Customs, Excise and Gold Tribunal - Mumbai
Hitendra Kumar Gadecha, Shrenik Mehta ... vs Commissioner Of Customs on 7 March, 2006
ORDER S.S. Sekhon, Member (T)
1. The application is disposed of by this order.
2. The appellant acquired inter alia 22 Special Import Licences (hereinafter referred to as SILs) from/through one Miss Sunita Goel, who came in possession of the same through Ms Vidya Mahadik, Mr Shrenik Mehta. Mr Shrenik Mehta procured the said licences from Mr one Sanjay Rai, who, in tarn, claimed to have got the same from one Mr Rameshchandra. Before the licences were acquired by the appellants herein, they had verified the fact of the issuance of such licences by the office of the DGTF, who published a monthly bulletin in which the licence numbers were appeared. This was done to confirm that the said licences were issued by the competent jurisdictional authority. Along with the original licences, the appellants also received transfer letters and each such transfer letter bore bank attestation verifying the signature of the transferor. Ex facie from the record, it was submitted that none of the 22 SILs had any endorsement/remark/stamp of cancellation of any mark/sign of defacement. Full payments were made towards consideration for acquiring the said SILs and cheques/demand drafts in favour of the parties were issued.
3. To a question from the Bench, the appellants submitted that payments were issued to a third party as a normal commercial practice as desired by broker of the transferor and it was pointed out that this was not one of the grounds taken by the Revenue or by the adjudicator in the proceedings against the appellant. It appears that on the basis of letter dated 24.2.1998 from a Foreign Trade Development Officer (FTDO for short), it was alleged that 15 out of 22 SILs were no longer valid on the ground that the same were cancelled/defaced. However, prior to this intimation dated 24.2.1998, the consignment of gold or silver imported by the appellant in April and July 1997, which were allowed clearance by the proper officer of Customs from time to time, as validity of the licence was not questioned by such proper officers when the SILs were presented for clearances of the goods imported.
4. The SILs are not found to be invalid for any other reasons. Investigation only alleged/that transfer letters in respect of 22 SILs were false and or bogus which has resulted in the issuances of the present Show Cause Notice culminating in the impugned order confirming the demands for duty, fine and imposing penalties.
5. After hearing both sides and considering the material, it is found:
(a) On merits:
(i) None of the said licences bore any endorsements/remarks of cancellation/defacement nor were they cancelled or defaced when the imports were made. They were also held to be valid licences and the clearances were allowed to be made. FTDO or any other officer of DGFT did not appear for cross examination, despite number of summons and letters sent to them by the adjudicator. The adjudicator's reliance on a single letter issued by FTDO therefore does not appear to be sufficient reason to come to a conclusion that the said SILs, as produced to Customs were in fact cancelled/invalidated on reasons as being alleged and found, when the SILs were not being alleged to be per se fabricated in any manner.
(ii) The SILs are freely transferable and are akin to negotiable instruments and since on the said licences, there was no endorsements or alteration to indicate cancellation/defacement, the liability of the holders in due course for having acquired them for a bona fide and valuable consideration cannot deprive them the benefit of the same especially when the benefit was granted ab initio granted by the proper officers of Customs whose primary duty was to verify the entitlement to the imports under the said SILs.
(iii) The appellants having acquired the said SILs, after due verification of the monthly bulletin of the DGFT and after verifying the signatures of the bank officers appearing on the transfer letter which are not being proved to be fake or forged are bona fide holders in good faith on consideration. The contents of letter dated 24.2.1998 from FTDO, New Delhi itself is not attested/proved before the adjudicator under cross examination; this letter alone would therefore be uncorroborated and unsubstantiated reason for the adjudicator to have arrived at a conclusion of the said SILs to have been cancelled/defaced and hence not valid. The demands as arrived are therefore clearly unsustainable.
(iv) The appellants are holders of the SILs as transferee and are not liable for the acts of commission and omission if any of the original holders who are of the DGFT authorities once the transfers have been effected as per the procedure preserved. This has been held by the Larger Bench in the case of Hico Enterprises v. Commissioner (LB). We therefore cannot find any liability on the transferee especially has been brought out by this post facto questioning of the imports allowed by the proper officer.
(b) Benefit of Notification:
(i) Notification 117/94-Cus dated 27.4.1994 exempts goods (gold, silver) covered by SILs. The exemption is eligible so long as the goods are covered. This exemption is irrespective of the fact whether the transfer letters are valid or not. This is not disputed.
(ii) The exemption is in respect of goods and a right in rem so long as the importer of the goods produces a valid SIL to cover the goods under import in terms of the description, quantity and value, the benefit of the exemption cannot be denied based on any subsequent cancellation of such a SIL. The SILs granted are valid till avoided, is a settled position in law (see East India Commercial Co Ltd v. Collector and the decision of this Tribunal in H Kumar Gem 2001 (137) ELT 61 which is a case on all fours applicable to the present case.
(c) On limitation
(i) Since the appellants/importers not having found to have been any way concerned with any reason to cancel/invalidate the SILs, they were not even aware of the alleged need to cancel/invalidate these licences or proved to be party to the proceedings of DGFT or the cancellation of the SIL by DGFT is not being established beyond all reasonable doubts by testing the said statement of FTDO, New Delhi in the cross examination before the adjudicator, we find that the appellants have a good prima facie case on limitation.
(d) On penalty under Section 114A of the Customs Act, 1962:L
(i) As the proviso to Section 28(a) and ingredients thereof cannot be found to be present in the facts of this case, no penalty could be imposed on the appellants under Section 114A of the Customs Act, 1962.
(ii) Reliance on the Ld D.R. on the case of JB Trading Corporation and ICI India Ltd , Surya Prabha Sales Corporation v. CC 1992 (67) ELT 571 are not well founded in the facts and circumstances of this case, since importers here, viz the appellants, are not fictitious. They are an existing firm who have obtained the SILs as holders in due course on a consideration in good faith and the fact of the licences being cancelled/invalidated is not established.
(iii) Reliance of the Ld D.R. on the case of Denocil Corporation Pvt Ltd also will not held the Revenue's case since this is not a case of issue of DPEB issue on the basis of fake documents. In the case of Denocil Corporation strictures were passed against the DGFT officers for having participated in the alleged grant of DEPB on fake documents. In this case, the DGFT officers are not attending the cross examination and this failure on part of these public officers to come and assist the adjudicator, the Commissioner of Customs, Ahmedabad, especially on the charge of cancellation/invalidation of the licences should have caused the Commissioner to have taken up the matter with the higher authorities when the DGFT organization failed to respond to the summons issued by him to appear before them, adjudicating the matter. That has not been done would indicate that the matter of cancellation/invalidation, if any, could not be considered at all as a piece of any evidence against the appellants herein.
(e) Confiscation fine and Penalty under Section 112 of the Customs Act, 1962.
(i) Since we do not find any reasons to impugn the import as originally effected, there is no reason for coming to a conclusion as regards liability to confiscation and/or penalties and duty demands as arrived at.
6. In this view of the matter, we would modify the order of pre deposit by granting this application, the pre deposits are required to be waived as the applicants have made out a prima facie strong case for the same.
7. Application allowed accordingly.