import Export vs CC New Delhi (ICD TKD ) 19.03.2015 (Perfect Export) 06.07.2018 (PPG) Feb-Mar. 2010 4.52 L 4.52 L DEPB(1) Yes Kandla 9 C/52668/2018 S J Patel vs C C New Delhi (ICD TKD) 05.10.2015 01.06.2018 (PPG) 2009 Penalty 67 L (under section 114AA) NA N.A. N.A The Appellant is properitor of the firm namely M/s BNS Export Import in whose name DFIA was issued based on fake/forged/fabricated export documents. The DFIA has been cancelled ab initio by DGFT. 10 C/52696/2018 Ramnikal S Gosalia & Co vs C. C PATPARGANJ 26.11.2015 (Royal Enternational) 25.07.2018 (PPG) Mar-May 2011 42.39 L 42.39 L DEPB(9) Yes Nhava Sheva Appellants-Importers bought forged TRA alongwith DEPBs issued based on forged/fake export documents. Duty exemption against such TRAs and DEPB merits rejection as none can be permitted to capitalize gain out of fraudulent activity and fake/forged/fabricated documents . 11 C/52747/2018 Mercedes Benz I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n use of TRAs for imprt clearnces whereas TRAs were not issued in these cases. 19 C/53424/2018 C. C . Patparganj NJ vs Sh. Paresh Daftary 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 67 lacs NA No 20 C/53425/2018 C. C . Patparganj NJ vs Sh. Jyoti Biswas 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 67 lacs NA No 21 C/53426/2018 C. C . Patparganj NJ vs Sh Tushar Umarshi kothari 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 67 lacs NA No 22 C/53427/2018 C. C . Patparganj NJ vs M/s Wadhwani Commodities Trading 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 66.07 L NA No 23 C/53428/2018 C. C . Patparganj NJ vs Sh.Prabir Ghosh 05.10.2015 (BNS Import & Export) 01.06.2018 (PPG) Sep2009 to September 2011 Penalties u/s 114AA 67 lacs NA No 24 C/52151/2019 Sh. Prabir Ghosh vs C.C.,PATPARGA NJ DRI Kolkata Zonal Unit(Indian International) dated 18/02/2016. corrigendum dated 08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular port of export. The duty credit is available for exports at specified rate for raw material, intermediates, components, parts and packing material etc. In terms of the Policy, DEPB scrips/license are freely transferrable and such scrips are permitted to be utilised for duty free import at the specified port, which is the port of export. If the DEPB scrips are required to be utilised at other ports than the port of export, it is allowed under Telegraphic Release Advise (TRA) facility as per the Notification No. 97/2009-Cus. dated 11 September, 2009 as amended. In this scheme, the importers are entitled to discharge the duty liability through debits against the DEPB scrips, under the notification as referred above. 4.2 Focus Product Scheme (FPS): This scheme, in terms of Chapter 3.15.1 of FTP, 2009-2015, has been framed with an objective of promoting the export products which have high export intensity/employment potential. The scheme is contained at paragraph 3.15.2 of the EXIM policy for export products listed in Table (1) of Appendix-37D of Handbook of Procedures, Vol.I to all countries including Special Economic Zone units, who shall be entitled for duty credit scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er para 3.13.3; (b) DGFT has issued Trade Notice No. 8/AM-12 dated 27.3.2012 for operationalisation of para 3.11.3 of HPB, Vol-I, 2009-2014 which is as under: "Duty credit scrip including a split shall be issued with a single port of registration which shall be port of export. After the issue of duty credit scrip but before registration with customs, the applicant can change the port of registration from RA (Regional Authority) concerned. Before registration, authorities shall verify the genuineness of duty credit script from the RA concerned only EDI system of message exchange put in place". 4.6 However, an applicant may use duty credit scrip for imports from other ports including ICD/LCS etc. after obtaining Transfer Release Advise (TRA) from the authorities at the port of registration. The above procedure pertaining to change of registration is applicable only in respect of EDI enabled ports. In case of export through non-EDI ports, port of registration cannot be changed and shall be the port of export only. The RA/licensing authorities can only entertain a request for port for change import in terms of para 3.11.3 of HPB procedures, subject to following conditions: (i) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, it is computerised and through system controlled message exchange between the port of export and port of import. In case of non-EDI ports, TRA is issued manually as per the procedure prescribed in the various circulars referred to above. The holder of the DEPB scrip or other entitled scrips, is required to make an application before the competent authority at port of registration (which is the port of export) that is required to follow the guidelines for issue of the TRA to other Customs Stations/Ports/Airports. The TRA is required to be produced by the importer before the Assistant Commissioner/Deputy Commissioner of the Customs station/port etc who after verification and confirmation permits the utilisation of such scrip/licenses for duty free import. 