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TMI Blog2025 (5) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Commissioner that imposes a penalty upon Rajinder Jain under sections 112(a)(ii) and 114AA of the Customs Act. 3. Mukta Enterprises is engaged in the import and trading of paper and paper articles. Intelligence was gathered that some persons gained illegal access to the Electronic Data Interchange [EDI] systems of the Indian Customs and tampered with details at the Inland Container Depot, Tughlakabad Port of Duty Free Scrips issued by the Directorate General of Foreign Trade [DGFT]. These Duty Free Scrips were found to have been utilised for payment of import duties by certain importers for import of paper and paper articles. Investigation also revealed that these Scrips were used by various importers by using the services of one common customs broker namely, "M/s Kirti Cargo" for filing the Bills of Entry for clearance of the import consignments. It was also found that the customs clearance related work of this customs brokers was looked after by one Sharafat Hussain, a 'G' card holder of the said customs broker company. Sharafat Hussain engaged himself in sale/purchase of these Scrips through his companies/firms namely M/s Zealous Overseas Pvt Ltd., M/s Zealous Internatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the importer were observed. These scrips were either found to have been tampered for enhancement of value/duty exemption therein or they were found to be not issued by DGFT at all. The methodology adopted by the importer in using such scrips is given as under:- (i) In some cases, they gave the particulars of a scrip and its date in the Bill of Entry but the registration number and its date reflected in the Bill of Entry were not in respect of the said scrip. It was for a scrip which was registered in the system fraudulently by changing the last few digits of the scrip, reflected in the Bill of Entry and which was not issued by the DGFT at all. Since, it was the registration number of the scrip which was picked by the EDI system, duty got debited from that fictitious scrip and not from the scrip which appeared in the Bill of Entry. Hence, duty in the Bill of Entry was not debited from a legitimate scrip. (ii) In some cases, they gave the particulars of a scrip and its date in the Bill of Entry but the registration number and its date reflected in the Bill of Entry were not in respect of the said scrip. It was for a scrip which was registered in the system fraudulently by cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas, from the foregoing, it appeared that M/s Mukta Enterprises, 2421, Chawri Bazar, Delhi-110006 had intentionally and willfully mis-stated and suppressed the fact of utilizing tampered/non-existent duty free Scrips/Licences/Authorisation which were ab-initio null and void for payment of Customs duties applicable on the import of dutiable goods made by them during the period 19/11/2012 to 17/06/2015, thus thereby evaded the applicable Customs duties to the tune of Rs.3,60,55,419/- (Basic Customs duty of Rs.2,04,04,760/- + Countervailing duty of Rs. 1,56,50,659/-). The acts of omission and commission on the part of the importer as discussed under aforesaid paras resulted in short payment/ non-payment of large amount of revenue to the exchequer. They were working under self-assessment and the onus to pay proper, duties/taxes/Government dues was on them. Intentional non disclosure and declaration of the entire facts well known to the importer resulted in contravention of various provisions of the Customs Act, 1962 (as amended) as discussed above. Thus, it appears that the importer breached the trust the Department had imposed on them in the era of self assessment. But these facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort paid. The duty has been debited from the ineligible scrips. Since the instrument through which the duty was debited was void at the time of registration in the Customs system, as has been brought out in the SCN, any debit of duty from such scrip can, at no cost, be considered payment of Customs duty due on such imports. It is clear that the said forged scrips could not have been used for payment of duty. It is a settled law that no benefit could be claimed through an instrument which was void ab-initio and thus the duty paid through such scrips is non-est. Therefore, the duty has been short paid. Since, the scrips were used by the agent of the Importer who was beneficiary of such duty payment; the Importer is liable to pay the duty so short paid. xxxxxxxx 66.3.2 In the instant case, the Importer was very well aware of the fraud regarding evasion of customs duty by using forged scrips. In fact, the Importer created a nexus with the Customs Broker through its G-card holder namely Sh. Sharafat Hussain (Noticee No. 3) for this fraudulent act of evading the customs duty. The Importer had conscience leaning to committing such act of fraud in the form of using forged scrips. