Custom, Excise & Service Tax Tribunal
M/S Ineos Abs India Ltd vs Commissioner Of Customs, Kandla on 13 August, 2015
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad ****
Appeal No : C/157,182-192,204-206,247,273-278,283-285,297, 299-313, 317-318,328-332, 334-336,339,347-351,363/2007 (Arising out of OIO No. KDL-COMMR-20-2007 Dated 09.04.2007, passed by Commissioner of Customs, Kandla)
1. M/s Ineos Abs India Ltd.
2. M/s Max Brass,
3. M/s Sonal Plastic Industries,
4. M/s Darsan Brass Industries,
5. M/s Rajhans Metals Ltd,
6. M/s Bharat Impex,
7. M/s Shankarvijay Brass Mould Works,
8. M/s Super Metal Corporation,
9. M/s Prakash Impex Pvt.Ltd.,
10. M/s Siyaram Metals Pvt.Ltd.,
11. M/s Dhanani Products,
12. M/s Saurashtra Scrap Sales,
13. M/s Bihar Organics Pvt.Ltd.
14. M/s Bharat Organics,
15. M/s Bharat Chemicals,
16. M/s Jyoti Wooden Industries,
17. M/s Modern Steels Ltd,
18. M/s Upper India Steel Mfg. & Engg. Co. Ltd.,
19. M/s Sharu Industries Pvt.Ltd.,
20. M/s RP Multimetals Pvt.Ltd.
21. M/s Pushpanjali Steel Alloys Pvt.Ltd.
22. M/s Nabha Steels Ltd.
23. M/s Amritvarsha Ispat Pvt.Ltd.
24. M/s R.S. Steels,
25. M/s Charu Steels Ltd.,
26. M/s Bansal Alloys & Metals Ltd.,
27. M/s A. Kumar & Brothers,
28. M/s Sanskriti International,
29. M/s AVG Enterprise,
30. M/s Shyam Timbers Pvt.Ltd.,
31. M/s M.K. Wood India Pvt.Ltd.,
32. M/s Mukesh Kumar & Co.,
33. Shri Liluram Gajanand
34. M/s Antao Balaji Ltd
35. M/s Oswal Lumbers Pvt.Ltd.,
36. Shri Amritlal Nareshkumar,
37. M/s B.T. Steels Ltd.,
38. M/s J.S. Khalsa Steels Pvt.Ltd.
39. M/s Aryan Steels,
40. M/s Vallabh Steels Ltd.,
41. M/s Indian Petrochemicals Corpn. Ltd.,
42. M/s Ispat Profiles India Ltd.
43. M/s Nirma Ltd.
44. M/s R.N. Forging Pvt.Ltd.
45. M/s Sanman Trade Impex Pvt.Ltd.
46. M/s Hazel Mercantile Ltd.
47. M/s Priceless Invertrade Pvt.Ltd.,
48. M/s N.M. Nagpal Pvt.Ltd.
49. M/s Rathi Ispat Ltd.
50. M/s Sharma Comemrcial Pvt.Ltd.
51. M/s Pushkar Steels Pvt.Ltd.
52. M/s Silvassa Plast,
53. M/s KLJ Organics Ltd.,
54. M/s KLJ Polymers & Chemicals Ltd.,
55. M/s KLJ Plsticizers
56. M/s Pcl Solvents : Appellant (s) Vs Commissioner of Customs, Kandla : Respondent (s) Represented by:
For Appellant (s) : Sh. W.Cristian, Paritosh Gupta, Anand Nainawati, Ms. Dimple Gohil, Uday Joshi, Vishal Agarwal, P.V. Sheth, V. Ansurkar, J. C. Patel, V.K. Jain, Ms. Shilpa Balani, Vikas Diophode, AdvocateS For Respondent (s): Shri J, Nair, Authorised Representative For approval and signature:
Mr. P.K. Das, Honble Member (Judicial) Mr. P.M, Saleem, Honble Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
Seen
4.
Whether order is to be circulated to the Departmental authorities?
