TMI Blog2022 (9) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... there is a presumption that the officer endorsing the scrips to be transferable would and should have satisfied himself that the conditions precedent to issuance of the scrips are in order. The endorsement of transferability was made only after such satisfaction by the officer, and the fatal error, in this case, has transpired at this stage, and not at the instance of the petitioner - Separately, the original vendor had forged the bank realisation certificates. In such an event, the fraud is attributable to the original vendor only and not to the petitioner who is a subsequent purchaser. In fact, the impugned show cause notices, in conclusion, attribute fraud only to the original vendor and not to the importer. There is an unambiguous findings of fact to the effect that the appellants in that case (the subsequent purchasers) were engaged in dubious practices and secret arrangements and the nexus between those entities and the fraudulent acts have been clearly established by the revenue in that case. This is absent in this case and in fact, there is not even an allegation of collusion, willful misstatement or suppression of facts in the present case. In the instant case, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in favour of the petitioner on 11.01.2018. With this, W.P.No.34936 of 2007 is rendered infructuous and the same is dismissed as such. No appeal appears to have been filed by the revenue challenging the aforesaid order and hence the same is stated to have attained finality. 4. As far as remaining WP.Nos.20056, 24937, 24938 of 2007 29866 of 2008 are concerned, the relevant facts necessary to consider and decide the issues are as follows: (i) The petitioner had purchased duty entitlement passbooks (DEPB) from various entities from open market. The purchase was through its customs house agents. (ii) The purchase was bonafide, in the sense that the parties are unrelated and there is no allegation in regard to there being any connection whatsoever between the petitioner and the vendor from whom scrips were purchased. (iii) The petitioner utilised the scrips and engaged in exports and no challenge has been raised nor any response sought in regard to those transactions of export even as per counter filed by the respondents. (iv) While this is so, R1 appears to have come to know that the scrips have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave all been passed after the expiry of twelve months. Thus, an order passed as against an invalid scrip would itself lose all force. 7. That apart, the show cause notices have been issued long past the relevant date, being the date of importation by the petitioner. An assessment is required to be made two years from the relevant date, that is, the date of the transaction in question. An extended period of five years is provided in those cases where the conditions set out in the proviso to Section 28A (1) are satisfied, being suppression, collusion or misrepresentation. In the present case, there is no allegation to this effect and hence, the impugned proceedings are vitiated on this ground as well. 8. Per contra, Mr.V.Chandrasekaran, learned Senior Panel Counsel appearing for R1 and Mrs.R.Hemlatha, learned Senior Standing Counsel appearing for R2 would defend the impugned orders pointing out that the factum of fraud and collusion in this case is unquestionable. The impugned orders in original set out clearly the instances of fraud perpetrated by the exporter, that is, the original vendor and hence the proviso condition, according to them, has been satisfied in full. 9. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that once an application is received for grant of credit under DEPB, a scrip is initially issued as a non-transferable endorsement. This is to ensure that the authorities satisfy themselves that the release of the sales proceeds have, in fact, been received. 14.It is only upon confirmation of receipt of export realisations that the scrip shall be endorsed to be non-transferable. This is what has transpired in the present case as well. Admittedly and undoubtedly, in my considered view, there is a presumption that the officer endorsing the scrips to be transferable would and should have satisfied himself that the conditions precedent to issuance of the scrips are in order. The endorsement of transferability was made only after such satisfaction by the officer, and the fatal error, in this case, has transpired at this stage, and not at the instance of the petitioner. 15. Separately, the original vendor had forged the bank realisation certificates. In such an event, the fraud is attributable to the original vendor only and not to the petitioner who is a subsequent purchaser. In fact, the impugned show cause notices, in conclusion, attribute fraud only to the original vendor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of facts is made only qua the original vendor. Thus, the proceedings are, in my view, barred by limitation. 