Custom, Excise & Service Tax Tribunal
M/S Pee Jay International vs Cc, Amritsar on 21 October, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. COURT NO. III Date of Hearing : 1.6.2011 Date of Pronouncement : 20.10.2013 For approval and Signature: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Shri Mathew John, 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? 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 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 Custom Appeal No. 619-620 of 2006-Cus. [Arising out of Order-in-Appeal No. 27-29/Cus/Appl/Ldh/2006 dated 28.8.2006 passed by the Commissioner of Customs, Chandigarh] M/s Pee Jay International Appellant Vs. CC, Amritsar Respondent
Appearance:
Appeared for Appellant : Shri Amit Jain, Advocate
Appeared for Respondent : Shri K.K. Jaiswal, SDR
Custom Appeal No. 1 and 72 of 2007
[Arising out of Order-in-Appeal No. 27-29/Cus/Appl/Ldh/2006 dated 28.8.2006 passed by the Commissioner of Customs, Chandigarh] CC, Amritsar Appellant Vs. M/s Pee Jay International Respondent Appearance:
Appeared for Appellant : Shri K.K. Jaiswal, SDR
Appeared for Respondent : Shri Amit Jain, Advocate
Coram:
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Shri Mathew John, Member (Technical)
Misc Order No. C/284/2011
FO 58350-58353/2013
Per Mathew John:
There are four appeals being decided in this Appeal. Two are filed by the importer and two are filed by Revenue. All the four Appeal arise from the same impugned order. The adjudication order confirmed the duty demanded and imposed redemption fine and penalty. In appeal Commissioner (Appeals) upheld the duty demanded but set aside fine and penalty. Both sides are aggrieved about the order of Commissioner (Appeals) and have filed these appeals.
2. This is a case where the Appellant purchased Duty Exemption Pass Book license No. 3010006203 dated 10-10-2000 from M/s Beni Exports Jalandhar and utilised it for payment of duty on goods imported by the Appellant under Bill of Entry No. 533 dated 12-10-2010 and BE No. 564 dated 19-10-2010. Later investigations conducted by revenue showed that the DEPB Scrip was obtained by fraud by Beni Exports. On 24-10-2001, DGFT Ludhiana cancelled the said DEPB scrip.
3. The short point in dispute is whether the duty forgone by the department on imports made by the Appellant using the said fraudulent DEPB scrip can be demanded and recovered from the Appellant. The Commissioner (Appeal) has waived the penalty imposed on the importer. Revenue has challenged such waiver.
4. The arguments on behalf of the Appellant are that they purchased the DEPB scrip in good faith against payment of consideration and utilized it under the bonafide belief that the license did not have any blemish. It is also emphasized that on the date of import of the goods the DEPB scrip was valid. It is argued that for recovery of short paid customs duty, Notice has to be issued under section 28 of the customs act within 6 months from the relevant date and the period can be extended only if the Appellant had done any fraud. Since no fraud on the part of the Appellant is alleged it is argued that the extended period cannot be invoked and hence the demand is time barred.
5. It is argued by the ld. Advocate that the decision of the Tribunal in the case of ICI India Limited Vs CC 2005 (184) ELT 339 is not applicable to the case because in that case the license itself was a forged one whereas in this case the license was in fact issued by JDGFT and was valid at the time of import of the goods. The ld. Counsel relies on the decision of the Supreme Court in CC Bombay Vs. Sneha Sales Corporation- 2000(121) ELT 577 SC. Para 5 of the order reads thus:
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.
6. The ld. Advocate further relies on 25 decisions of Tribunal, different High Courts and the Apex Court. Since the Revenue is relying on one decision of the Apex Court in this matter in the case of Friends Trading Company, I propose to list and examine only the decisions of the Apex Court cited by the Appellant which are the following:
S.No. Case Law 1. East India Commercial Co. Ltd. v. CC-1983 (13) ELT 1342 (SC) 2. CC vs. Sneha Sales Corp. - 2000 (121) ELT 577 (SC) 3. CC vs. Ajay Kumar - 2009 (92) RLT 883 (SC) 4. CC vs. Leader Valves Ltd. - 2007 (227) ELT A29 (SC) 5. CC vs. Hico Enterprises - 2008 (228) ELT 161 (SC) 6. CC vs. Aafloat Textiles - 2009 (91) RLT 719 (SC) 7. Larson & Turbo Ltd. vs. CC - 2007 (211) ELT 513 (SC) 7. The LD. DR on the other hand relies on the following decisions:
(i) Friends Trading Co Vs. UOI- 2010 (254) ELT 652 (P&H) affirmed by Supreme Court in decision reported at 2010 (258) ELT A72 (SC).