4.9 The department of Revenue issued a Notification No. 97/2009-Cus. dated 11 September, 2009 to operationalise the duty free entitlement passbook scheme. The notification has specified, at clause-IV, places of port of registration (port of export) in which Ghojadanga is also mentioned. The Notification authorises the Commissioner of Customs to permit export from other than the ports mentioned at Sr. No. (IV) of the notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t." 5. The Directorate of Revenue Intelligence, Kolkata, Zonal Unit (hereinafter referred to as "DRI KZU") received information about a syndicate of unscrupulous persons based in West Bengal who in association with some exporters/brokers of licenses/scrips from other parts of the country were involved in preparing fake export documents on the basis which they were getting various duty credit licenses, such as, DEPB/FPS/DFIA/VKGUY etc. from different offices of Director General of Foreign Trade (DGFT). The intelligence further indicated that in such fake export documents, exports were being shown through one of the non-EDI Land Customs Stations (LCS) namely, Ghojadanga LCS under the jurisdiction of the Commissionerate of Customs (Preventive), West Bengal, which was without the facility of Electronic Data Transfer (EDI) and followed manual customs processes. As per intelligence, two persons namely, Paresh Daftary of Kolkata and Jyoti Biswas of Maslandpur (a place near Ghojadanga LCS) were the mastermind of these fraudulent exports and had illegally obtained duty credit licenses for various exporters involving customs duty exemptions amounting to over Rs. 20 crores. It was also gathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in one such export indicating the possibility of export proceed realisation through non-banking channel as no exports had actually taken place. These licenses, which were procured on fake and forged export documents, were utilised at various ports for the clearance of duty free import by the various importers. But in most of these cases the imports were made after availing the TRA facility, which were also forged as it emerged from the investigations by the DRI. In cases where TRA was not required, the port of export was got changed by the office of DGFT contrary to the Foreign Trade Policy and procedure. 8. The DRI also took up the matter with the concerned DGFT for cancellation of fraudulently obtained licenses. The licenses have been cancelled by the DGFT in most of the cases, ab initio, as per the documents filed by the learned Departmental Representative, copies of which were made available to the learned Advocates appearing on behalf of the parties. 9. Paresh K. Daftary in his statement dated 16.1.2012 stated that: (i) He was aware of the search on 22.9.2011 conducted at his shop "Zenith Shoppe" and had also seen the copy of the seizure list which was received from throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kothari who used to obtain import licenses from DGFT on the basis of such fake export documents provided by him. Tushar Kothari was aware of the fact that such licenses were fraudulently obtained from DGFT on the basis of fake export documents through Md. Fahim Zada; (viii) That he arranged the fake export document through his agent at Ghjojadanga LCS/Petrapole LCS through Jyoti Biswas, who used to prepare fake export documents including invoices, packing lists, bills of export etc and got them fraudulently stamped and signed as if by the Customs Officers of the Ghojadanga LCS. Thereafter, to use forged license verification/ endorsement and also release advices, he used to send these documents to Tushar Kothari, who arranged for the registration of the said licenses at the port of importation mostly Nhava Sheva, and Patparganj ICS. The letter for confirmation of TRA was being issued to Petropole LCS and then sent by Fax along with the confirmation copy of TRA. The confirmation letter of TRA Verification used to be prepared by Jyoti Biswas in fraudulent manner in the name of Customs Officer by using fake seal and signature and then sent to the port of import by Fax from STD booth. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and used to facilitate his illegal activity of export/import through Ghojadanga/Petrapole LCS. He also accepted that he had dealt with various types of licenses, namely DEPB/DFIA etc. and also arranged exports of M/s Satyam Overseas (prop. Kamal Sharma), M/s Kabir Impex. (Prop Rajeev Moolchand Sharma) and M/s Sai international (prop. Devendra Sharma) and Paresh Daftary used to process the export document through his associates who also knew firm Khodiar Exim, which according to him, was raised by Paresh Daftary. 