Yes
CORAM:
MR. P.K. DAS, HONBLE MEMBER (JUDICIAL)
Mr. P.M, SALEEM, HONBLE MEMBER (TECHNICAL)
Date of Hearing/Decision: 13.08.2015
Order No. 11440-11497/2015 Dated 13.08.2015
Per: P.K. Das
These appeals are arising out of a common order, and therefore, all are taken up together for disposal.
2. The relevant facts of the case in brief are that M/s. Trisuns Chemical Industry Ltd. (in short M/s. Trisuns), an unit set up in Kandla Special Economic Zone, was engaged in manufacture of Castor Oil of different grades. They had another unit of the same name in Domestic Tariff Area (in short DTA Unit) situated at Bhachau also engaged in the manufacture of similar goods i.e. Castor Oil of different grades. The officers of Directorate of Revenue Intelligence (DRI) searched the factory premises of M/s. Trisuns on 12.01.2004 and 05.03.2004 on the basis of intelligence that M/s. Trisuns committed various irregularities removal, clearance, inter-unit transfer, storage and export of Castor Oil with an intention to earn various export incentives like DEPB credit, which are not available to a unit set up in a Special Economic Zone. It is also found that the M/s. Trisuns manipulated/forged bills of lading etc. to claim export to Russia under Debt Repayment Trade Agreement between India and Russia, while the goods were actually exported to destinations other than Russia.
3. A Show Cause Notice dated 27.07.2004 was issued, proposing demand of duty on various issues, alongwith interest and to impose penalty to the M/s Trisuns. It is also proposed to demand of duty alongwith interest and to impose penalty on the appellants herein, who imported goods, duty free by utilizing the DEPB Scrips sold by M/s. Trisuns. It has been alleged that M/s Trisuns had wrongfully availed DEPB credit on export of Castor Oil by misdeclaration the same as DTA produce, whereas, the goods originated from M/s. Trisuns in SEZ unit. So, the appellants herein availed the DEPB credit on the basis of DEPB Scrips fraudulently obtained by M/s. Trisuns. By the impugned order, the Adjudicating Authority confirmed the demand of duty alongwith interest and imposed penalties on M/s Trisuns on various issues. It has also confirmed the demand of duty equal to DEPB credit alongwith interest and imposed penalty of equal amount of duty against the importers (i.e. the appellants herein).
4. Heard both sides and perused the case reocords.
5. It is submitted by the appellants that the DEPB Scrip was valid at the time of importation of the goods, even at the stage of issue of Show Cause Notice and passing of the impugned adjudication order. The matter was heard at length on various dates. It is seen from the Tribunal Order No. I/163-233/2015 dated 29.04.2015., the Learned Authorised Representative for the Revenue requested time to take instruction from the Commissionerate as to whether DEPB Licence was cancelled in this case. On 29.06.2015, the learned Authorised Representative on behalf of the Revenue submitted Written Submission alongwith case laws and the matter was heard on 30.06.2015 and 13.08.2015. It was contended by the Revenue in the Written Submission that DEPB licenses were cancelled ab initio by the Development Commissioner, Kandla Special Economic Zone, Gandhidham vide Order-in-Original No. 01/2009-10 dated 28.01.2010. Thus, it is clear that while passing the impugned adjudication order dated 30.03.2007, DEPB licenses/scrips on the basis of which the appellant availed DEPB benefit, were valid.
6. The appellants imported various items without payment of duty under DEPB scrips purchased from the open market in the year 2000. Originally, the DEPB scrips were issued in favour of M/s. Trisuns against export of Castor Oil. The case of the Revenue is that DRI Authorities during investigation found that M/s. Trisuns is not eligible DEPB Scrips/Licences, as the goods were cleared from the Special Economic Zone and documents were manipulated to show the goods were cleared from the DTA Unit. As the DEPB licenses were obtained by the M/s. Trisuns, fraudulently, the appellants are not entitled to import duty free material on the basis of the said DEPB scrips. In the Show Cause Notice dated 27.07.2004, it was proposed demand of duty alongwith interest and to impose penalty on the appellants amongst others. Both the sides placed various decisions in their favour on merits as well as on limitation. We find that, the matter may be decided without going into the merits and only on limitation.
