Custom, Excise & Service Tax Tribunal
M/S. Jimit Diamonds vs Commissioner Of Customs (Ii), Airport ... on 8 November, 2016
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
C/709, 821, 828, 876, 877, 965/05
(Arising out Order-in-Original No. Commr/MCT/11/05 dated 12.05.2005 passed by the Commissioner of Customs (Adj), Mumbai)
For approval and signature:
Honble Shri M.V. Ravindran, Member (Judicial)
Honble Shri Raju, Member (Technical)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
1. M/s. Jimit Diamonds
2. M/s. Chandan Gems
3. M/s. Suraj Diamonds & Jewellery Ltd.
4. M/s. Suchita Enterprises
5. M/s. Karni Enterprises
6. M/s. Alpha Export
Appellant
Vs.
Commissioner of Customs (II), Airport Special Cargo, Mumbai
Respondent
Appearance:
Shri T. Viswanathan, Advocate for appellant no. 3 Shri Anil Balani, Advocate for appellant no. 2 None for other appellants Shri C. Singh, AC(AR) & Shri M.K. Mall, AC (AR) for the respondents CORAM:
Honble Shri M.V. Ravindran, Member (Judicial) Honble Shri Raju, Member (Technical) Date of hearing : 20-10-2016 Date of decision : 08.11.2016 O R D E R No: ..
Per: Raju Appellant had procured REP licence from open market. The appellants are engaged in the manufacture and export of cut and polished diamonds. Rough diamonds are exempted under notification 36/96-Cus. The appellant had obtained the said REP licence after it had changed hands many times by open market transactions without involving office of DGFT. Notices were issued to the appellants seeking to confiscate the goods and impose penalty under Section 111 or 112 of the Customs Act. It was alleged that the appellant had purchased the said licences at a premium of 3-4% which was less than the market rate of premium which was 6%. On these grounds, it was alleged that the appellants were aware of the doubtful nature of the licences. The diamonds imported against REP licences were held to be liable to confiscation and various redemption fines were imposed on the appellants. Penalties under Section 112 of the Customs Act were also imposed on the appellant. Aggrieved by the said order, the appellants are before the Tribunal.
2. Shri T. Viswanathan, Advocate appeared for M/s. Suraj Diamonds & Jewellery Ltd. and Shri Anil Balani, Advocate appeared for M/s. Chandan Gems. Nobody appeared for other appellants. The matter was adjudicated by a common order and the facts in the case of all the appellants are similar. Ld. counsel for M/s. Suraj Diamonds & Jewellery Ltd. argued the matter. Ld. counsel argued that they have been purchasing licence from open marketing regularly and it is not necessary that they purchased the said licence directly from the person who had obtained the licence. In the instant case he argued that the licence had changed hands four times before they purchased the licence. He argued that they had purchased the licence at a premium of 3.6%. He argued that the prevailing rate of premium of such licences was 3 to 4=% as can be seen from the list of transaction annexed in their appeal at annexure 2. Ld. counsel argued that they were not aware that the licences have been obtained on the strength of forged documents and therefore no penal provisions can be invoked. Ld. counsel argued that at the time of imports, the licences were valid and the same have been cancelled much after the date of importation. Ld. counsel relied on the decision of the apex court in the case of East India Commercial Co. Ltd. 1983 (13) ELT 1342 (SC) and in the case of Sneha Sales Corporation 2000 (121) ELT 577 (SC). Ld. counsel argued that the notice is barred by limitation as the same has been issued after the period of five years. Ld. counsel argued that the maximum limitation period of five years which is applicable under Section 28 will also apply to the case of confiscation and penalty. Ld. counsel also argued that goods cannot be confiscated and redemption fine cannot be imposed as the goods are not available for confiscation. For these arguments ld. counsel relied on the decision of the Hon'ble High Court of Bombay in Finesse Creation Inc. 2009 (248) ELT 122 which has been confirmed by the apex court in 2010 (255) ELT A120 (SC).
3. Ld. AR relied on the impugned order. In the written submission, ld. AR reproduced certain para of the impugned order. Ld. AR relied on the decision of the Hon'ble Apex Court in the case of Aafloat Textiles (I) P. Ltd. 2009 (235) ELT 587 (SC). He argued that in view of the decision of the apex court no benefit of such licence can be granted to such appellant. Ld. AR also relied on the decision of the Bombay High Court in Vaibhav Exports 2009 (244) ELT 527 (Bom) to argue that penalty is imposable in cases even in the absence of mensrea. Ld. AR relied on the decision of the Hon'ble High Court of Punjab & Haryana in the case of Golden Tools International 2006 (199) ELT 213 (P&H) to assert that the ultimate beneficiary of a fraud cannot be held to be innocent.