(ii) CC Vs. Sona Castings- 2010 (259) ELT (Tri-Del).
8. The facts in this case are identical to that in the case of Friends Trading Co. and that in the case of Sona Casting (Supra). DEPB scripts were obtained on the basis of fraudulent documents. The script was cancelled by DGFT only after import of the goods by the transferee of the license.
9. The case of East India Commercial Co. Ltd is the earliest of the cases quoted by the Counsel for Appellant. This case was under the old Sea Customs Act, 1878. Further it was about violation of post import condition that the goods should have been used by the importer himself that is the goods should not have been sold. So this decision is not relevant to the facts of present case. The present position in the matter is quite different because of section 111(o) of Customs Act 1962 and the decision of Apex Court in CC Vs. Jagdish Cancer and Research Center 2001 (132) E.L.T. 257 (S.C.) and also in CC Vs WOCKHARDT HOSPITAL & HEART INST.- 2006 (200) E.L.T. 15 (Bom.)
10. The second decision namely that in CC Vs. Sneha Sales Corporation, the matter was similar to the facts of the case at hand but with the difference that the license was for permitting imports and not a license authorizing exemption from duty.
11. The facts of CC vs. Ajay Kumar (Supra) are similar to that in the present case. It is seen that in this case, the Apex Court decided that the extended period of 5 years under section 28 cannot be invoked in such cases. This view was affirmed in the case of CC Vs. Leader Valves (supra).
12. The facts in the case of CC Vs. Hico Enterprises are very different from the facts of the present case. The issue was whether the transferee is bound by the post import obligation to export certain goods which was a condition for issuing the Advance License. The Court decided that the obligation is with transferor and not with transferee.
13. In the case of CC (Prev) Vs. Aafloat Textiles India Ltd the Apex Court held that the licenses were forged. The transferee, the importer did not make adequate enquires before buying the licenses and hence the extended period of time under section 28 was held to be applicable. The Respondents case is that he had made enquires with JDGFT and hence the extended period of time should not apply in his case.
14. The facts of the case of Larson and Toubro is very different. It is cited only to argue how the Respondent is protected from invoking extended period of time because of his bonafide belief and actions.
15. A DEPB script is similar to a cheque drawn on the Government exchequer and is transferrable by endorsement. However it is not a negotiable instrument enjoying the protection of section 120 of the Negotiable Instruments Act. So the transferee, even for bonafide consideration, cannot get a better claim than the transferor against government, the drawee. So a transferee in such transaction has to exercise the well known maxim caveat emptor, though this maxim is relevant strictly for his right against the transferor and not against the drawee. If he has not exercised due care about the bonafides of the transferor while purchasing scripts, adverse consequence due to such negligence will follow, as is the consequence of the decisions of the Apex Court in the cases of Aafloat Textiles and Friends Traders and needs no further discussion.
16. The only issue to be discussed is whether the extended period under section 28 of Customs Act can be invoked in such cases for demand of revenue loss caused to the exchequer by the fraudulent activity of the transferor by demanding duty foregone on imports made by the transferee. In the cases of Ajay Kumar and that of Leader Valves (supra) the Apex Court held that extended period cannot be invoked against the transferee. In the case of Aafloat Textiles and Friends Trading Supra, the Apex Court took a contrary view. The latter decisions of the Apex Court are later decisions. Thus there has been change in the approach of the Apex Court. We are bound by the views of the latest decisions of the Apex Court in this regard.
17. However we notice that the Honorable High Court of Punjab and Haryana has held in the case of The Mall Amritsar V. M/s Parkar Industries Jalandhar- 2007 (207) ELT 658 and in the case of Friends Trading Co. Supra held that in such situations it is not proper to impose penalty on the transferee who imported the goods. We respectfully follow these decisions.
18. Therefore all the four Appeals are rejected.
(Archana Wadhawa) Member(Judicial) (Mathew John) Member(Technical) Per Archana Wadhwa
19. After having gone through the order proposed by my learned Brother, though I agree with him that the appeals filed by the Revenue are to be rejected, I do not find myself in agreement with my learned brother that the appeals filed by the assessee are required to be rejected. Accordingly, I proceed to record a separate order.