7. The Adjudicating Authority confirmed the demand of duty equal to DEPB credit on the appellants under the proviso to Section 28 of the Customs Act, 1962 alongwith interest at applicable rates. It has also imposed penalty equal amount of duty against the appellants/importers under Section 114 A of the Customs Act, 1962. The provisions of Section 28 of the Act 1962 as it stood during relevant period, is reproduced below:-
Section 28 . Notice for payment of duties, interest, etc. (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may,
(a)) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year;
(b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words one year and six months, the words five years were substituted.
8. On plain reading of proviso to Section 28(1) of Customs Act, 1962, it is clear that the extended period of limitation of five years would be invoked in case any duty has not been levied or has been short-levied or the interest, which has not been charged etc., by reason of collusion or any willful mis-statement or suppression of facts by the importer or the exporter or the agent of the employee of the importer or exporter. In the present case, all the appellants are importer. Section 2 (26) of the Customs Act, 1962, defined importer in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. There is no dispute that the appellants are importers. So, it is required to be considered as to whether the importers/appellants had committed any fraud or willful mis-statement etc., as mentioned in the proviso to Section 28 of the Act. The Adjudicating Authority observed that Bills of lading were forged to export of Russia, while the goods were delivered for other destination. The details of consignments in the shipping bills were deliberately misdeclared by M/s Trisuns and obtained DEPB on the basis of above exports and transferred them to different importers, who utilized them against clearance of duty free import of the goods. The appellants in reply of the show cause notice have taken the definite stand that they have purchased the DEPB licenses from the open market. In this context, the reply to show cause notice of M/s. Indian Petrochemicals Corporation Ltd. may be referred. It is stated that the DEPB in question against which they cleared the goods, had been duly endorsed as Transferable by the licensing authority and was thus freely transferable in law. In view of the DEPB having been endorsed as Transferable, they acquired the same bonafidely for valuable consideration from M/s. Trident (India) Ltd., Ahmedabad, who were the 1st Transferee, from M/s. Trisuns. When they acquired the said DEPB licenses by transfer, as also when they imported and cleared the goods under said DEPB, the same was valid and subsisting.
9. The main contention of the Learned Authorised Representative for the Revenue is that the DEPB licenses were obtained by misrepresentation, is an act equal to fraud. Once fraud is established, it vitiates everything including consequential benefits. The Learned Authorised Representative referred the relevant portion of the findings of the Adjudicating Authority, as under:-
In this regard, it is seen from the facts of this case that the core issue on which the whole case is pivoted is the DEPB scrips which were produced for seeking clearance of the imported goods by the various noticees (importers). The csrips were a result of fraudulent practice adopted by TCIL (B) and TCIL (Z) as already discussed in the foregoing paragraphs and as such does not give a validity to be admitted as a legal document for clearance of any imported goods. The scheme of notification 34/97-Cus is in the nature of permitting clearance of goods by debiting Duty Exemption Pass Book based on credits acquired instead of collecting cash. The DEPB as such is an instrument of payment of duty distinguishable from an import license. In fact as per the decision of Honble High court of Calcutta in the case of M/s ICI India Ltd., V/s Commissioner of Customs (Port) Calcutta (2005)(184) ELT 339(Cal):-
4. The DEPB licence/scrip is admittedly a negotiable one and is available in the market. Any one can purchase it from the market and avail of the credit out of it. This was so done by the appellant. But ultimately it was found that the said DEPB licences/scrips were forged. These facts are not in dispute as we find from the finding of the learned CEGAT. The only question that has been put forward, on the basis of the finding of the facts without challenging the same, is about the effect of absence of collusion on the part of the appellant, as pointed out earlier, in relation to the availability of the credit under the forged DEPB Scrips. But in the decision in United India Insurance (supra), the insured, but the Insurance Policy was not found to be forged. The question would be different if the document itself, on the strength whereof credit is claimed is forged. In that event, the same cannot be equated with merely an irregularity in the licence of the driver driving the vehicle in relation to the liability of the insurer in relation to a valid insurance policy under the Motor Vehicles Act providing for compulsory insurance to secure third party interest. In this case, the document itself having been found to be forged whether there was collusion or fraud on the part of the appellant in the issue of the DEPB licence/scrips becomes absolutely immaterial and irrelevant since no credit can be derived from a forged DEPB. If the DEPB is forged, then the same is non est and therefore, there is no valid DEPB. As such no credit can be derived thereunder. In such circumstances, one may defend his case that one may not be liable for collusion or fraud and exposed to other penalties therefore, but still then one would be liable to pay the duty and interest and for other statutory consequences which one cannot avoid. As such it has been very clearly held that the forged DEPB license book / scrips or licences obtained by resorting to fraudulent practices which are procured from market the question of whether there was collusion or fraud on the part of appellants in the issue of the licence/scrips becomes absolutely immaterial and irrelevant since no credit can be derived from such DEPB licence/scrips. The Honble Supreme Court vide its decision in ca No. 249 of 2005 filed by m/. ICI India ltd. dismissed the SLP and as such this judgement of Honble Kolkata High Court is fully applicable to the current case and would override the decisions relied upon by the importers.