13. In his statement, Prabir Bhaduri, Authorised Signatory of CHA firm M/s KCPJ International Agency accepted that he used to handle the export documents on behalf of the various exporters at the Land Customs Stations in West Bengal and had handled the export related activity of M/s Kabir Impex also. 14. Thus, it was clear from the above narration that Paresh Daftary and Jyoti Biswas used to facilitate fraudulent export at Ghojdanga LCS so as to obtain licenses from the various offices of DGFT and traded the same which were utilised by the various importers as indicated above. 15. Against this backdrop, various show cause notices were issued to the importers and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 775-CESTAT-Chennai; (l) CC, Visakhapatnam Vs. Acalmar Oils & Fats Ltd. - 2018 (8) TMI 1533; (m) Unique Trading Company Vs. CC - 2018-TIOL-3772-CESTAT-MUM. (vi) It is held by the Supreme Court/High Court/Tribunal that once the licence is validly issued by the DGFT, then the import cannot be rendered illegal even if the license has been subsequently cancelled, if there is no fraud or collusion on the part of the buyer of the license. (vii) Duty cannot be demanded from the importers, even if the DEPB scrips are forged as that will not make entire transaction void ab intito as at best it would be voidable. The decision of Punjab & Haryana High Court in Friends Trading Company Vs. Commissioner of Customs, Amritsar - 2006 (202) ELT 611 (Tri.-Del.) would not be applicable to the facts and circumstances of the case. On the other hand, reliance was placed on the decision in Pee Jay International Vs. Commissioner of Customs - 2016-TIOL-2136-HC-P&H-CUS and M/s Khaas Textiles Pvt. Ltd. Vs. Additional Director General (Adj.), DRI, New Delhi - 2019-VIL-290-CESTAT-DEL-CU. Reliance was also placed on the decision in Commissioner of Customs, Amritsar Vs. Patiala Casting Pvt. Ltd. - 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir brokers; (xii) In Mercedes Benz Appeal the broker, SJ Impex was supposed to arrange for TRAs from the port of export in terms of the sales contract. Both the DEPB scrips and TRA were validly procured and handed over to them by the broker. (xiii) The appellants, therefore had no reason to indulge in forgery of TRA as the DEPB scrips sold to them were valid and purchased on payment of valid consideration. Therefore, the appellants have not committed any forgery in purchasing the scrips on a belief that they had been issued by the DGFT. Further, TRAs were merely a procedural formality and the benefit of duty free import cannot be withdrawn by the DGFT or Customs Department. As per settled law, no substantive benefit can be denied failure to follow the procedural guidelines. Reliance was placed on the decision in Mangalore Chemicals & Fertilisers Ltd. Vs. Deputy Commissioner - 1991 (55) ELT 437 (SC). The appellants who had purchased the DEPB license/scrips on valuable consideration cannot be asked to forego the benefit under DEPB scrips merely on account of forgery of TRA by the exporter/broker of the license. There is no finding in the impugned order against the appellant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where duty has not been paid or short paid by reason of collusion or wilful mis-statement or suppression of fact, which is not the case in the present proceedings. Therefore, the demand against the appellant is not sustainable. This apart they were bona fide purchaser and had not indulged in any activity of manipulation of port of export/import. 18. Learned Departmental Representative on the other hand, has supported the impugned order on the basis of finding contained therein. In addition, the following decisions were relied upon in support of the impugned order: (1) Eastern Silk Indus. Ltd. Vs. CC - 2016 (336) ELT 141 (Tri.-Kolkata); (2) Friends Trading Co. Vs. Union of India - 2011 (267) ELT 33 (P&H); (3) Friends Trading Co. Vs. Commissioner of Customs - 2011 (267) ELT 67 (Tri.-Del.); (4) Commissioner of Customs (Preventive) Vs. Aafloat Textiles (I) P. Ltd. - 2009 (235) ELT 587 (SC); (5) K.I. International Ltd. Vs. Commissioner of Customs, Chennai - 2012 (282) ELT 67 (Tri.- Chennai); (6) Commissioner of Customs, Hyderabad Vs. Pennar Industries Ltd. - 2015 (322) ELT 402 (SC); (7) Apar Ltd. Vs. Commissioner of Customs (Export), Mumbai - 2012 (276) ELT 534 (Tri.