20. As the simple facts involved in the present appeal stands adverted to in the order proposed by learned Member (Technical), I am not repeating the same so as to avoid redundancy. The short issue involved in the present appeal is as to whether the appellants are entitled to the benefit of duty free imports made by them against DEPB scrips which were admittedly valid at the time of imports. Learned brother relied upon the Punjab and Haryana High Court decision in the case of Friends Trading Co. vs. UOI and the Tribunals decision in the case of CCE vs. Sona Castings. I have seen the said two judgements. Whereas in the case of Friends Trading Co., there is nothing on record to show as to whether the DEPB scrips were cancelled by the DGFT authorities before or after the imports were completed, the Tribunals decision in the case of Sona Casting has not taken note of Larger Bench decision of the Tribunal in the case Hico Enterprises vs. CCE Mumbai [2005 (189) ELT 135 (LB)] as confirmed by the Honble Supreme Court as reported in [2008 (228) ELT 161 (SC)].
21. As against the above, I find that there are catena of judgements laying down that if the DEPB scrips are valid at the time of import of the goods, the transferee cannot be held liable for consequences, on subsequent cancellation of the scrips by the DGFT authorities. I would like to refer to the detailed order of the Larger Bench of the Tribunal in the case of Hico Enterprises. It stands concluded by the Larger Bench, after examining the various precedent decisions of various jurisdiction as also quasi judicial authorities that the licences issued by DGFT authorities are issued after arriving at the satisfaction of various conditions / export obligations of the original licence holder. Such satisfaction arrived at by the DGFT authorities is binding on the customs department. The transferee of such licence cannot prove, once again, fulfilment of the obligations on the part of the original licence holder. It stands held by the Larger Bench that the maxim that fraud vitiate everything is not applicable in respect of third parties right created by bonafide transaction. The department can resort to any remedy ordinarily available under the law and proceed against the exporter, who procured the licence by mis-representing the facts. It stands observed by the Larger Bench that inasmuch as the transferability is granted by DGFT only after the export obligation is discharged by the licence holder in terms of DEEC scheme / notification including the satisfaction of the condition that exporter / licence holder has not availed the modvat credit on inputs, the transferee of the licences, who purchased the same from the open market and get the transfer endorsement from DGFT, can legally presume that export obligation had been fulfilled without availing of inputs credit and satisfying the condition of the notifications. Accordingly, it was held that assuming that the original licence holder has committed fraud and obtained transferability by mis-representation even then the rights created by the licence in favour of the importer is valid. Such a transaction is voidable and not void ab initio. Accordingly, it was held that the legal maxim LEX NON COGIT AD IMPOSSIBILIA can be invoked and transferee cannot be called upon to reverse the benefits availed under the licence on the ground that original licence holder has obtained it by fraud.
The said decision of the Larger Bench stands approved by the Honble Supreme Court when the appeal filed by the Revenue was rejected as reported in [2008 (228) ELT 161 (SC)]. By a detailed order, the Honble Apex Court concluded that the judgement of the CESTAT does not suffer from any infirmity to warrant interference.
22. I find that the above Larger Bench decision, as confirmed by the Honble Supreme Court, is fully applicable to the facts of the present case. The observation made by learned Member (Technical) that the issue in that case was as to whether the transferee is bound by the post import obligation to export certain goods which was a condition for issuing the advance licence, with respect, may not be appropriate. The sole issue before the Larger Bench according to my understanding, was as to whether the licence, obtained without fulfilling the conditions of the notification No. 203/92 by the original licence holder can be made a ground for denying the duty free imports to the subsequent transferee of the same. As such, I am of the view that the issue in the present appeal stands fully covered by the decision of the Larger Bench of the Tribunal as confirmed by the Honble Supreme Court.