10. In the case of M/s. ICI India Ltd. (supra), as heavily relied upon by the Adjudicating Authority, the document itself, on the strength whereof credit is claimed, is forged. In the present case, it is significant to note that, the appellant produced the DEPB licenses purchased from the open market on payment of the consideration. There is no dispute that the said DEPB licenses were valid at the time of importation, even at the stage of show cause notice and adjudication order. So, the facts in case of M/s. ICI India Ltd. is distinguishable. The Honble Gujarat High Court in the case of Prayagraj Dyeing and Printing Mills Pvt. Ltd. vs. Union of India 2013 (290) E.L.T. 61 (Guj) while dealing with proviso to Section 11 A of the Central Excise Act, 1944 peri-materia to Section 28 of the Customs Act, 1962 observed that extended period cannot be invoked for mere failure to pay duty and positive evasion of duty is required for this purpose. In that case, the assesses availed the CENVAT credit on the basis of the invoices issued by the supplier, which was subsequently found forged. The Honble Gujarat High Court set-aside the demand, as extended period of limitation cannot be invoked for the reason, the original document issued by manufacturer were genuine, who became untraceable and its holder purchased for valuable of consideration, and taken CENVAT credit on its basis, who is not party of the fraud committed by the manufacturer. The relevant portion of the said decision is reproduced below:-
10.?In this connection, we find substance in the contention of Mr. Parikh, the learned senior advocate appearing on behalf of the appellants, that there is a marked distinction between a forged document and a document issued by practising fraud. If it appears that a document is a forged one or a manufactured one, it is concocted or a created one in the eye of law and it is in the eye of law a non-existent document. On the other hand, a document issued in the context of a fraud or misrepresentation, is by itself a genuine document and according to settled law, such document is, at the most, voidable and is valid till it is set aside. A transaction that takes place on the basis of such document is good one and can even give a good title to the holder in due course for valuable consideration. At this juncture, we may profitably refer to the observations of the Supreme Court made in the case of CCE v. Decent Dyeing Co., reported in 1990 (45) E.L.T. 201 = (1990) 1 SCC 180 wherein, the Supreme Court held that it would be intolerable if the purchasers were required to ascertain whether excise duty had already been paid as they had no means of knowing it. It was further pointed out that duty of excise is primarily a duty levied on a manufacturer or purchaser in respect of a commodity manufactured or produced. As pointed out by a Division Bench of this Court in the case of Commissioner of Central Excise v. D.P. Singh reported in 2011 (270) E.L.T. 321, the judgment of the Supreme Court in the case of New India Assurance Company (supra), was distinguished, being one relating to a forged document which renders a document null and void, and as such, has no application to this type of cases. Similarly, reliance over the judgment of the Supreme Court in the case of Commissioner of Customs (Preventive) v. Aafloat Textiles (I) P. Ltd. reported in 2009 (235) E.L.T. 587, cannot be supported as Afloat case is one pertaining to a forged document but not in respect to a document otherwise genuine, issued by practising fraud. The facts stated in the case of Afloat indicated that the same was a case of a forged invoice and thus, the principles laid down therein cannot have any application to an invoice which is, otherwise, genuinely issued by a manufacturer registered with the Revenue. Justice Arijit Pasayat who delivered the judgment of the Supreme Court in the case of Afloat (supra), in a subsequent case of Commissioner of Customs v. Ajay Kumar & Company, reported in 2009 (238) E.L.T. 387, clearly indicated that the same being not a case of forged document but one of issue of license by practising fraud, the Tribunal was right in holding that the transferee of the license should not be made liable. It may not be out of place to mention here that the Tribunal, in its judgment, reported in 2006 (205) E.L.T. 747 indicated in paragraph-7 as follows :
if that be so, the concept that a fraud vitiates everything would not be applicable to cases where a transaction of transfer of license is for value consideration without notice, arising out of mercantile transactions, governed by common law and not provisions of any statute.
