2011 (5) TMI 683 - AT - Customs

Benefit under tainted DEPB scrips was claimed confiscation - redemption fine - Penalty under Sec.114A of the Act - Importer who steps into the shoes of seller of forged document does not stand on better footing and cannot be allowed to retain benefit illegally obtained - Taint attaching to the document on the basis of which benefit is taken is not washed of. Fraud or suppression continues if document is not genuine. - Decided against the assessee. Penalty on employees of M/s. Apar Ltd - presumption - scrips were purchased from the market at a less premium which was prevalent at the time, therefore, it is evident that they were aware that the scrips were not genuine - this finding is only on presumption. - penalties on these three appellants set aside

Issues Involved:
1. Demand of duty and interest under Sec. 28 of the Customs Act.
2. Confiscation of imported goods under Sec. 111(d) and 111(o) of the Customs Act.
3. Imposition of redemption fine.
4. Imposition of penalties under Sec. 114A and Sec. 112(a) of the Customs Act.
5. Validity of DEPB scrips obtained through forged documents.
6. Applicability of extended period of limitation.

Detailed Analysis:

1. Demand of Duty and Interest under Sec. 28 of the Customs Act:
The adjudicating authority confirmed a demand of Rs. 72,25,465/- along with interest on M/s. Apar Ltd., under Sec. 28 of the Customs Act. The appellant contended that they were bona fide purchasers of DEPB scrips and were unaware that these scrips were obtained through forged documents. However, the tribunal referenced the case of Friends Trading Company vs. CC, Amritsar, where it was established that benefits availed on the basis of DEPB scrips obtained by forged documents cannot be retained. The Hon'ble Punjab & Haryana High Court and the Supreme Court upheld this view. Thus, the demand of duty was found to be justified.

2. Confiscation of Imported Goods under Sec. 111(d) and 111(o) of the Customs Act:
The adjudicating authority confiscated the imported goods valued at Rs. 1,42,56,626/- under Sec. 111(d) and 111(o) of the Customs Act. The appellant argued that the goods were not prohibited and the DEPB scrips were valid at the time of import. However, the tribunal held that the benefit under the tainted DEPB scrips was claimed, making the goods liable for confiscation. This was supported by the decision in Friends Trading Co. vs. Union of India, where it was held that the taint of fraud continues if the document is not genuine.

3. Imposition of Redemption Fine:
The adjudicating authority allowed the release of confiscated goods on payment of a redemption fine of Rs. 20 lakhs. The tribunal reduced the redemption fine to 10% of the value of the confiscated goods, taking into account the facts and circumstances of the case.

4. Imposition of Penalties under Sec. 114A and Sec. 112(a) of the Customs Act:
A penalty of Rs. 72,25,465/- was imposed on M/s. Apar Ltd. under Sec. 114A of the Customs Act. The tribunal upheld this penalty, referencing the Hon'ble Punjab & Haryana High Court's decision in Friends Trading Co. vs. Union of India, which stated that an importer using forged documents cannot retain any benefits obtained. Penalties of Rs. 5 lakhs on Shri K.N. Desai, Rs. 3 lakhs on Shri R.G. Avasthi, and Rs. 2 lakhs on Shri C. Pinto were imposed under Sec. 112(a) of the Act. However, the tribunal set aside these penalties, finding that the evidence against these individuals was based on presumption without any substantial proof of their knowledge about the forged nature of the scrips.

5. Validity of DEPB Scrips Obtained Through Forged Documents:
The tribunal found that the DEPB scrips were obtained by submitting forged documents. It was established that benefits availed on the basis of such fraudulent documents could not be retained. This was supported by multiple judicial precedents, including decisions by the Hon'ble Punjab & Haryana High Court and the Supreme Court.

6. Applicability of Extended Period of Limitation:
The appellant argued that the demand was time-barred. However, the tribunal noted that the show-cause notice was issued within the normal period of limitation from the date of payment of duty. The tribunal also referenced the decision in Friends Trading Co. vs. UOI, where the extended period of limitation was upheld in cases involving fraudulent DEPB scrips.

Conclusion:
The tribunal upheld the demand of duty and interest, confiscation of goods, and the penalty on M/s. Apar Ltd. However, it reduced the redemption fine and set aside the penalties on the individual employees due to lack of substantial evidence. The judgment reinforced the principle that benefits obtained through fraudulent means cannot be retained, and the extended period of limitation is applicable in such cases.

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