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2011 (5) TMI 677 - AT - CustomsDEPB - Fraud - held that - the original allottees of the DEPBs had not earned any credit of duty in the absence of exports and, therefore, the appellant who purchased those DEPBs did not acquire any credit , let alone sufficient, for duty-free clearance of their imports in terms of Notification 34/97-Cus. when strictly construed. It is trite law that an Exemption Notification requires to be strictly interpreted (vide Rajasthan Spinning & Weaving Mills, Sterlite Industries etc.) and the benefit of any doubt has to be given to the Revenue (vide Novopan India). Therefore, we hold that the appellant is not entitled to claim the benefit of the Notification. It was open to the Department to demand duty from the appellant under Section 28 of the Customs Act without recourse to any other procedure of revision of assessment. Issuance of consolidated show cause notice against 19 SCN - period of limitation - held that - we have to accept the contention of the ld. JCDR that the show-cause notice dt. 05-10-2001 was issued in continuation of the earlier set of 19 show-cause notices and that the demand of duty was within the normal period of limitation. In our view, the best evidence in support of this contention is the fact that all the show-cause notices were adjudicated upon by the Commissioner in a single proceeding culminating in the impugned order. - Decided against the assessee. Interest u/s 28AB - held that - the assessee has to pay interest on the duty amount under sub-section (1) of Section 28AB as amended. However, no interest is leviable for any period prior to 11-05-2001 as sub-section (2) of Section 28AB forbids levy for past period. Penalty u/s 114A - held that - the show-cause notices had not alleged collusion, wilful misstatement of facts or suppression of facts against the appellant. Hence imposition of the penalty on them is beyond the scope of the show-cause notices.
Issues Involved:
1. Liability of the appellant due to ab initio cancellation of DEPBs. 2. Legality of the demand for duty under Section 28 without challenging the assessment. 3. Limitation period for the demand of duty. 4. Liability for interest on duty under Section 28AB. 5. Imposition of penalty under Section 114A. Detailed Analysis: Issue No. I: Liability due to Ab Initio Cancellation of DEPBs The appellant, De-Nocil, utilized DEPBs for duty-free import of goods. These DEPBs were later found to be obtained fraudulently and were cancelled ab initio by the licensing authority. The appellant argued that as bona fide purchasers, they should not be affected by the cancellation. However, the tribunal held that the concept of fraud vitiating everything applied here, meaning the DEPBs were invalid from the start. The tribunal emphasized that the appellant should have ensured the validity of the DEPBs before using them. The tribunal cited several cases, including Golden Tools International, where it was held that the licensing authority had the power to cancel DEPBs retrospectively. Thus, the tribunal concluded that the appellant was liable to pay customs duty as the DEPBs were invalid. Issue No. II: Legality of Demand for Duty under Section 28 The appellant contended that the department could not demand duty without revising the assessment under Section 129 D (2). The tribunal rejected this, citing UOI vs. Jain Shudh Vanaspati Ltd. and Venus Enterprises vs. CC, Chennai, which held that a show-cause notice under Section 28 could be issued subsequent to the clearance of goods. Therefore, the tribunal concluded that the department was within its rights to demand duty without revising the assessment. Issue No. III: Limitation Period for the Demand of Duty The appellant argued that the demand was time-barred as the show-cause notice dated 5.10.2001 was issued beyond the normal period of limitation. The tribunal noted that the earlier 19 show-cause notices were issued within the normal period and the subsequent notice was a continuation of these. Citing B.P.L. India Ltd vs. Commissioner, the tribunal held that the demand was not time-barred as the show-cause notice dated 5.10.2001 was issued in continuation of the earlier notices. Issue No. IV: Liability for Interest on Duty under Section 28AB The tribunal noted that Section 28AB, as amended on 11.5.2001, applied to the case. Although the original show-cause notices did not allege collusion or suppression, the amended section did not require such allegations. Thus, the appellant was liable to pay interest from 11.5.2001 to the date of payment of duty. Issue No. V: Imposition of Penalty under Section 114A The tribunal observed that the show-cause notices did not allege collusion, wilful misstatement, or suppression of facts against the appellant, which are prerequisites for imposing a penalty under Section 114A. Consequently, the penalty imposed on the appellant was set aside. Additional Judgment: Appeal No. C/85/2003 by Shri P. K. Srinivas The penalty of Rs. 10 lakhs imposed on P. K. Srinivas under Section 112(a) was contested. The tribunal found no specific allegation of involvement in the fraud against Srinivas and noted that no penalty was imposed on De-Nocil under Section 112. Therefore, the penalty on Srinivas was vacated. Final Orders: 1. The demand of duty against De-Nocil is upheld. 2. Interest on duty under Section 28AB is payable from 11.5.2001 to the date of payment. 3. The penalty under Section 114A is set aside. 4. The order holding the goods liable to confiscation under Section 111(o) is upheld, but no penalty under Section 112 is imposed on De-Nocil. 5. The penalty on P. K. Srinivas is set aside, and his appeal is allowed.
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