23. I further find that the reliance placed on the Honble Supreme Court decision in the case of CCE vs. Aafloat Textile (I) Pvt. Ltd. may not be appropriate inasmuch as the licences in that case were admittedly forged licences. The effect of the same would be as if the licence never existed in the eyes of law. In the present case, admittedly the licensces are not forged but the same stands issued by DGFT in accordance with the law and were valid at the time of import of the goods. Subsequent cancellation of the same by DGFT would not effect the appellants right to import the goods free of duty, at the time, when the licence were admittedly valid licence. The appellant could not have forecast that the bonafide purchase of the licence from the market is going to be cancelled subsequently by the DGFT. Once the DGFT authorities issued the licence, it has to be presumed that the same were issued after satisfying the genuineness of the documents presented before them by the original licence holder. If DGFT has failed to examine, verify, and to arrive at a correct finding of fact of genuineness of such documents and issued the same and allowed the transfer of the same, a bonafide purchaser in the market cannot be held liable to bear the consequences of the lapses on the part of the DGFT. It cannot be out of place to mention here that the difference between a forged licence and the licence procured on the basis of mis representation is the same as the difference between a fake Rs.500 note or Rs.1000 note and genuine note transferred by the holder by making some mis-representation. Where as the fake Rs.500/- note would mean as if there is no money in the hands of possessor of the same, the original Rs.500/- note that was procured by mis-representation would result in the possessors right to use the same. At this point, I also take note of the Tribunals decision in the case of Ajay Kumar & Co. vs. CC [2006 (205 ) ELT 747 (Tri-Del)] laying down that DEPB scrips procured by the original allottee by fraud but valid at the time of import by transferee, would not result in denial of the benefit of the same even when the same are subsequently cancelled by the authorities. The said decision of the Tribunal was upheld by the Honble Supreme Court when the appeal filed by the Revenue was rejected, as reported in 2009 (92) RLT 883 (SC). By following the Larger Bench decision in the case of Hico Enterprises as confirmed by the Honble Supreme Court, it was held that inasmuch as there was no reference to the alleged infraction of M/s. Parker Industries, from whom the appellant in that case had procured the DEPB scrips, the Honble Supreme Court held that there was no infirmity in the Tribunals order.
24. Apart from the above, I also find that the imports were made in October, 2000 and the licences were cancelled by DGFT in October 2001. Thereafter, show cause notice was issued to the appellant by invoking the longer period of limitation. The demand stands raised in terms of provisions of section 28 of the Customs Act, 1962. The said section lays down the normal period of limitation as also the extended period of limitation for issuing show cause notice for recovery of duty not paid, short paid or erroneously refunded. Proviso to said section is to the effect that where such non-levy, short levy etc. is by reason of collusion, or wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provision of this section shall have the effect as if for the word one year and 6 months, the words five years were substituted. Such and only such reasons as mentioned in the said proviso enables the Revenue to invoke the extended period of limitation. The duty in the present case is being demanded from the importer on the ground that licence used by him were procured by the original licence holder / seller by mis-representing facts before the DGFT authorities. There is no allegation of any mis-representation or fraud or collusion or suppression of facts on the part of the importer. The fraud committed by a third party cannot result in availability of longer period to the Revenue so as to raise the demand against the importer i.e. the person to whom the show cause notice is being issued. The various factors detailed in the said proviso must relate to the person to whom the show cause notice is being issued. Inasmuch as in the present case it is not the Revenues stand that the present appellant mis-stated or suppressed any facts with intent to evade payment of duty or can be attributed with any other factor enumerated in the said proviso. I am of the view that demand of duty is to be held as barred by limitation.
25. For the above proposition, I again refer to the Tribunals decision in the case of Ajay Kumar Co. as upheld by Honble Supreme Court, referred in the preceded paragraph. Reference is also being made to the Tribunals decision in the case of CC vs. Binani Cement Ltd. [2008 (231) ELT 171 (Tri-Ahmd)] wherein it was held as under:-
5.?After considering the above statements, I find that the duty demand was made against the respondent under the provisions of Section 28(1) of the Customs Act which allows invocation of longer period in case of collusion, wilful misstatement or suppression of facts. The above circumstances should be present qua the importer i.e. the person against whom the demand is being made and not against the exporter i.e. the person who has procured the DEPB passbook and transferred the same to the importer against consideration. As such, I am of the view that setting aside of demand on the point of limitation by Commissioner (Appeals) is legal and proper.
26. The said decision of the Tribunal was upheld by the Honble High Court of Gujarat as reported in 2008-TIOL-622-HC-AHM-Cus. For better appreciation I reproduce para 6, 7 and 8 of the High Courts decision :-
6.?In fact, in Paragraph No. 4 of the order of Tribunal, it is recorded Revenue in their memo of appeal have not attributed any mis-statement or suppression of fact to the respondent herein. They have simply asserted that the case involved fraud committed by the exporter resulting in clearance of imported goods without payment of duty by importer and as such, Revenue should be allowed to recover the customs duty.
7.?In the aforesaid factual matrix after appreciation of evidence on record, the Tribunal has come to the conclusion that there is no collusion, willful misstatement or suppression of facts qua the importer namely the person against whom the demand is being made. The Tribunal has thus upheld the view expressed by the Commissioner (Appeals).
