TMI Blog2023 (5) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... roper authority is DGFT as per Import-Export Policy. A letter dated 21.12.2009 was written to the Joint Director, DGFT, Surat by Assistant Commissioner, SIIB (Export) to cancel the said scrips. Joint Director has till date not issued any notice to the appellant for cancellation of the said scrips nor any proceedings have been initiated. In such a situation Customs authorities could not have adjudicated upon the issue holding that the DEPB scrips were obtained by way of fraud. Interestingly it is noticed that while the show cause notice proposes imposition of penalty under Sections 114, 114A and 114AA of the Customs Act. Order-in-original has been passed imposing penalty under Sections 114A, 114AA and Section 112(a) and (b). In the impugned order, penalty has been upheld under Section 112(a) and (b) and also under Section 114AA of the Customs Act, while holding that the goods were liable for confiscation under Section 113(d) and (i) of the Customs Act. Show cause notice specifically provided for imposition of penalty under Section 114 - None of the authorities i.e. adjudicating authority or the appellate authority, have held that penalty to be imposed under the said section. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not in regard to upholding penalty under Section 114AA of the Customs Act in respect of export of goods, but the issue is whether penalty could have been imposed under the provisions of a section which was not even existent at the time when the offence was alleged to be committed - Similarly, the case of M/S. MUNJAL SHOWA LTD. VERSUS COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE (DELHI IV) AND M/S. FRIENDS TRADING CO. VERSUS UNION OF INDIA AND ORS. [ 2022 (9) TMI 1076 - SUPREME COURT] is with regard to the penalties imposed on the persons importing the goods under DEPB scrips found to be forged and fake. Appellant is neither an importer nor has claimed any benefit of any exemption under any DEPB scrips found to be forged and fake. In such a situation the said judgment also does not advance the case of Revenue. Appeal allowed. - Customs Appeal No. 85361 of 2020 Customs Appeal No. 85364 of 2020 - FINAL ORDER NO. A/85326-85327/2023 - Dated:- 13-1-2023 - HON BLE MR. SANJIV SRIVASTAVA , MEMBER ( TECHNICAL ) Shri D. H. Nadkarni , Advocate , for the Appellant Shri D. S. Maan , Deputy Commissioner , Authorised Representative for the Respondent ORDER These a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law for the time being in force, in India 2.1 A letter dated 11.03.2008 was received from Thane Commissionerate that some units were issuing bogus invoices for passing fraudulent Cenvat credit to claim bogus rebate. 2.2 After completion of investigation, central excise authorities issued a show cause notice dated 30.09.2008 to M/s. Muni Group of Companies and other 78 noticees for demand of rebate fraudulently claimed and also for imposition of penalty on the various persons involved. Investigation carried out by central excise officers reached to the conclusion that ARE-1s issued were bogus and the goods which were exported under DEPB shipping bills were never manufactured at the address given by the unit. As such the exporter exported the goods under DEPB scheme and availed DEPB benefit under the DEPB scheme fraudulently. Summons were issued to appellant 1 for investigation of such export firm. However, even after repeated summons, the exporter did not turn up. 2.3 From the above it appeared to the Revenue that no goods were manufactured in the premises of the supporting manufacturers. Their ARE-1s were bogus and no goods were transshipped for export and the goods men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable only to the importer and the appellant is not the importer. Chowhan Exports [2000 (121) ELT 833 (T)] Nippon Audiotronix [2000 (120) ELT 736 (T)] Paresh Parekh [2008 (221) ELT 411 (T)] Penalty under Section 112(a) and (b) of the Customs Act is not applicable as the appellants are not the importers. This penalty is neither proposed nor a part of the adjudication proceedings. The impugned order upholds the penalty under these sections which were never part of the proceedings. Penalty cannot be upheld in the said section. Ballarpur Industries Ltd. [2007 (215) ELT 489 (SC)] Raphael Pharmaceuticals Pvt. Ltd. [1988 (38) ELT 11 (AP)] The issue in the present case is for the period 01.09.2004 to 31.12.2004 which is prior to insertion of Section 114AA of the Customs Act on 13.07.2006. Penalty under said Section could not be imposed as held in the following decisions:- Elgi Equipments Ltd. [2001 (128) ELT 52 (SC)] Mithilesh Kumari [1989 (40) ELT 257 (SC)] Otis Elevator Co. (I) Ltd. [2007 (345) ELT 509 (Bom.)] The DEPB licence has till date not been cancelled by the DGFT authority nor any proceedings initiated against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s duty which had arisen by way of a ramification from the background of the evasion of Central Excise duty. I also observe that the Appellant No. 1 had knowingly purchased bogus ARE-Is from Muni Group, showing units of Muni Group as the supporting manufacturer and intentionally tried to claim duty benefit shown in the respective ARE-1s, just by presenting the documents to the Customs Authorities at the time of export along with the non-duty paid textile fabrics procured by them from the open market. 8. I further find that the Department has discharged the burden on the Appellant Nos. 1 2 is establish the fact that CENVAT credit had been used by the Muni Group for issuing bogus AREs. Further, I observe that there is strong force in the contention made in the Show Case Notice that when there is no existence of the fabrics mentioned in the ARE-1s, the question of the exporter obtaining this fabrics and exporting the same would be totally false and baseless. 