12.?The next question is whether demand of reversal is barred by the period of limitation. In our opinion, in view of our above finding that if the original document is issued even by practising fraud, a holder in due course for valuable consideration unless shown to be a party to a fraud, cannot be proceeded with by taking aid of a larger period of limitation as indicated in Section 11A(1) of the Act. It is now settled law that Section 11A(1) is applicable when there is positive evasion of duty and mere failure to pay duty does not render larger period applicable. In the case before us, it is not the case of the Revenue that the transferees were party to any fraud and therefore, the Revenue cannot rely upon a larger period of limitation. Our aforesaid view finds support from the following decisions of the Supreme Court :
(i) CCE v. Chemphar Drugs & Liniments, reported in 1989 (40) E.L.T. 276.
(ii) Padmini Products v. Collector of Central Excise, reported in 1989 (43) E.L.T. 195.
(iii) Lubrichem Industries Limited v. CCE, Bombay, reported in 1994 (73) E.L.T. 257.
(iv) Nesle (India) Limited v. CCE, Chandigarh, reported in 2009 (235) E.L.T. 577.
13.?We thus find substance in the contention of Mr. Parikh that in the case before us, in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied, and thus, even if the original document was assumed to be issued by practising fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the case before us. In this connection, we may profitably refer to the decision of the Supreme Court in the case of Commissioner of Central Excise, Belapur v. E. Merck India Ltd. reported in 2009 (238) E.L.T. 386 (S.C.) where the Supreme Court took a view that in the absence of a willful misdeclaration on the part of the respondent-assessee, there was no scope of invoking Section 11A of the Act.
11. In the present case, it is undisputed fact that the DEPB scrip/licence had been issued by the DGFT, against the export of goods, produced by the exporter. The appellants purchased DEPB scrips on payment of valuable consideration and it was valid document at time of import. There is neither any allegation nor evidence that the appellants were aware of the fraud committed by the exporter M/s. Trisuns. The goods were imported in the year 2000 and DEPB scrip was cancelled only on 28.01.2010. DEPB scrips issued by DGFT is itself genuine, at the time of import and valid till it is set-aside transaction on the basis said document was good and it is good title to holder for valuable consideration and the rights of such third party are required to be protected as held by the Honble High Court. The various decisions as placed by the appellants are as under:-
(a) Commissioner of Customs, Amritsar vs. Patiala Castings Pvt. Ltd. 2012 (283) E.L.T. 269 (Tri.-Del.), it has been held as under:-
7.?There is difference between a forged DEPB scrip, which is ab initio void, even if the same has been transferred on sale and a DEPB scrip actually issued by the DGFT, though on the basis of forged documents provided or false declaration made by the exporter, which is like a voidable contract. The two categories of DEPB scrips cannot be equated. In the former case, where the DEPB scrip, being forged/fabricated, is ab initio void, the judgment of Apex Court in case of Aafloat Textile Industries reported in 2009 (235) E.L.T. 587 (S.C.) will apply and duty can be demanded even from the transferee who had made duty free imports against the forged scrip and for this purpose, the principle of caveat emptor being applicable, longer limitation period under proviso to Section 28(1) would be applicable, while in the latter case, where the DEPB scrip had been validly issued by the DGFT, but being obtained by fraud/mis-declaration on the part of the exporter, was subsequently cancelled, the judgment of the Apex Court in case of East India Commercial (supra) and Sneha Sales Corporation (supra) will apply and duty can not be recovered from the transferee if before the cancellation of the DEPB scrips duty free imports had been made by the transferee and there is no evidence showing that the transferee had not acted bona fide or was aware of the fraud committed by the original holder of the DEPB scrip.