-M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forged the export documents but had also forged TRA by forging the signatures of Custom officers posted at Ghojadanga LCS. 21. Reliance placed by learned Counsel for the appellants on M/s Khaas Textile Pvt. Ltd. (supra) is not correct as in the licenses which were utilized in that case were under the FPS, wherein there is no need of issuance TRA. 22. Learned Departmental Representative also submitted copy of letter dated 24.12.2019 addressed to Registrar, CESTAT, R.K. Puram, wherein it has been stated that out of 216 licenses involved in these cases, 201 have been cancelled by the various offices of DGFT and the remaining are in the process of being cancelled. As the licenses have been cancelled ab initio, the entire clearance effected on such licenses become void and, therefore, the appellant is required to pay the customs duty while clearing these consignments along with interest and penalty. 23. With regard to the Departmental Appeals, the contention of the learned Departmental Representative is that the adjudicating authority has erroneously held the TRA were involved in import clearance in those cases but factually the issue was regarding utilisation of FPS scheme, for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh Daftary, Prabir Ghosh and Jyoti Biswas. These three persons circumvented all the laws, be it Customs, Foreign Trade or Exim Policy. They attempted to hoodwink all the government agencies and committed a fraud, which could only be detected, subsequently, in the investigation by the DRI. The appellants have not asserted that the exports had not been effect for they only contend that they were not a party to the fraudulent activities. The Adjudicating Authority has taken great pains to evaluate the entire sequence of events. We have very carefully examined the findings. They are based on evidence produced. We see no good reason to take a different view. 27. It is, therefore, necessary to examine the cases which have been advanced by the learned Counsel on behalf of the appellants. 28. In East India Commercial Co. Ltd., the Supreme Court noticed that the goods were imported under a valid license and, therefore, it was not possible to hold that the goods imported were prohibited or restricted under Customs Act. This case pertained to Sea Customs Act, 1872, while the present case is under the Customs Act, 1962. The relevant paragraph of the judgement is reproduced as under : "35. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore it is not possible to say that the goods imported were those prohibited or restricted by or under Chapter IV of the Act within the meaning of Clause (8) of Section 167 of the Sea Customs Act. 36.It follows that on the assumption that the allegations made in the notice are true, the tribunal has no jurisdiction to proceed with the inquiry under Section 167(8) of the Sea Customs Act. 29. It is manifestedly clear that the case at hand is distinguishable since there was no issue of TRA and the involvement of transferee had not been brought on record in the investigation. Thus, this case would not help the appellants. 30. In Sneha Sales Corporation, the matter was remanded to the Tribunal to decide whether the goods were liable for confiscation under Section 111(m) of the Act. Paragraph 7 of the judgement that is reproduced as under: "7. Shri Choudhary has also urged that although the Collector had also ordered confiscation of the goods under Section 111(p) of the Act for the reason that there was violation of the provisions of Section 11C of the Act, the Tribunal, while allowing the appeal and setting aside the order of the Collector, has not dealt with the part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluable consideration, is entitled to the goods free from any right in the original seller to stop them, and thus his position is better than that of the original buyer, same is a position of sales in market-overt. Without attempting to enumerate the various rights which are assignable, either by the express act of the parties, or by the operation of law, we may observe, generally, the maxim assignatus utitur jure auctoris, i.e. an assignee is clothed with the rights of his assignor is subject to many restrictions, shortly enumerated hereinbelow. (See Broom's Legal Maxiims, tenth Edition, p. 302) Assignatus utitur jure auctoris (Hal. Max, p.14) - An Assignee is clothed with the rights of his assignor. "This maxim applies generally to all property, real and personal, and refers to assigns by act of parties, as where the assignment is by deed; and to assigns by operation of law, as in the case of an executor. All rights of the assignor in the thing assigned must pass from him to the assignee by virtue of the assignment, for duo non possunt in solido unam rem possidere. It should be observed, also that the thing assigned takes with it all the liabilities attached to it in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the person who has committed the fraud, and who endeavours to avail himself of it, the contract shall be considered as null and void. But there is no case in which a fraud intended by one man shall overturn a fair and bona fide contract between two others. Even as between the parties