9. I observe that invoices, ARE-Is issued were bogus / fake and the goods which were exported under the DEPB shipping bill were not manufactured at the address given in the ARE-1 by the Mont group. In this regard, I o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in question. Thus, the issues of whether extended period of limitation available for recovery of the duty against the licenses obtained fraudulently from transferee of such licenses though the misdeclaration has been made by the original license holder and whether the demand of duty against the transferee is sustainable in such cases have been settled by Apex Court by superseding all the earlier Orders. In view of the above settled position, the extended period of limitation is clearly invokable while demanding duty from the importer who has imported goods under DEPB Licenses obtained by fraudulent means. 4.3 In the present case I find that there is no denial of the fact that the goods have actually been exported against the shipping bills filed by the appellant. The shipping bills are the prescribed documents for all the purposes of Customs and there is no case that these goods as declared in the shipping bills were misdeclared in any respect of value, description or quantity. 4.4 In the case of Lark Chemicals Pvt. Ltd. [2019 (369) ELT 1372 (Tri.-Mumbai)] following has been held:- 5.6 In case of Pradip Polyfils P. Ltd. [2001 (173) E.L.T. 3 (Bom.)] Hon ble Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. In absence of any correction/amendments in the licence, the value of imported goods sought to be exempted by the said licence cannot be suo motu altered by the Customs Authorities. In our view order of Commissioner (Appeals) and adjudicating authority is not only contrary to the decisions referred above but also contrary to Circular No. 23/96-Cus. issued by C.B.E. C. and which has been used as basis for raising the demand. 5.8 In case Aafloat Textile (I) Pvt. Ltd. [2009 (235) E.L.T. 587 (S.C.)] relied upon by the Commissioner (Appeals), Hon ble Supreme Court has held as follows : 19. It was for the buyer to establish that he had no knowledge about the genuineness or otherwise of the SIL in question. 20. The maxim caveat emptor is clearly applicable to a case of this nature. As per Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edn. 2005 at page 721 : Caveat emptor means Let the purchaser beware. It is one of the settled maxims, applying to a purchaser who is bound by actual as well as constructive knowledge of any defect in the thing purchased, which is obvious, or which might have been known by proper diligence. 21. Caveat emptor does not mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quences 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. From the above paras referred from the said decision it is quite evident that the case under consideration was in respect of a licence that was obtained by fraud. When this licence obtained by fraud, was presented by the buyer of said licence Supreme Court held as above. In the case under consideration the issue is not in respect of licence obtained by fraud. The issue is in respect of mismatch between the declared unit price of imported goods on Bill of Entry and that computed on the basis of quantity and value mentioned in the licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial No. 23 of the rate-list under the product Group Code 90 merely specified the description and a rate without any further condition for eligibility. Learned Counsel relies on the decision of the Tribunal in Commissioner of Customs v. Emami Ltd. [2004 (167) E.L.T. 523 (Tri.-Kolkata)], Kobian ECS India Pvt. Ltd. v. Commissioner of Customs, Mumbai [2003 (157) E.L.T. 662 (Tri.- Mumbai)] and Dewas Soya Limited v. Union of India [2009 (235) E.L.T. 821 (Del.)] and further decision in the matter of Union of India v. Dewas Soya Limited [2011 (270) E.L.T. 17 (Del.)]. It is seen from the records that the Directorate General of the Foreign Trade had clarified vide letter dated 23rd May 2002 that the exporter would not be eligible for credit if inputs allowed in the Standard Input Output Norms (SION) entry at Serial No. K-195 (Misc. Product Group) had not been used in the manufacture of the product. That their manufacturing process does not utilise these two ingredients has been admitted by the appellant. Accordingly, the decision of the original authority to withhold the approval for allowing credit does have the sanctity of law. It is also seen that the original authority had permitted co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousand rupees, whichever is the greater; (ii) in the case of dutiable goods, other than prohibited goods to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater; (iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under Section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees, whichever is the greater; (iv) in the case of goods falling both under clauses (i) and (iii), to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest; (v) in the case of goods falling both under clauses (i) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest. 10. On a plain reading of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 28(2) can only be to the Company. The penalty contemplated by Section 114A can only be on the person liable to pay the duty and not to any other person. Viewed in this light, the order imposing penalty under section 114A on the Director is illegal. 