Bombay High Court
The Commissioner Of Customs (Import) ... vs Coromandal Fertilizers Ltd on 5 December, 2018
Bench: Akil Kureshi, M.S. Sanklecha
Uday S. Jagtap 11-18-CUAPP-11==.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CUSTOMS APPEAL NO.11 OF 2018
The Commissioner of Customs (Import)
Mumbai .. Appellant
v/s.
Coromandal Fertilizers Ltd. .. Respondent
Mr. Swapnil Bangur a/w Mr. Ram Ochani for the appellant Mr. Rajesh Ostwal a/w Mr. Jas Sanghavi I/b PDS Legal for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. DATED : 5 th DECEMBER, 2018.
P.C.
1. The Department has filed this appeal challenging the judgment of the Customs Excise and Service Tax Appellate Tribunal ("CESTAT" for short) dated 22.03.2017.
2. The following questions are presented before us for our consideration :-
(i) Whether the CESTAT was right in considering that the DEPB license is being issued by DGFT; hence there is no privity of contract between department of Revenue and the Transferee 1 of 6 ::: Uploaded on - 07/12/2018 ::: Downloaded on - 29/12/2018 07:04:56 ::: Uday S. Jagtap 11-18-CUAPP-11==.doc of License to claim any benefit of estoppels; Action of Customs is without prejudice to action of DGFT, and not department on them when it has been clearly held so by Hon'ble S.C. in case of Sheshank Ltd. and followed by other High Courts ?
(ii) Whether the CESTAT failed to appreciate that the assessee cannot rely provisions of the Sales of Goods Act to frustrate the provisions of the Customs Act, 1962, in as much when the customs Act, which is a specific Act, specifies person from whom duty to be recovered, which is a general Act, ignoring the settled provisions of Special Act / statute which will prevail over the General Act / statute?
(iii) Whether the CESTAT was right in not considering that fraud vitiates everything, there is not a single case where duty exemption has been extended to any importer / third party obtaining license for valuable consideration, rather if they are invoking / relying principles of Contract act, they should also seek remedy therein i.e. principles of restitution, hence, Tribunal could not have exceeded thereby granting relief under Contract Act?
(iv) Whether the CESTAT ought to have considered the High Court's ruling in the case of Friends Trading case, 2011-267 ELT 33 (P&H) and Apex Court's Ruling in the case of M/s. Tata Iron & Steel Ltd. Vs. CC, Mumbai, wherein it was held that liability can be fastened on transferee without notice of fraud, 2 of 6 ::: Uploaded on - 07/12/2018 ::: Downloaded on - 29/12/2018 07:04:56 ::: Uday S. Jagtap 11-18-CUAPP-11==.doc moreover, in this case assessee had knowledge of fraud, hence, no necessity of invoking legal presumption?
(v) Whether the CESTAT was right in not considering submission of Revenue to refer matter to Larger Bench in view of contradictory orders passed by Two different Benches in view of contradictory orders passed by Two different Benches (In view of Vodafone India Ltd. 2015-324 ELT 434-Bom/ Sunbel Alloys Co. 2015-316 ELT - 353 - Bom / Kraps Chem Pvt. Ltd. 2015-319 ELT - 622 SC)?
3. Brief facts are that the respondent-assessee had purchased certain DEPB scrips from the market in relation to which investigation of the Department revealed that the DEPB licenses were obtained by the seller by fraud. In other words, the Department had material to suggest that without making actual export, on the strength of fraudulently created documents such DEPB licenses were obtained. On the strength of such DEPB scrip, the assessee had cleared imported goods. A show-cause notice, therefore, came to be issued against the assessee and others on 30th July, 2002 to show-cause why dues should not be recovered, goods should not be confiscated and penalty should not be imposed. After adjudication authority held against the assessee, the issue reached to the Tribunal. The Tribunal allowed the appeal of the assessee primarily 3 of 6 ::: Uploaded on - 07/12/2018 ::: Downloaded on - 29/12/2018 07:04:56 ::: Uday S. Jagtap 11-18-CUAPP-11==.doc on the ground that the assessee being a bona fide purchaser without notice and not being party to the fraud, no recoveries can be made from the assessee. The Tribunal relied on the decision of the Supreme court in the case of Commissioner of Customs Vs. Vallabh Design Products, 2016 (341) ELT A222.
4. Learned Counsel for the Revenue vehemently contended that the Tribunal has committed an error. The DEPB scrips were fraudulently obtained by the original seller. The assessee as a purchaser, cannot derive any benefit out of such scrips. On the other hand, counsel for the assessee submitted that similar issue came up for consideration before the Punjab & Haryana High Court in case of Vallabh Design Products. The High Court held that benefits cannot be denied to the bona fide purchaser for value even if the DEPB scrips were obtained by fraud or forgery not committed by the purchaser. This decision is reported in 219 ELT 73. Counsel pointed out that the Supreme Court in case of Vallabh Design Products (supra) has confirmed the view of Punjab & Haryana High Court.
5. Foundational facts are not disputed. The assessee does not dispute that the DEPB scrips in question were not obtained through 4 of 6 ::: Uploaded on - 07/12/2018 ::: Downloaded on - 29/12/2018 07:04:56 ::: Uday S. Jagtap 11-18-CUAPP-11==.doc fraud. The Department has not brought any evidence on record to suggest that the assessee was party to the fraud. In fact, possibly there is no such allegation in the show-cause notice also.
6. Under similar circumstances, the Division Bench of Punjab & Haryana High Court in case of Vallabh Design Products had held and observed as under :-
"9. After hearing learned Counsel for the parties, we are of the considered view that this appeal is devoid of any merit. The assessee- respondent admittedly is not a party to the fraud. There are categorical finding that it had purchased DEPB from the open market in the bona fide belief of its being genuine. The assesee-respondent had paid full price and accordingly had availed the benefit.
10. It is also worth noticing that the assessee-respondent was issued a show-cause notice dated 10-6-2002 (P-2) before cancelling the DEPB, which was obtained by M/s. Parker Industries, however, we are 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 right of the parties had been crystalised, the imports having been affected on 15-11-1997. The revenue cannot avail the extended period because the assessee- respondent has not been accused of mis- representation, collusion or suppression of facts within the meaning of proviso to Section 28 of the Customs Act.
11. The matter is not res integra. The revenue-appellant has also filed other appeals challenging similar others passed by the Tribunal, bearing (CUSAP Nos. 13, 14, 15 and 17 of 2006. Vide judgment rendered in the case of Commissioner, Customs V. M/s. Leader Valves Ltd. (CUSAP No. 15 of 2006, dated 15-3- 2007), we have already dismissed the afore-mentioned appeals."
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7. Some what similar view has been expressed by the Division Bench of this Court in Taparia Overseas Pvt. Ltd. Vs. Union of India, (2003) 161 ELT 47. In the said case, import license was obtained by original license holder by fraud. The license was transferred for value without notice. The goods were imported under such license. The Court held that the cancellation of valid license would only operate from the date of cancellation or from suspension thereof. The goods imported prior to cancellation of license would be validly imported.
8. In the circumstances, no question of law arises.
9. Accordingly, appeal is dismissed.
(M.S. SANKLECHA, J.) (AKIL KURESHI, J.)
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