2013 (9) TMI 30 - AT - Customs

Assesses obtained DEPB scrip fraudulently on the basis of forged/fake export documents Duty demand penalty u/s 112(a) Held that - if the DEPB scrip had been validly issued by the DGFT, but being obtained by fraud/mis-declaration on the part of the exporter - subsequently cancelled - duty can not be recovered from the transferee if before the cancellation of the DEPB scrips duty free imports had been made by the transferee and there was no evidence showing that the transferee had not acted bona fide or was aware of the fraud committed by the original holder of the DEPB scrip following the judgement of Commissioner of Customs, Amritsar Vs Patiala Castings Pvt. Ltd.(2012 (11) TMI 266 - CESTAT, NEW DELHI) wherein the decision of Friends Trading Co. Vs UOI (2008 (10) TMI 344 - PUNJAB & HARYANA HIGH COURT) was considered. Waiver of pre deposit of duty pre deposit of duty and penalty along with interest waived stay granted.

Summary

Issues:
1. Import of duty-free materials under DEPB scripts obtained fraudulently.
2. Validity of demand of duty and penalty.
3. Applicability of limitation period.
4. Interpretation of DEPB scrips obtained through fraud.

Analysis:
1. The case involves the import of duty-free materials under DEPB scripts acquired fraudulently. The applicant imported materials under 8 DEPB scripts purchased from a supplier who obtained them through forged/fake export documents. The DGFT cancelled all DEPB scrips, leading to a show cause notice proposing duty and penalty. The Commissioner confirmed the duty of Rs.51,05,919/- and a penalty of Rs.30 lakhs under section 112(a) of the Customs Act.

2. The advocate for the applicant argued that divergent decisions exist on the issue, citing the Tribunal's decision in Commissioner of Customs, Amritsar Vs Patiala Castings Pvt. Ltd. The advocate contended that if the DEPB scrip is forged, duty demand is valid. However, since the DEPB scrip was valid at the time of purchase and import, the demand is disputed. The Revenue argued citing the decision of the Punjab & Haryana High Court in Friends Trading Co. Vs UOI, where duty demand was upheld for DEPB obtained through fraud.

3. The issue of limitation was raised by the applicant's advocate, claiming the demand is barred by limitation. The Tribunal considered the decision in Friends Trading Co. and differentiated between forged DEPB scrips and valid DEPB scrips obtained through fraud. The judgment highlighted that duty can be demanded from transferees if the DEPB scrip was forged, applying the principle of caveat emptor.

4. The Tribunal relied on the decision in Patiala Castings Pvt. Ltd., which discussed the distinction between forged DEPB scrips and valid DEPB scrips obtained through fraud. The judgment emphasized that duty cannot be recovered from transferees if the DEPB scrip was validly issued by the DGFT but obtained fraudulently. The Tribunal dismissed the Revenue's appeals, finding no merit in demanding duty from the transferee in the absence of evidence of knowledge about the fraud.

In conclusion, the Tribunal's decision in the present case is aligned with the principles established in previous judgments, emphasizing the importance of differentiating between forged and valid DEPB scrips in determining duty liability for importers.