themselves we must not forget figurative language of Lord Chief Justice Wilmot, who said that "that statute law is like a tyrant; where he comes he makes all void; but a common law is like a nursing father, and makes void only that part where the fault is, and preserves the rest." On the above canvas, having examined the well settled, established and well recognised concept of law that the effect of fraud is not to render the transaction void ab initio but renders it voidable at the instance of the party defrauded and transaction continues valid until the party defrauded has decided to avoid it. 37. Alternatively, let us consider it from another angle assuming that licence comes to an end upon it is suspension and/or cancellation, in catena of cases, it is laid down that the date of import of goods would be the date on which the Bill of Entry was presented under section 46. This legal positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to them. It is also worth noticing that the assessee-respondent was never issued any show cause notice before cancelling the DEPB which was obtained by M/s. Parker Industries and obviously the notice was also to be issued to them alone. We are further of the view that notice under Section 28 of the Customs Act could not be issued to the assessee-respondent because a period of six months stipulated by Section 28 of the Customs Act stood already expired and the rights of the parties had been crystallized. The revenue cannot avail the extended period because the assessee-respondent could not be accused of mis-representation, collusion or suppression of facts within the meaning of proviso postulated by Section 28 of the Customs Act. Therefore, there is no merit in this appeal." 35. All other judgments which have been cited by the learned Counsel are on the issue that the transferee of the license will not be responsible for the payment of duty, if they had purchased the license on bonafide belief that they were genuine. The issue of forged TRA was not examined by the Court. These cases would not help the appellants. 36. In Sumit Wool Processors & others, the Tribunal held that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty if the same is claimed by fraudulent act of exports. The relevant paragraph of the order is reproduced as under: "8. The ratio laid by the Apex Court in the above case law is squarely applicable to the facts involved in the present proceedings in as much as the conditions contained in exemption Notification No. 40/2006-Cus., dated 1-5-2006 have to be fulfilled to the satisfaction of the Customs authorities and if these conditions are not satisfied then action can be taken by the Customs authority for demanding duty even if Licensing authority has not taken any action with respect to DFIA Licenses. One of the conditions of the exemption Notification No. 40/2006-Cus., dated 1-5-2006, read with EXIM Policy, is that duty free yarn import is permissible only for those goods what were exported by the appellants. As the said exports were not 100% mulberry natural silk yarn, as prescribed under SION J-123, but Noil yarn and that too along with cotton, therefore, the import of goods other than the material exported cannot be held to be proper and action for demanding Customs duty against the appellants is justified even if no action is taken by DGFT for cancellation of impugned DFIA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had purchased bona fide for valuable consideration and utilized it for availing of the credit against its own import, stands in the same footing as a driving licence of the driver of the vehicle as it stood in the said case. Therefore, this is an important question of law that whether in the absence of any proof of collusion or fraud or absence of bona fide on the part of the appellant, the appellant could be deprived of the credit of the DEPB licences/scrips purchased by him bona fide for valuable consideration since found to be forged. 4. The DEPB licence/scrip is admittedly a negotiable one and is available in the market. Anyone can purchase it from the market and avail of the credit out of it. This was so done by the appellant. But ultimately it was found that the said DEPB licence/scrips were forged. These facts are 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit under Rule 57A of the Central Excise Rules, 1944, and made willfully wrong declaration to the licensing authority to obtain the endorsement of transferability of the same while transferring the licenses to the appellant herein. In view thereof, the extended period of limitation would be available to the authorities for the purpose of claiming the duty even against the appellant herein, who is the transferee of the licence in question." 9.2 In view of the above observations and settled proposition of law, it is held that demands against the appellants are not time barred. 