8.?In light of the aforesaid facts and circumstances of the case, it is apparent that there is no error in law committed by the Tribunal so as to warrant interference. No question of law, as proposed or otherwise, much less a substantial question of law can be said to be arising out of the impugned order of Tribunal. The appeal is accordingly dismissed.
27. Reliance can also be placed upon the decision of Honble Punjab and Haryana in the case of CC Amristsar vs. Vallabh Design Products [2007 (219) ELT 73 (P&H)] wherein the Honble High Court held that show cause notice, invoking the longer period, could not be issued to the importer because the period of six months stipulated by Section 28 of the Customs Act stood already expired and the rights of the parties have been crystallised, the imports having been affected before cancellation of exports. The Honble Court further observed that the Revenue cannot avail the extended period because the transferee importer has not been accused of mis-representation or collusion or suppression of facts within the meaning of proviso to Section 28 of the Customs Act. To the similar effect is the other decision of the Tribunal in the case of CCE Leader Valves Ltd. [2007 (218) ELT 349 (P&H)] laying down that the assessee not being party to the fraud committed by the original licence holder and having purchased the DEPB scrips from the market in the bonafide belief of its being genuine after paying full price. The extended period cannot be availed by the Revenue, inasmuch as the subsequent transferee importer cannot be accused or mis-representation collusion or mis-statement of facts within the meaning of proviso to section 28. The said judgement of Honble Punjab & Haryana High Court stands confirmed by the Honble Supreme Court when the appeal filed by the Revenue was rejected, as reported in [2007 (227) ELT A 29 (SC)]. A reference to another decision of Punjab and Haryana High Court case can be made in the case of CC, Amritsar Vs. Deebee Marketing Pvt. Ltd. as reported in [ 2009 TIOL-225-HC-P&H-Cus]and another judgement of Punjab and Haryana High Court in the case of CC, Amritsar vs. M/s. Fertichem India vide their order dated 27.1.2009 in Customs Appeal No. 23/2006. In the case of Kamani Oil Industries vs. CC, New Delhi as reported in [2006 (196) ELT 21 (Tri-Del)], the Tribunal while dealing with the Revenues contention observed that reference of suppression or mis-statement under the proviso to Section 28 to importer or exporter can only be to the import or exporter of the consignment which is liable to duty and not to the other exporters or other importers.
28. A reference at this stage may be made to the Tribunals decision in the case of Binani Cement Ltd. [2008 -TIOL-2058-AHMD-CUS] There was originally difference of opinion between the two Members as regards the merits of the case as also on the point of limitation. The dispute was resolved by third Member. Learned Member (Technical) agreed with Member (Judicial) on both grounds i.e. merits and limitation. It was held by majority decision that the fraud committed by the exporter cannot be a ground for invoking the longer period against the importer. The proviso to Section 28 of the Act refer to two categories of persons either the importer or the exporter for invoking the longer period. In terms of the said section, suppression or mis-statement has to be on the part of the concerned assessee. As such, demand in that case was held to be barred by limitation. Inasmuch as in the present case as there is no allegation of suppression or mis-statement to the appellant, who is the importer of the goods, I find no reason to permit the Revenue to raise the demand by invoking the longer period of limitation.
29. Another reason for holding that the extended period would not be available to the Revenue is that Commissioner (Appeals) himself has held that no penalty is leviable on the importer. The said part of the impugned order of the appellate authority stands agreed upon by the learned Member (Technical). Once it is held that no penalty is required to be imposed on the appellants, the same reflects upon the fact of absence of any malafide intention to evade payment of duty on the part of the appellants. If that be so, the invokation of longer period, which also includes factum of malafide, cannot be permitted. In this regard I may refer to Tribunals decision in the case of Indian Petrochemicals Corpn. Ltd. vs. CCE, Vadodara as reported in [2009 (237) ELT 317 (Tri-Ahmd)] laying down that once penalty does not stand imposed on the ground that there was no malafide on the part of the appellants, it has to be held that there was no intention to evade payment of duty and the same criteria would apply for the purpose of limitation.
30. For the reasons recorded as above, I am of the view that the appeal filed by the appellant is required to be allowed. However, as already observed, I agree with my learned brother Member (Technical) that the Revenues appeal are required to be rejected.
(Archana Wadhwa) Member(Judicial)
Difference of Opinion
(1) On merits of the case whether the appeal filed by M/s. Pee Jay International is required to be rejected as held by learned Member (Technical) or the same is required to be allowed as held by learned Member (Judicial) ?