4. We have gone through the rival submissions. We find that the common facts are that REP licences have been obtained on the strength of forged shipping bills. The licences have transferred hands a number of times in open market without endorsement of DGFT before it reached the appellant. The appellants have paid a premium of 3.4% of these licences. There is no allegation on the appellant of being involved in the fraudulent issue of licence. The licences were valid at the time of import of goods. We find that Hon'ble apex court in the case of East India Commercial Co. Ltd. (supra) has examined the issue in similar set of facts. In para 35 of the said decision, the apex court has observed as under:-
35. Nor is there any legal basis for the contention that licence obtained? by misrepresentation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause. (8) of Section 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. The decision of the Hon'ble apex court has been interpreted by the Hon'ble apex court in Sneha Sales Corporation (supra). The said decision while interpreting the decision of East India Commercial Co. Ltd. observed as follows:-
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.
5. In an identical case involved in REP licences, the Delhi bench of the Tribunal in Deep Exports 2016 (338) ELT 742 has observed as follows:-
12. Regarding lack of evidence on record to the effect that either the appellant or the commission agent had made any enquiry about the transferers. We find that the REP licences transferred were genuine documents issued by the competent authority. Even if the appellants had made any enquiry with the DGFT themselves as the issuing authority at the time of purchase or utilisation for import of gold, there is no way the validity of REP licence could have been put to question. This is clear from the fact that the fraudulent submission of forged bank document/ shipping bills by the original exporters who obtained the REP licence was unearthed much later by the detailed enquiry of the officers. We find the original authority extensively quoted and relied on the decision of Hon'ble Supreme Court in CC (Prev.) vs. Aafloat Textiles (I) P. Ltd. 2009 (235) ELT 587 (SC) = 2009-TIOL-42-SC-CUS. We have perused the said decision. The Hon'ble Supreme Court in that case was dealing with a Special Import Licence (SIL) which was forged and was never issued by the DGFT. The signature and security seal of the authority was forged. Now in the present case, the REP licences were issued by the competent authority and as such were genuine documents. However, the original parties/ exporters made fraudulent representation by giving forged documents to obtain such REP licences. As such there is a clear difference in facts between the case decided by the Hon'ble Supreme Court and the present case. In this connection, we may refer to the decision of the Hon'ble Supreme Court in East India Commercial Co. Limited- 2002-TIOL-138-SC-LMT-CB, it was held as under:
"35. Nor is there any legal basis for the contention that licence obtained by misrepresentation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause (8) of Section 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. On May 1, 1948, the Central Government issued an order in exercise of the power conferred on it by Section 3 of the Act to provide for licences obtained by misrepresentation, among others, and it reads:
In the circumstances, we must hold that when the goods were imported, they were imported under a valid licence and therefore it is not possible to say that the goods imported where those prohibited or restricted by or under Chapter IV of the Act within the meaning of Clause (8) of Section 167 of the Sea Customs Act.
The Apex Court in the case of Union of India vs. Sampat Raj Dugar -2002-TIOL-141-SC-CUS-LB held that when on the date of import the goods were covered by a valid licence, subsequent cancellation of licence is of no relevant nor does it retrospectively render the import illegal.
Again, in CC vs. Sneha Sales Corporation - 2002-TIOL-440-SC-CUS held that licence obtained by misrepresentation or fraud does not make it non est as a result of its cancellation. As per Section 3 of the Import and Export Act misrepresentation or fraud renders a licence voidable. When the goods were imported and cleared before such cancellation, contravention of import cannot be alleged."
6. In the instant case the goods which were imported against the licence have been processed and disposed of by the appellant. The goods are not available for confiscation. The goods have not been seized or released against a provisional bond. In these circumstances, the decision of the Hon'ble High Court of Bombay in Finesse Creation Inc. (supra) is squarely applicable in the said decision, the Hon'ble High Court has observed as follows:-
5. ?In our opinion, the concept of redemption fine arises in the event the goods are available and are to be redeemed. If the goods are not available, there is no question of redemption of the goods. Under Section 125 a power is conferred on the Customs Authorities in case import of goods becoming prohibited on account of breach of the provisions of the Act, rules or notification, to order confiscation of the goods with a discretion in the authorities on passing the order of confiscation, to release the goods on payment of redemption fine. Such an order can only be passed if the goods are available, for redemption. The question of confiscating the goods would not arise if there are no goods available for confiscation nor consequently redemption. Once goods cannot be redeemed no fine can be imposed. The fine is in the nature of computation to the state for the wrong done by the importer/exporter.
7. In view of the above decisions and facts and circumstances in these cases, the appeals are allowed and impugned order is set aside.
(Pronounced in Court on ...............................) (M.V. Ravindran) Member (Judicial) (Raju) Member (Technical) //SR
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C/709/05 & Ors.