10. So far as the argument of Shri S.K. Mehta (Advocate), with respect to on Section 28AAA(1) of the Customs Act is concerned, it is relevant to reproduce this Section as follows : "Section [28AAA. Recovery of duties in certain cases. - (1) Where an instrument issued to a person has been obtained by him by means of - (a) Collusion; or (b) Willful misstatement; or (c) Suppression of facts, For the purposes of this Act or the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992), by such person or his agent or employee and such instrument is utilized under the provisions of this Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll of Entry dated 24-11-2000. It availed exemption from payment of Customs Duty under notification dated 7-4-1997 under Section 25 of the Customs Act, 1962 against DEPB Scrip dated 14-11-2000. Finding that the said Scrip was procured fraudulently by the predecessor of the appellant, Scrip obtained by the appellant was held to be void ab initio. Accordingly, demand of duty was raised against the appellant vide Order-in-Original dated 4-10-2005. The said order was affirmed in appeal and has been further affirmed on second appeal by the Tribunal. The Tribunal rejected the contention that on the date of cancellation of DEPB Scrip i.e. 2-1-2003, the appellant having already taken the benefit, the same could not be withdrawn. Further contention that limitation for taking action under Section 28 of the Act had expired and the extended limitation under the proviso could not be invoked in absence of misstatement or suppression being attributed to the appellant was also rejected. The Tribunal followed the judgment of this Court in the case of the assessee itself in respect of different DEPB Scrips in Friends Trading Co. and Another v. Union of India - 2010 (254) E.L.T. 652, which in turn ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that which is the right of another. The buyer according to the maxim has to be cautious, as the risk is his and not that of the seller. 27. Whether the buyer had made any enquiry as to the genuineness of the license within his special 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 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, obviously fraud was involved and that was sufficient to extend the period of limitation." 42. The Supreme Court also held that in case forged license is purchased from the market, the burden of proof remains with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of DEPB scrips not acquired legitimately. 10.4 The observations of the former Lord Chief Justice of England, Sir Edward Coke, more than three centuries ago, that "fraud avoids all judicial acts, ecclesiastical or temporal", noticed by the Supreme Court in S.P. Chengalvaraya Naidu v. Jagannath, AIR 1994 SC 853, are apt for the instant case. The Apex Court has also observed that an act of deliberate deception with the design of securing something by taking unfair advantage of another is a "fraud". "Fraud" is a cheating intended to get an advantage. A person whose case is based on falsehood has no right to seek relief in equity. In Commissioner of Customs v. Essar Oil Ltd., (2004) 11 SCC 364 = 2004 (172) E.L.T. 433 (S.C.), their Lordships of the Supreme Court have observed that it is a fraud in law if a party makes representations, which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. Being the ultimate beneficiaries of the fake TRAs, the importer Appellants were not innocent. Claim at the threshold was based on fake TRAs. Therefore, Revenue has rightly invoked extended period under Section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oose to challenge that authority's order. 9.2 We have also examined the evidence gathered by DRI, which includes (i) statements (recorded under Section 108 of the Customs Act) of the persons who played various roles in forging SBs and BCERs and obtaining DEPB licences mostly in the name of non-existent firms from DGFT's office on the basis of the forged documents, (ii) documents such as DEPBs, SBs, BCERs and application forms for DEPBs collected from DGFT's office, (iii) customs verification reports regarding SBs and banks' verification reports regarding BCERs, (iv) statements (under Section 108 ibid) of customs officers who disowned the signatures appearing purportedly as theirs on the SBs, (v) statement (under Section 108 ibid) of the Export Manager of M/s. APL India Pvt. Ltd. who stated that they had not handled the cargo mentioned in the SBs, and (vi) orders of the Deputy DGFT, Mumbai cancelling the DEPB licences ab initio. It is significant to note that the appellant has not assailed the above evidence. The appellant has virtually acquiesced in the factual position that the DEPB licences used for duty-free clearance of the goods imported by them had been obtained by the orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of