TMI Blog2023 (4) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. In doing so, he also manipulated the license itself in collusion with the officers and entered wrong figures in the customs EDI system thereby magnifying several fold the benefit under the license. It is a well settled legal principal that fraud vitiates everything and nobody can profit from the fraud whether or not the fraud itself was committed by that person. In this case, the fraud of forging and manipulating the license was done by Sharafat and Vinod Kumar Pathror and not by the appellant. It is for this reason, the FIR filed by the Department with the Economic Offences Wing of the Police also does not include the appellant as a suspect. However, the benefit of the exemption under the license is not available on the strength of a fraudulent licence and the appellant is liable to pay the duty. In the case of Nidhi Enterprises, this Tribunal held that the buyer of the licenses has to fulfill the requirement of Caveat Emptor . The appellant in this case has not even remotely fulfilled its obligation as a buyer of the licences/ scrips. In fact, the appellant had not even bought the licences/scrips but only purchased the benefit from the licences/scrips. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Appeal filed by the appellant is partly allowed by setting aside the penalty imposed on the appellant (M/s. Bimal Papers Pvt. Ltd.) under section 114AA and upholding rest of the impugned order insofar as it pertains to the appellant M/s. Bimal Papers Pvt. Ltd. - CUSTOMS APPEAL NOs. 52688-52689 OF 2019 - FINAL ORDER NO. 50460-50461/2023 - Dated:- 12-4-2023 - MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) AND MS. BINU TAMTA, MEMBER (JUDICIAL) Shri Akhil Krishan Maggu, Advocate, Shri Vikas Sareen, Advocate Shri Ayush Mittal, Advocate for the appellant. Shri Rakesh Kumar, authorized representative for the Department ORDER These two appeals have been filed by M/s. Bimal Paper Pvt. Ltd.[Appellant] and Shri Praveen Kumar Jain [Jain], Director of the appellant, assailing the same order-in-original dated 24.09.2019 [Impugned order] passed by the Principal Commissioner of Customs, Import Commissionerate, Inland Container Depot, Tughlakabad, New Delhi and hence they are being disposed of together. The operative part of the impugned order is as follows :- (i) I hereby confirm the demand of duties of Customs (BCD + CVD) amounting to Rs. 2,35,29,862/- (Rupees Two Crore T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xiii) I do not impose any penalty under Section 114AA of the Customs Act, 1962 on M/s Kirti Cargo . 2. Customs Appeal No. C/52688 of 2019 is filed by the appellant aggrieved by (i) to (v) of the operative part of the impugned order. Appeal No. C/52689 of 2019 is filed by Jain, aggrieved by (vi) and (vii) of the impugned order which imposed penalties on him. 3. The undisputed facts of the case are that the appellant imported goods which were cleared using licenses/duty free scrips under various export promotion schemes, such as, DFIA/FPS/FMS/VKGUY/DEPB during the period 01.04.2015 to 29.08.2015. M/s. Kirti Cargo [Kirti] was indicated as the Customs Broker /Custom House Agent (CB/CHA) in the Bills of Entry but they were actually filed by one Shri Sharafat Hussain [Sharafat] who was neither a licenced CB nor was the employee of Kirti. Kirti simply lent its licence for a consideration and had nothing to do with the Bills of Entry. 4. Investigations revealed that the duty free licences/scrips using which the goods imported by the appellant were cleared were neither issued to the appellant nor were they transferred to it. The licenses were actually issued to various ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the corresponding exemption notification. 9. During the relevant period, details of the licences/scrips issued by the DGFT were not getting transmitted from the DGFT‟s server to the Customs server. Instead, the licencee had to be bring them to the Customs officers to get the details entered by a Customs officer into the Customs Electronic Data Interchange (EDI) system. Thereafter, as the Bills of Entry were assessed utilising the licence, appropriate amounts would be debited from the licence in the Customs EDI. At the time of clearance of the goods, the licence/scrip had to be produced before the officer. 10. Sharafat and his company Zealot International bought the licences/scrips from licencees but got the wrong details entered in the Customs EDI system thereby showing higher value of duty free entitlement than was in the licence. 11. The customs broker M/s Kirti Cargo in whose name the Bills of Entry were filed is a Proprietorship firm owned by Shri Ramesh Chadha, who accepted that he sublet his licenses to Sharafat for Rs. 25,000/- per month and, therefore, he was in no way involved in the clearance of the cargo including in the use of the forged scrips. To su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market traders/Businessman of the same market in respect of the same issue and everybody submitted their documents and proof before the investigating officer and are co-operating with them to prove that they are the victim here and have not done anything illegal or forged any Scrips or licenses. (v) The FIR was filed by the office of the Commissioner of Customs (Export) ICD, TKD, New Delhi Special Investigation and Intelligence branch, only against two persons namely Shri Vinodh Kumar Pathror Shri Sharaffat Hussain. 14. In short, the submissions of the learned counsel for the appellant was that the appellant cannot be held responsible for the misdeeds of others, viz., Shri Sharafat Hussain and Shri Vinod Kumar Pathror and the Departmental officers who colluded with them because of which wrong details of the scrips were entered into the Customs EDI system. It is also his submission that a First Information Report [FIR] against Shri Vinod Kumar Pathror and Shri Sharafat Hussain was filed by the Revenue which also did not indicate that the appellant was involved in the fraud. The investigating police officer had summoned the appellant and he has been cooperating with the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods imported by the appellant. He submits that it has been decided by this Tribunal in the case of M/s Nidhi Enterprises and ors. [2022 (11) TMI 869 CESTAT NEW DELHI] that there is no provision to transfer the benefit of any exemption either under the policy or any notification or any provision of the law. The license and scrips are freely transferable and if they are transferred the transferee gets the benefit of the notification but without transferring the licenses/scrips, the benefit of the exemption cannot be transferred. He, therefore submits that the appellant has clearly violated the law and claimed the benefit of ineligible exemption and, therefore, was liable to pay the duty and interest, as demanded. Further, in view of the violations of the appellant, the confiscation of the goods under section 111 and imposition of penalties under section 112, 114A and 114AA need to be upheld. He prays that the appeal may be dismissed and the impugned order may be upheld. 