8.?Under the law of the contracts when a contract between two parties has been entered into by fraud or mis-representation on the part of one party and for this reason, the contract is a voidable contract which can rescinded by the other party, the right of rescission is lost if before rescission, the third party acting in good faith, acquires rights in the subject matter of the contract. Thus, when a person obtains some goods from another person by fraud and before the seller is able to avoid the contract, he disposes of the same to a bona fide third party, the seller can not recover the goods from the third party. Since as held by the Apex Court in the case of East India Commercial (supra), principles of law of contract apply to the issue of import licence, the above mentioned principle would apply to the present case also and unless it is proved that the respondent in this case, who obtained the licence on transfer/purchase basis from M/s. ATM International, had knowledge about licence having been obtained by M/s. ATM by fraud, the duty cannot be demanded from them, when at the time of import, the licence was a valid licence and had not been cancelled. In this case, there is neither allegation nor any evidence to show that the appellant had knowledge about the fraudulent mis-representation of M/s. ATM International in obtaining the DEPB scrips.
(b) Collector of Customs, Bombay vs. Sneha Sales Corporation 2000 (121) E.L.T. 577 (S.C.), it has been held by the Honble Supreme Court as under:-
4.Shri Anoop Choudhary, the learned Senior Counsel? appearing for the appellant in support of the appeal, has urged that the Tribunal was in error in interfering with the order passed by the Collector regarding confiscation of the goods as well as the imposition of penalty. As regards confiscation under Section 111(d) of the Act the submission of the learned counsel is that since the licences have been cancelled by Deputy Chief Controller of Imports and Exports ab initio the Collector was right in holding that there was no valid authorisation for the import of the goods and goods have been imported in contravention of the provisions of the Import (Control) Order, 1955 read with Imports and Exports (Control) Act, 1947. We are unable to accept this contention of the learned counsel in view of the law laid down by this Court in East India Commercial Company Ltd. v. Collector of Customs, Calcutta (supra) wherein this Court has said :-
Nor there is any legal basis for the contention that licence obtained by misrepresentation makes the licence honest. With the result that the goods should be deemed to have been imported without licence in contravention of the order issued under S. 3 of the Act so as to bring the case within cl. (8) of s. 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable; it is good till avoided in the manner prescribed by law.
5.In the aforementioned decision of this Court it? has been clearly laid down that in a case where the licence is obtained by misrepresentation or fraud it is not rendered non est as a result of its cancellation so as to result in the goods that were imported on the basis of the said licences and being treated as goods imported without a licence in contravention of the order passed under Section 3 of the Import and Export Act that fraud or misrepresentation only renders a licence voidable and it becomes inoperative before it is cancelled. In the present case the licences were cancelled by order dated December 18, 1986 after the goods had been imported and cleared. The Tribunal was, therefore, right in holding that the import of the goods was not in contravention of the provisions of Import and Export Order, 1955 and Import and Export (Control) Act, 1947 and the goods were not liable to be confiscated on that basis under Section 111(d) of the Act.