f.o.b. value of exports made in freely convertible currency. The credit shall be available against such export products and at such rate as may be specified by the Director General of Foreign Trade by a Public Notice issued in this behalf. Any item except those appearing in the Negative List of Imports shall be allowed for import without payment of basic customs duty, special duty of customs as well as additional duty of customs, against the credit under a Duty Entitlement Pass Book (DEPB). The holder of Duty Entitlement Pass Book (DEPB) shall have the option to pay additional customs duty, if any, in cash as well." [underlining supplied] Para 7.29 provided that "DEPB may be issued on (a) post-export basis and (b) pre-export basis". Para 7.30 explained that "DEPB on post-export basis shall be granted against exports already made". Para 7.32 provided as follows:- "The DEPB on post-export basis and/or the items imported against it are freely transferable. The transfer of DEPB shall, however, be for import at the port specified in the DEPB which shall be the port from where exports have been made". In the present case, "DEPBs on post-export basis" were obtained from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferor should give a formal letter to the transferee, giving full particulars regarding number, date and value of the licence transferred and the name and address of the transferee, and complete description of the import items for which the licence is transferred .............." [underlining supplied] Now the relevant ruling of the Hon'ble High Court in Taparia Overseas is reproduced below : - "......the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions governed by common law and not by provisions of any statute". [underlining added] The transfer of REP licences in the case of Taparia Overseas was governed by common law as observed by the Hon'ble High Court and by ordinary law as per para 226 of the Import & Export Policy ibid. Indisputably, there is total harmony between the Policy provision and the court's ruling. A closer look at para 226 of the Policy would reveal as to why the transfer of REP licence was said to be "governed by the ordinary law" - the licence was freely transferable as in an ordinary mercantile transaction without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence no credit of any duty had accrued to the allottees of the DEPBs. Even if it is assumed that the DEPBs, though issued without actual accrual of duty credit to the allottees, vested the benefit in them artificially, the appellant cannot legitimately claim the benefit after its retrospective cancellation by the licensing authority which, as per the High Court's ruling in Golden Tools International, has the power under Section 9(4) of the FT (D&R) Act to cancel DEPB "credit" already "utilized". In our view, the distinction drawn by the learned counsel between a forged DEPB and a DEPB issued on the basis of forged documents is of no significance where the DEPB of the latter category is cancelled with retrospective effect by the authority which issued it. Both are incapable of vesting any credit of duty in the DEPB-holder so as to be used for purposes of Notification No. 34/97-Cus. 9.31 The cases of Hico Enterprises and Ajay Kumar & Co. decided by the Supreme Court are also distinguishable. The relevant paragraphs of the two judgments are quoted below: Hico Enterprises: - "It is seen that in view of the fact that in the show cause notice issued on 4-3-1999, there was no refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e penalty on De-Nocil under Section 112 of the Customs Act in lieu of confiscation" as "the goods imported by De-Nocil were not available for confiscation". A penalty under Section 112 of the Customs Act in lieu of confiscation is unheard of in law though such penalty could be imposed on an importer who is found to have rendered the goods imported by him liable to confiscation under Section 111 of the Act. This is the reason why we refrain from imposing alternative penalty under Section 112 of the Customs Act on De-Nocil. 14.3 Where any penalty under Section 112 of the Customs Act is not imposed on De-Nocil regarded as the main offender by the department in this case, there can be no penalty under the same provision of law on P. K. Srinivas on the ground of abetment. In the result, the penalty on P.K. Srinivas is vacated and his appeal is allowed." 45. In Munjal Showa Ltd. Vs. Commissioner of Customs & Central Excise (Delhi-IV), Faridabad - 2009 (246) ELT 18 P&H also decided an issue regarding the liabilities of transferee towards Customs duty. Paragraphs 18, 19 and 21 are reproduced as under: "18. Coming to the admitted facts of the present case, the appellant availed exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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