(2) Whether law declared by the Larger Bench of the Tribunal in the case of Hico Enterprises as affirmed by Honble Supreme Court is applicable to the facts of the instant case or not ?
(3) Whether the demand has to be held as barred by limitation as observed by Member (Judicial) or the larger period of limitation is available to the Revenue to raise the demands against the appellants.?
(Archana Wadhwa) Member(Judicial)
(Mathew John) Member(Technical)
ss
PER: D.N.PANDA
31. Reference was returned twice to the original bench to settle the facts of the case so as to reach to a proper conclusion. But that bench again and again with out settling the facts referred the questions framed therein to the Honble President under his administrative Jurisdiction for reference to third member. Accordingly the matter come up before me for the third time. Taking the material on record and following the judgment of Honble Bombay High Court in the case of Union Bank of India V. Canara Bank - 2012 (283) ELT 5 (Bom) the reference is answered in the following paragraphs.
32. Uncontroverted material facts is apparent from Para 22 to Para 31 of the adjudication order which reveals that M/s. Beni Exports, Jalandhar had fraudulently obtained 17 transferable DEPB Scrips of Rs.94,56,262/- submitting forged Bank Realization Certificate (BRC) which were cancelled ab-initio by the Jt. DGFT, Ludhiana vide Order in file NO.9/11/AM2002/ECA/LDH/25669 dated 24.10.2001.
33. One Shri Balbir Chand who was master mind behind the above fraud had floated a firm called M/s. Beni Exports in Jalandhar making his driver Shri Rakesh Kumar as benamindar owner thereof with the sole object of defrauding Revenue. To satisfy his greed, Rakesh Kumar took Rs.50,000/- from Balbir Chand for performing marriage of his sister and also made a foreign trip financed by Balbir. He travelled to Dubai carrying with him 20,500 US Dollar to hand over that money to one Vinod Kumar for transferring 20,000 US Dollar to State Bank of Bikanir and Jaipur at Jalandhar keeping 500 Dollar with him. Balbir was beneficiary of that remittance to show that as Bank realisation from export.
34. Using above fraudulent bank remittance, DEPB scrips were obtained by M/s. Beni Exports, Jalandhar under fraud. M/s.Pee Jay International, Ludhiana was beneficiary of the said scrips as a transferee. It was admitted fact that none of the Shipping Bills, invoices, packing list as well as Bank realizations by Beni exports were credible evidence entitling it to DEPB scrips. Balbir Chand deliberately avoided investigation and left India to Canada.
35. Aforesaid material facts remained unrebutted during adjudication as well as is in appeal hearing before Tribunal as is appellant from the order referred. So also that remained uncontroverted in the course of reference hearing. It was conclusively evident from record that DEPB scrips were fraudulently obtained by M/s Beni Exports without any lawful title thereon. M/s Beni Exports having no title over the non est DEPB scrips transferred that to the appellant who failed to acquire any good title over the same. Such scrips were used by appellant to discharge customs duty on imports made by it.
36. Above act of the appellant caused prejudice to Revenue since the scrips were non est and obtained under fraud. It is settled principle of law that no Court in this country can allow any benefit of fraud to be enjoyed by anybody as has been held by Apex Court in the case of Chengalvaraya Naidu reported in 1994 (1) SCCI:AIR1994 SC 853. Ram Preeti Yadav v/s U.P. Board High School and Inter Mediate Education (2003) 8 SCC 311, and K.I. International reported in 2012 (282) ELT 67 (Tri.Chennai).
37. On the aforesaid material facts and evidence, following points of difference between the members of original bench arose and those were referred for answering by the third member:
(1) On merits of the case whether the appeal filed by M/s. Pee Jay International required to be rejected as held by learned Member (Technical) or the same is required to be allowed as held by learned Member (Judicial)?
(2) Whether law declared by the Larger Bench of the Tribunal in the case of Hico Enterprises as affirmed by Honble Supreme Court is applicable to the facts of the instant case or not?
(3) Whether the demand has to be held as barred by limitation as observed by Member (Judicial) or the larger period of limitation is available to the Revenue to raise the demands against the appellants as held by Member (T).
38. In the course of reference hearing, no attention to any material or evidence was invited to appreciate that the DEPB scrips were genuine and not obtained fraudulently.
