2005 (10) TMI 406 - AT - Customs

Summary

Issues Involved:
1. Waiver of pre-deposit and stay of impugned order.
2. Validity of DEPB scrips obtained through fraudulent means.
3. Applicability of extended period of limitation under Section 28(1) of the Customs Act.
4. Liability of importer for duty when DEPB scrips are fraudulently obtained by the exporter.
5. Impact of cancellation of DEPB scrips on the importer's duty liability.
6. Bona fide purchaser defense and its implications.

Issue-wise Detailed Analysis:

1. Waiver of Pre-deposit and Stay of Impugned Order:
The appellants sought waiver of pre-deposit and stay of the impugned order made by the Commissioner of Customs, Amritsar, which held that the imported goods were liable to confiscation and ordered recovery of Rs. 25,27,405/- along with interest and imposed a personal penalty of Rs. 2 lakhs. The Tribunal directed the appellants to make a pre-deposit of Rs. 8 lakhs within eight weeks, failing which the appeal would be dismissed. Upon compliance, the impugned order would be stayed during the pendency of the appeal.

2. Validity of DEPB Scrips Obtained Through Fraudulent Means:
The Revenue argued that the DEPB scrips were obtained by the exporter through fraudulent means and were subsequently canceled ab initio by the issuing authority. The Tribunal referenced the decision in ICI India Ltd. v. Commissioner of Customs, Calcutta, which held that a fake document is ab initio unlawful and void, and no benefit could accrue to its holder. The Supreme Court's decision in New India Assurance Co. Ltd. v. Kamla and Others supported this view, affirming that a fake document remains null and void forever.

3. Applicability of Extended Period of Limitation Under Section 28(1) of the Customs Act:
The Tribunal upheld the invocation of the extended period of limitation under the proviso to Section 28(1) of the Customs Act, noting that the exporter had willfully misstated and suppressed facts to obtain DEPB scrips fraudulently. The Tribunal emphasized that the provision empowered the recovery of duty within the prescribed period, even if the benefit was availed of by the purchaser of such credit.

4. Liability of Importer for Duty When DEPB Scrips Are Fraudulently Obtained by the Exporter:
The appellants contended that the fraud committed by the exporter could not be attributed to the importer, who was a bona fide purchaser of the DEPB credit. The Tribunal, however, held that the liability to pay import duty rested with the appellants, as the fraudulently obtained DEPB scrips were purchased by them. The Tribunal noted that the courts cannot recognize the validity of a license canceled on the ground of fraud for any purpose.

5. Impact of Cancellation of DEPB Scrips on the Importer's Duty Liability:
The appellants argued that the cancellation of the DEPB license nearly one year after the import could not have a retrospective effect. The Tribunal rejected this argument, stating that the cancellation of the license under Section 9 of the Foreign Trade (Development and Regulation) Act, 1992, became final and no legal benefit accrued to the exporter on the basis of fraudulently obtained duty-credit.

6. Bona Fide Purchaser Defense and Its Implications:
The appellants claimed to be bona fide purchasers of the DEPB credit and not concerned with any fraud committed by the exporter. The Tribunal noted that, even if the appellants were not directly involved in the fraud, the liability to pay duty and interest remained. The Tribunal directed a pre-deposit of Rs. 8 lakhs, considering the appellants' lack of direct involvement in the fraud and the relevant facts and circumstances of the case.

Conclusion:
The Tribunal dismissed the appellants' request for a complete waiver of pre-deposit and stay of the impugned order, emphasizing the fraudulent nature of the DEPB scrips and the applicability of the extended period of limitation for recovery of duty. The appellants were directed to make a pre-deposit of Rs. 8 lakhs, failing which the appeal would be dismissed. The Tribunal's decision underscored the principle that fraud nullifies everything and that the liability to pay import duty rests with the importer, even if they were not directly involved in the fraud.