2011 (6) TMI 446 - AT - Customs

Penalty - DEPB Scrip obtained by fraud - whether the duty forgone on imports made by the Appellant using the said fraudulent DEPB scrip can be demanded and recovered from the Appellant - whether extended period can be invoked - assessee contended that he purchased DEPB scrip in good faith against payment of consideration and utilized it under the bonafide belief that the license did not have any blemish - Held that - In such situations it is not proper to impose penalty on the transferee who imported the goods. See Friends Trading Co.(2008 (10) TMI 344 - PUNJAB & HARYANA HIGH COURT), The Mall Amritsar V. M/s Parkar Industries Jalandhar (2006 - TMI - 1089 - HIGH COURT, PUNJAB & HARYANA - Customs) Appeals are rejected.

Summary

Issues:
1. Whether duty forgone on imports made using a fraudulent DEPB scrip can be demanded from the importer.
2. Whether the extended period under section 28 of the Customs Act can be invoked for demanding revenue loss due to fraudulent activity of the transferor.
3. Applicability of various legal precedents and decisions cited by both parties.
4. Imposition of penalty on the importer in such situations.

Analysis:
1. The case involved four appeals arising from the same impugned order where the duty demanded and penalties were contested. The central issue was whether duty forgone on imports using a fraudulent DEPB scrip could be recovered from the importer. The Commissioner (Appeals) waived the penalty, leading to appeals from both the importer and the Revenue. The importer argued good faith in purchasing and utilizing the DEPB scrip, emphasizing the lack of fraud on their part. Legal arguments included the requirement of issuing a notice under section 28 of the Customs Act within a specific timeframe unless fraud is proven. The importer relied on legal precedents to support their case, distinguishing their situation from cases involving forged licenses.

2. The debate also centered on whether the extended period under section 28 of the Customs Act could be invoked to demand revenue loss caused by the transferor's fraudulent activity. Legal arguments were presented citing conflicting decisions from the Apex Court. While some cases held that the extended period could not be applied against the transferee, others took a different view. The judgment highlighted the evolution in the Apex Court's stance on this issue and emphasized the need to follow the latest decisions.

3. The legal analysis delved into various legal precedents cited by both parties, including decisions from the Apex Court and High Courts. The judgment discussed the relevance of each cited case to the present situation, highlighting distinctions and similarities. The court examined how different cases informed the interpretation of the law concerning duty recovery in instances of fraudulent activities related to import licenses.

4. Finally, the judgment addressed the imposition of penalties on the importer in such scenarios. It referenced decisions from the High Court of Punjab and Haryana that deemed it inappropriate to penalize the importer in situations involving fraudulent DEPB scrips. The court followed these precedents and rejected all four appeals, maintaining the waiver of penalties imposed on the importer.