39. It was an established fact on record that Rakesh Kumar was a mere benamidar proprietor of M/s Beni Exports and was aware of the entire ill design of Balbir Chand who was master mind behind the fraudulent DEPB scrips obtained in the aforesaid manner. Ld. Counsel for assessee in the course of hearing only supported order recorded by ld. Judicial Member who opined to allow the appeals of assessee while both Members dismissed Revenues appeal. It was submitted that assessee the appellant not being involved in the fraud, it is entitled to use the DEPB scrips acquired from M/s Beni Exports. Therefore, there shall not be levy of any duty demand, redemption fine or penalty.
40. It is an established fact on record that there was no DEPB scrips in existence in the eyes of law for transfer thereof to the appellant for use against discharge of import duty by the appellant. In ICI India Limited v. CC (Port), Calcutta - 2005 (184) E.L.T. 339 (Cal.) as affirmed by Apex Court in appeal by ICI India Ltd. and reported in 2005 (187) E.L.T. A31 (S.C.) it has been held that the DEPB scrip is a negotiable instrument and is available in the market. Anyone can purchase it from the market and avail of the credit out of it. But, ultimately if that is found to be forged, fake or not acquired lawfully nor legitimate, credit cannot be derived therefrom. It is also settled principle of common law that a purchaser does not acquire better title if transferor had no title or title is ab initio void. Similarly title not acquired legitimately is also void. Therefore a purchaser of non est or ungenuine DEPB scrip fails to acquire any good title over the same being ab initio void as has been held by Honble High Court of Punjab & Haryana in the case of Friends Trading Co. and Another v. Union of India - 2010 (254) E.L.T. 652 (P&H) and affirmed by Apex Court as reported in 2010 (258) E.L.T. A72 (S.C.). This principle has also been recognized under Section 27 of the Sales of Goods Act, 1932. In a batch of cases reported as CC, Mumbai v. M/s. Vaibhav Exports, Mumbai & Others - 2009-TIOL-673-HC-MUM-Cus. = 2009 (244) E.L.T. 527 (Bom) it has been held by Honble High Court of Bombay that forged licensees, in law are no licensees.
41. Appellant acquired non est, unlawful and illegitimate DEPB scrip from market without causing enquiry with the issuing authority thereof to avoid evil consequence of fraud. Failure to make such enquiry led him to great risk when non est scrips were used against discharge of duty and such fraud detected by Revenue. Therefore, appellant is liable to make good of the loss of duty suffered by Revenue.
42. Any one becoming beneficiary of non est, fake, forged or illegitimate DEPB scrip, fails to plead bar of limitation against adjudication under section 28 of the Customs Act, 1962 as is held in CC V. Candid Enterprises 2001(130) ELT 404 (SC). The appellant did not come out with clean hands to show that the DEPB scrips used by it were genuine. Material evidence establishes that the scrips were non est and fraud was committed against Revenue. White collar crimes committed under absolute secrecy are not exonerated from penal consequence of law as has been held by Apex Court judgment in the case of K.I. Pavunny v. AC, Cochin - 1997 (90) E.L.T. 241 (S.C.). Similarly no adjudication is barred under Section 28 of the Customs Act, 1962 if Revenue is defrauded for the reason that enactments like Customs Act, 1962, and Customs Tariff Act, 1975 are not merely taxing statutes but are also potent instruments in the hands of the Government to safeguard interest of the economy. One of its measures is to prevent deceptive practices of undue claim of fiscal incentives.
43. When fraud is established that unravels all as has been held by Apex Court in the case of UOI v. Jain Shudh Vanaspati Ltd. - 1996 (86) E.L.T. 460 (S.C.) and in Delhi Development Authority v. Skipper Construction Company (P) Ltd. - AIR 1996 SC 2005. Any undue gain made at the cost of Revenue defrauding it is to be paid back to treasury since fraud committed against Revenue void all judicial acts, ecclesiastical or temporal and no good title over DEPB scrip has no value in the eyes of law for any purpose. Tribunal in the case of CC v. D.M. Enterprises - 2007 (213) E.L.T. 414 held that fraudulently obtained DEPB credits has no title on the face of law and it was also held in DIC India Ltd. v. CC - 2008 (226) E.L.T. 545 that forged and fake DEPB scrip do not confer any title on the claimant or transferee thereof who uses such ab initio void scrips. In the case of ICI India Ltd. v. CC-2009 (240) E.L.T. 290, it has been held by Tribunal that transaction based on fraud continues to be tainted by the vice and the person committing the fraud is precluded from deriving any benefit. Similar view was also expressed by Tribunal in the case of Kamala Metachem v.CC-2007-TIOL-2247 CESTAT-KOL, so also in the case of M/s.Synotex Industries v.CC - 2008-TIOL-777-CESTAT-KOL.