17. We have considered the submissions from both sides and perused the records. 18. The question of liability of the importer for using fake or forged DEPB licenses/scrips where the importer itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. Following the decision of the Supreme Court in Munjal Showa, this Bench, in the case of M/s Nidhi Enterprises held that duty was payable where the duty was not paid initially by using fake/forged scrips/licenses. The relevant paragraphs of this order is as follows :- 29. There is no provision to transfer the benefit of any exemption either under the policy or any notification or any provision of the law. The licences and scrips are transferable and if they are transferred, the transferee consequently gets the benefit of the exemption notification. Without transferring the licence/scrip, the benefit of exemption cannot be transferred. An example will further clarify the difference. Indian Railways have now made tickets transferable between family members. When A‟ buys a railway ticket A‟ earns a right to travel in a particular train on a date between the stations and occupy the allotted berth/seat. If A‟ transfers the ticket to his family member B‟ the right to travel is also transferred as a consequence. Without transferring the ticket, A‟ cannot simply say let B‟ travel instead of me because the right to travel flows from the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed authorized representative that caveat emptor (Buyer Beware) is a well established principle and it requires the buyer of any goods to take reasonable precautions with respect to what he is buying. When one is buying an instrument for lakhs of rupees and claiming benefit of exemption from customs duty from it and such an instrument is numbered and is issued by any authority, it would be reasonable to expect that the buyer would know what instrument it is buying from who and in whose name it was issued originally. Even if one buys a car from another one would at least check the registration number of the car, make, model, etc. In the present case, none of purchase invoices produced by the appellant even indicate the licence or scrip which the appellant bought. The invoices show that the appellant bought the benefit of exemption which is not transferable and it had not bought the licences/scrips which were transferable. For this reason, the appellant neither received physical licences/scrips nor has it produced at the time of claiming the benefit of the exemption. Effectively, so far as the appellant is concerned instead of paying duty to Government exchequer it had paid a perce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th consequential benefits, if any, to him . 20. We find the matter in this case is identical to the case of M/s Nidhi Enterprises inasmuch as the appellant did not pay the duty as required, but instead of paid a percentage of the duty payable to Sharafat who, in turn, used fake/forged scrips/licenses to clear the goods. The appellant was not aware as to which scrip or license would be used to clear its goods because they were never transferred in its name. Without transferring the licenses, Sharafat transferred the benefit of the licence to the appellant. In doing so, he also manipulated the license itself in collusion with the officers and entered wrong figures in the customs EDI system thereby magnifying several fold the benefit under the license. 21. It also needs to be pointed out that the appellant did not give any authorization or engaged M/s Kirti Cargo the CHA indicated in the Bills of Entry nor was issued nor has it issued any authorization in favour of Shri Sharafat Hussain or his firms. The appellant neither filed the bills of entry by itself nor has it authorized any license customs broker, but engaged Shri Sharafat Hussain who filed the bill of entry using the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. Confiscation and penalty 25. In the impugned order the imported goods were held as liable to confiscation under section 111(d) and 111(o) of the Customs Act, 1962. However, as the goods were not available, no redemption fine was imposed. Penalties were imposed under sections 114A and 114AA on the appellant and under sections 112 (a) (ii) and 114AA on Shri Jain, the Director of the appellant firm. These sections read as follows: Section 111. Confiscation of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation: - xxxx (d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; xxxx (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer; xxxxx SECTIO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty or interest as reduced or increased, as the case may be, shall be taken into account: Provided also that in case where the duty or interest determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available if the amount of the duty or the interest so increased, along with the interest payable thereon under section 28AA, and twenty-five percent of the consequential increase in penalty have also been paid within thirty days of the communication of the order by which such increase in the duty or interest takes effect : Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114. Explanation . - For the removal of doubts, it is hereby declared that - (i) the provisions of this section shall also apply to cases in which the order determining the duty or interest sub-section (8) of section 28 relates to notices issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers have necessarily to be complicit in the offence but action against the officers is not part of these proceedings. Learned authorised representative states that the matter relating to the involvement of officers has been referred to the Central Bureau of Investigation which is investigating the matter. We agree that if the involvement of the officers is a far more serious matter than mere action under the Customs Act and it also needs to be investigated from the point of Prevention of Corruption Act and Central Civil Services Conduct Rules. As far as the imported goods in this case are concerned, they were clearly liable for confiscation under section 111(o). As they were not available for confiscation, they were not actually confiscated nor has any redemption fine been imposed. We, therefore, find that the goods were correctly held as liable for confiscation under section 111(o). 28. As far as the penalty on the appellant is concerned, it has been imposed under section 114A and section 114AA. 29. Penalty under section 114A is a mandatory penalty imposable if the duty is not paid due to collusion or any wilful mis-statement or suppression of facts. We have already upheld t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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