19. That apart, to my mind, this is a case where the Department has missed the bus. The presumption which is apparent from a reading of Article 7.38 of the Handbook would make it clear that there is a burden cast upon the respondent to fully apply his mind and satisfy himself prior to issuance or endorsing scrips as transferable. If there is an error committed by the authority at that juncture, then the gravity and the burden of that error has to be borne by the Department and cannot be passed on to a subsequent purchaser. In fact, the SCNs issued reveal that action has also been proposed as against named officials of the Customs Department for their role in colluding with the original vendor in the forgery of the BRCs. 20. Finally, the period of scrips is long gone and thus there is absolutely no justification for the Department to retrospectively cancel such non-existent scrips. In such an event, the question that would arise is as to what really, the Department seeks to cancel, as the asset/scrip has expired and is no longer in existence. 21. Reliance is pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 (11) SCC 364) 24. The first judgment in the case of Aafloat Textiles (supra) authored by Justice Arijit Pasayat (as he then was) confirms an order passed by the Customs, Excise and Service Taxes Appellate Tribunal (Mumbai) (CESTAT). The challenge was on the ground that the scrips themselves stood vitiated since they had been forged. Thus the very substratum of the transaction fails and in such a case, the benefit of extended limitation must be available to the Department. 25. The Bench examined the question of fraud, noticing that fraud constitutes an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a cheating intended to get an advantage. Fraud vitiates every solemn act. After some deliberation, the Bench noted that caveat emptor qui ignorare non debuitquod jus alienum emit, cautioning that it is for the purchaser to beware of what he is purchasing and to ensure that the title of what he has purchased, is solid. 26. The arguments advanced are two fold in the context of this judgment. Firstly, that fraud vitiates the transaction at the inception and in such a situation, it cannot be said that the extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle to the holder in due course for valuable consideration. At this juncture, we may profitably refer to the observations of the Supreme Court made in the case of CCE v. Decent Dyeing Co., reported in (1990) 1 SCC 180 wherein, the Supreme Court held that it would be intolerable if the purchasers were required to ascertain whether excise duty had already been paid as they had no means of knowing it. It was further pointed out that duty of excise is primarily a duty levied on a manufacturer or purchaser in respect of a commodity manufactured or produced. As pointed out by a Division Bench of this Court in the case of Commissioner of Central Excise v. D.P. Singh reported in 2011 (270) E.L.T. 321, the judgment of the Supreme Court in the case of New India Assurance Company (supra), was distinguished, being one relating to a forged document which renders a document null and void, and as such, has no application to this type of cases. Similarly, reliance over the judgment of the Supreme Court in the case of Commissioner of Customs (Preventive) v. Aafloat Textiles (I) P. Ltd. reported in 2009 (235) E.L.T. 587, cannot be supported as Afloat case is one pertaining to a forged document but n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... steps as provided in Rule 7(2) is an essential condition of availing the credit. The distinction sought to be made by Mr. Parikh that the period involved therein related to June, 2003 is not tenable because sub-rule (e) of Rule 7 was introduced even earlier with effect from April 1, 2003. 48. The next question is whether demand of reversal is barred by the period of limitation. In our opinion, in view of our above finding that if the original document is issued even by practising fraud, a holder in due course for valuable consideration unless shown to be a party to a fraud, cannot be proceeded with by taking aid of a larger period of limitation as indicated in Section 11A(1) of the Act. It is now settled law that Section 11A(1) is applicable when there is positive evasion of duty and mere failure to pay duty does not render larger period applicable. In the case before us, it is not the case of the Revenue that the transferees were party to any fraud and therefore, the Revenue cannot rely upon a larger period of limitation. Our aforesaid view finds support from the following decisions of the Supreme Court: (i) CCE v. Chemphar Drugs Liniments, reported in 1989 (40) E.L.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraud as the appellants were not even alleged to be parties to the fraud, and this is a question which goes to the root of the jurisdiction, and thus, the error committed by the Tribunal amounted to substantial question of law. The decision relied upon by the Revenue, therefore, cannot have any application to the facts of the present case. 30. To summarize, the test laid out was whether the subsequent purchaser had been found to have played a part in the original transaction. In the instant case, the scrip had been obtained on the strength of a forged Bank Realisation Certificate (BRC). However, while the scrip itself stands vitiated, the Department had clearly been remis in not just issuing the scrip, but in enforcing the same as 'transferable' six months after the issuance thereof. Moreover, the petitioner has admittedly obtained the scrip, bonafide and for valuable consideration and only after an endorsement of transferability was made upon it by the officers. No fraud has been attributed to it, and rightly so, as it had entered into the transaction with the legitimate expectation that the scrip was genuine, with an endorsement/stamp of departmental approval. 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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