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romotion Scheme. The importers are not involved in the issue of the Duty Free Licences; iii) Licences were valid at the time of clearance of the goods and the purchasers of the licences cannot be held liable if investigation throws doubts on the licences; iv) The extended period of limitation could not have been invoked in the facts and circumstances of the case; and v) Penalties could not have been imposed upon Mukta Enterprises or Rajinder Jain. 9. Shri Nagendra Yadav, learned authorised representative appearing on behalf of the department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. Learned authorised representative made the following submissions: i) The period of violation is from 18.01.2014 to 01.06.2015 when there was no system of exchange of data between DGFT and Customs EDI and the genuineness of the Scrips was to be verified from physical copies; ii) Though the Scrips may be transferable but the procedure prescribed for purchasing the Scrips by obtaining physical copies of the Scrips and getting them registered was not followed. On the other hand, they have relied upon certain persons for bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven from the findings recorded by the Department, it has been found that the DEPB licenses/Scripps, on which the exemption benefit was availed of by the appellant(s) (as buyers of the forged/ fake DEPB licenses/Scripps) were found to be forged one and it was found that the DEPB licenses/Scripps were not issued at all. A fraud was played and the exemption benefit was availed on such forged/fake DEPB licenses/Scrips. 9. In that view of the matter and on the principle that fraud vitiates everything and such forged/fake DEPB licenses/Scripps are void ab initio, it cannot be said that the Department acted illegally in invoking the extended period of limitation. In the facts 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 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation can also be invoked. This issue is no longer res integra and it has been settled by the Supreme Court in M/s Munjal Showa Ltd. Vs. Commissioner of Customs And Central Excise (Delhi-IV) And M/s Friends Trading Co. Vs. Union of India And Ors. 2022 (9) TMT 1076-Supreme Court. The Supreme Court was seized of a matter where forge/fake DEPB licences/scrips were used to pay duty on imported goods. After completing investigation, show cause notices were issued invoking the extended period of limitation which were challenged both on the ground of limitation as well as on the ground that though the scrips were forged, the importers had no intention to evade the customs duty. The Commissioner of Customs passed orders confirming the duty which was upheld by the Tribunal and the High Court. Aggrieved, the appellant appealed to the Supreme Court which upheld the confirmation of the demands invoking extended period of limitation. However, insofar as the penalties were concerned, Supreme Court held that whether the buyers had knowledge of fraud or forged/fake DEPB licences/scrips and whether the buyers were to take precautions to find out the genuineness of the scrips which they had purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sharafat Hussain, in turn, used manipulated/forged licences to clear the Bills of Entry. In our considered view, this does not even remotely meet the requirement of caveat emptor. Under these circumstances, we find no reason to hold that the appellant was a genuine buyer of licences/scrips and had purchased them in good faith." (emphasis supplied) 17. In M/s Bimal Paper Pvt. Ltd. and Shri Praveen Kumar Jain, Director versus Principal Commissioner of Customs, New Delhi again a similar controversy was examined by a Division Bench of the Tribunal involving both M/s Kirti Cargo and Sharafat Hussain. The Division Bench relied upon the judgment of the Supreme Court in Munjal Showa and the decision of the Tribunal in Nidhi Enterprises and observed as follows: "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 trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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. 24. 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, the impugned order correctly confirmed the demand of duty from the appellant. Since, the duty is payable the corresponding interest also has to be paid, as applicable." (emphasis supplied) 18. The aforesaid decisions have examined both the aspects namely, as to whether the importer can contend that he was not responsible for the manipulation/forgery committed in the Scrips and whether in such circumstances the extended period of limitation can be invoked. These decisions do not support the contentions advanced by learned counsel for the appellants that the appellant was not responsible for the forgery. The aforesaid decisions hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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