42. While upholding the decision of the Tribunal in the case of R.S. Trade Link v. CC, New Delhi - 2010 (255) E.L.T. 572 (Tri.-Del.), Honble High Court of Delhi has held in the case of Rahuljee & Company Ltd. v. CC, New Delhi - 2011 (267) E.L.T. 313 (Del.) as under:-
15.?We do not find any illegality in the reasoning recorded by the Tribunal in this regard which is as under :-
6.1.1.?As regards the duty liability, since there is no dispute about the fact that the advance licence against which duty fee imports of copper/brass scrap have been made by these importers, are forged and had never been issued by DGFT, in view of -
(a) Honble Madras High Courts judgment in case of East West Exporters v. AC, Customs reported in 1993 (68) E.L.T. 319 (Mad.)
(b) Honble Calcutta High Courts judgment in case of ICI India Limited v. CC, Calcutta reported in 2005 (184) E.L.T. 339 (Cal.), the SLP to Honble Supreme Court against which has been dismissed vide order reported in 2005 (187) E.L.T. A31(S.C.), and
(c) Judgment of Honble Punjab & Haryana High Court in case of CC, Amritsar v. ATM International reported in 2008 (222) E.L.T. 194 (P&H), the imports would have to be treated as if made without any advance licence and accordingly the customs duty exemption would not be available and since the goods had been cleared by availing full duty exemption, the imports would be liable to pay the duty.
6.1.2 As regards to applicability of extended period for recovery of duty under proviso to Section 28(1) of the Customs Act, 1962, is well settled by Honble Supreme Courts judgment in case of CC (P) v. Afloat Textiles (I) P. Ltd. reported in 2009 (235) E.L.T. 587 (S.C.) wherein principle of Caveat Emptor was dealt holding extended period for recovery of duty under Section 28(1) of the Customs Act would be applicable. In this regard, paras 23, 24, 25, 26, 27, 28 and 29 of this judgment are reproduced below:-
23.?Caveat emptor, qui ignorare non debuit quod jus alienum emit. A maxim meaning Let a purchaser beware; who ought not to be ignorant that he is purchasing the rights of another.
24.?As the maxim applies, with certain specific restorations, not only to the quality of, but also to the title to, land which is sold, the purchaser is generally bound to view the land and to enquire after and inspect the title deeds; at his peril if he does not.
25.?Upon a sale of goods, the general rule with regard to their nature or quality is caveat emptor, so that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, expressed or implied. It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all risk to defect in the goods, unless there are circumstances beyond to mere fact of sale from which a warranty may be implied.
26.?No one ought in ignorance to buy that which is the right of another. The buyer according to the maxim has to be cautious, as the risk is his and not that of the seller.
27.?Whether the buyer had made any enquiry as to the genuineness of the licence within his special knowledge. He has to establish that he made enquiry and took requisite precautions to find out about the genuineness of the SIL which he was purchasing. If he has not done that, consequences have to follow. These aspects do not appear to have been considered by the CESTAT in coming to the abrupt conclusion that even if one or all the respondents had knowledge that the SIL was forged or fake that was not sufficient to hold that there was no omission of commission on his part so as to render silver or gold liable for confiscation.
28.?As noted above, SILs were not genuine documents and were forged. Since fraud was involved, in the eye of law such documents had no existence. Since the documents have been established to be forged or fake, obviously fraud was involved and that was sufficient to extend the period of limitation. In view of the above, reference can be answered as follows:-
1) Appeals filed by M/s. Pee Jay International are required to be rejected and Revenues appeal to be allowed.
2) In view of the judgement of Apex Court in Friends Trading Co. reported in 2010(258) ELT A72 (SC) the decision of Larger Bench does not govern the field.
3) Demand is not time barred in view of fraud committed against Revenue and lager period of limitation was rightly involved by Revenue for the reason that fruits of a forbidden tree is always forbidden. Registry to pace the matter before appreciation.
(Pronounced in the open court on 21/10/2013) (D.N. PANDA) JUDICIAL MEMBER Final Order
45. In view of the majority order, the appeal filed by the Revenue is rejected and appeals filed by the appellants are also rejected on merits as also on limitation.
(Archana Wadhwa) Member(Judicial)
(Mathew John) Member(Technical)
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