9. Learned Departmental Representative tried to sustain the penalty imposed on the Director under section 112 of the Act. Adjudicating Authority in the impugned order had categorically stated that the provisions contained in section 112 are not invoked for imposing penalty on the Managing Director. Since the adjudicating authority has consciously excluded Section 112 and invoked the provisions contained in Section 114A only, it is not now open to the Revenue to try to sustain the order under section 112. Consequently, we vacate that part of the order which imposes penalty on Shri K.S. Goindi, Managing Director. 10. Third point urged by the Learned Counsel is that Section 114A could not be invoked in relation to imports effected prior to 28-9-1996. Section 114 imposes penalty on the person who is liable to pay duty as determined under section 28(2). Circumstances which warranted an order under section 28(2) shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ensure that the goods described on the shipping bill alone are actually exported. The Customs Department would also verify the FOB value declared by the exporter with regard to Present Market Value (PMV), and hand over the Export Promotion Copy of Shipping Bill to the Exporter. (b) The exporter after realising the export sale proceeds, will apply to the prescribed authority in the office of the Director General Foreign Trade Ministry of Commerce (herein after refer to a DGFT) in the form prescribed in Appendix 11C of the Handbook of Procedures, along with prescribed documents, such as Export Promotion Copy of Shipping Bills, export realisation certificate. The applicant also indicates the product description and the rate of credit available to the said goods as per the rate prescribed by the DGFT in the DEPB Schedule. The DGFT issue Duty Entitlement Pass Book licence and a Pass Book after scrutiny of the application form in Appendix 11C. The DGFT grants the DEPB rates, as claimed, on the export goods, which had been verified by the Customs Department. The credit given in the Passbook can be utilized for payment of duty on the imported goods. At the time of payment of duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and come to a finding that the exports made in this case were not entitled to DEPB under serial no. 86 of the Product Code 83 of the DEPB Schedule. Since all that was required, in the case was for the Commissioner to have reported the matter to the DGFT authorities and not sit in judgments over the grant and or determine entitlement of DEPB which were not within the jurisdiction of the Customs to do so. The order of determination of the eligibility or otherwise of DEPB as made in this case cannot be upheld. (f) The DEPB Schedule describe PC Boards without any qualification or restrictions. Relying on the case of Atari (India) Electronics - 1990 (45) E.L.T. 321 it could be held that both kinds of Circuit Boards i.e. plain or unpopulated or printed and populated could be covered as PC Boards. The Commissioner has come to a finding In fact the items imported was fully assembled item to be used as an add on card for computer is a finding arrived without any material or expert agencies reports on record. Para 1 of the impugned order reads as - ..........Examination of the goods by the customs officers showed that goods were misdeclared. The item being exported was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o issue an order under Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992, which would vide subsection (3), would then deem then to be a prohibition under Section 11 of the Customs Act, 1962. Besides of Rule 14(1) and 14(2) of Foreign Trade (Regulation) Rules, 1993 on a plain reading, would cover declaration for obtaining a licence and import any goods and DEPB s would not be covered by the word Licence as defined in the Foreign Trade (Development and Regulation) Act, 1992. A claim for DEPB export would not be a declaration for import. In this view of the matter, the liability for confiscation of the goods, being prohibited goods, under Section 113(d) and/or 113(i), as brought out by the Commissioner cannot be upheld. Confiscation arrived at under Section 113(d) or/and 113(i) cannot be upheld. (h) Ones goods are not found to be liable for confiscation, penalty under Section 114(i) of the Customs Act, 1962 cannot be sustained. The penalty imposed is required to be set aside. 4.12 Similar view has been expressed by the Tribunal in the case of Polynova Chemicals Ltd. [2005 (179) ELT 173 (Tri.- Mumbai)]. 4.13 The decisions relied upon by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances, the Department was absolutely justified in invoking the extended period of limitation. 10. It is also required to be noted that the moment, the appellant(s) was/were informed about the fake DEPB licenses, immediately they paid the Customs Duty, may be under protest. The Customs Duty was paid under protest to avoid any further coercive action. Be that as it may, the fact remains that the DEPB licenses/Scripps on which the exemption was availed by the appellant(s) was/were found to be forged one and, therefore, there shall be a duty liability and the same has been rightly confirmed by the Department, which has been rightly confirmed by the Tribunal as well as the High Court. 11. Now, so far as the submission on behalf of the buyer(s) - appellant(s) relying upon the decision of this Court in the case of Aafloat Textiles India Private Limited and Ors. (supra) is concerned, whether the buyer(s) had a knowledge about the fraud or the forged / fake DEPB licenses/Scripps and whether the appellant(s) - buyer(s) was/were to take requisite precautions to find out about the genuineness of the DEPB licenses/Scripps which they purchased, would have a bearing on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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