(a) Commissioner of Customs, Amritsar vs. Gopi Chand Krishan Kumar Bhatia 2013 (295) E.L.T. 739 (Tri. Del.) has been held as under:-
8.?In the background of the facts that -
(a) DEPB scrip/licence had been actually issued by DGFT, though against misrepresentation and forged papers produced by the exporter;
(b) there is neither allegation nor evidence that the respondent was aware of the fraud committed by the exporter - M/s. Amber Exports at the time of making imports; and
(c) at the time of import, in March 2000, the DEPB scrip was valid as the same was cancelled only on 7-12-2004;
the principle that fraud nullifies everything would not be applicable to the respondent, as -
(i) issue of DEPB scrip to an exporter by DGFT against certain stipulated export performance is like an agreement in the nature of grant and when the DEPB scrip has been issued against forged papers produced or misrepresentation by the Exporter, the agreement would be a voidable agreement and the DEPB scrip would be valid till it is cancelled;
(ii) in terms of Apex Courts judgment in case of Vikas Sale Corporation reported in [1996] 102 STC 106 and judgment of Honble Delhi High Court in case of Philco Exports v. STO reported in (2001) 124 STC - 503 (Cal.), REP licence and DEPB scrip are goods attracting sales tax on their transfer on sale;
(iii) in this case, when the respondent had obtained the DEPB scrip from M/s. Amber Exports on transfer and at the time of its use for duty free imports, he was not aware of the fraud committed by the seller/transferor M/s. Amber Exports, it is the provisions of Section 29 of the Sales of Goods Act readwith Sections 19 and 19A of the Contract Act which would be applicable and the respondent would have to be treated as having good title to the DEPB scrip;
(iv) it is the above principle which has been followed by the Apex Court in case of East India Commercial reported in 1983 (13) E.L.T. 1342 (S.C.) (para 35) and by the Tribunal in the case of Hico Enterprises v. C.C., Mumbai (supra) (paras 30 and 31); and
(v) the cases like this case, where a DEPB scrip actually issued by DGFT, though obtained by fraud by the Exporter, is used by a bona fide transferee who had no knowledge about the fraud committed by the Exporter, cannot be compared with the cases where the DEPB scrip had been forged/fabricated by a person and had not been issued at all by the DGFT and the forged/nonest DEPB scrip had been used for duty free imports by another person - in the second category of cases, it is the judgment of the Apex Court in case of Aafloat Textiles reported in 2009 (235) E.L.T. 587 (S.C.), which would apply.
(d) In the case of Binani Cement Ltd. vs. Commissioner of Customs, Kandla 2010 (259) E.L.T. 247 (Tri. Ahmd) it has been held that in the case of subsequent cancellation of DEPB License, such cancellation made when license have already utilized and executed and hence became non est. Such, licence will not have any effect on merits already made on the basis of such licence, which are valid at the time of import and the benefit of the exemption Notification cannot be denied. This decision of the Tribunal was upheld by the Honble Supreme Court by Judgement dated 27.02.2009 in Special Leave to Appeal (Civil) No. CC 2296/2009 (Commissioner of Customs, Kandla vs Binani Cements Ltd.).
12. The Learned Authorised Representative also relied upon various decisions as under:-
(a) Commissioner of Customs, Kandla vs. Essar Oil Ltd. 2004 (172) E.L.T. 433 (SC)
(b) Friends Trading Co. vs Union of India 2011 (267) E.L.T. 33 (P&H)
(c) Friends Trading Co. vs Union of India 2010 (254) E.L.T. 652 (P&H)
(d) Friends Trading Co. vs Commissioner of Customs, Amritsar 2006 (202) E.L.T. 611 (Tri-Del)
(e) APAR Ltd. vs Commissioner of Customs (Export), Mumbai 2012 (276) E.L.T. 534 (Tri-Mum)
(f) Dow Agroscience India Pvt. Ltd. vs. Commissioner of Customs, Mumbai 2012 (283) E.L.T. 524 (Tri-Mum)
(g) ICI India Ltd vs Commissioner of Customs, (Port), Calcutta 2005 (184) E.L.T. 339 (Guj)
(h) ICI India Ltd vs Commissioner 2005 (187) E.L.T. A31 (SC)
13. It is noticed that the above decisions have already been considered in the case laws, as relied upon by the appellants. So, there is no need to discuss the said decisions in detail. On the other hand, the decisions cited by the Learned Advocates on behalf of the appellants are directly on the issue. After considering the facts and circumstances of the case and the case laws, we hold that the demand of duty for the extended period of limitation cannot be sustained and therefore, the imposition of penalty would not be warranted.
14. In view of the above discussions, we set-aside the demand of duty alongwith interest and imposition penalty on the appellants as barred by limitation. All the appeals filed by the appellants are allowed.
(Dictated & Pronounced in open Court)
(P.M.Saleem) (P.K. Das)
Member (Technical) Member (Judicial)
govind
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