2007 (3) TMI 166 - HC - Customs

Demand (Customs) Revenue contended that assessee-respondent was not entitled to avail any benefit of DEPB on the ground of DEPB purchased by the assessee from open market has be cancelled by the DGFT Held that assessee entitled to availed the benefit of DEPB for the reason that it is third person liability not of assessee

Summary

Issues:
1. Challenge to Tribunal's order by revenue under Customs Act.
2. Validity of DEPB scheme and its operation.
3. Fraudulent acquisition of DEPB scrip by M/s. Parker Industries.
4. Cancellation of DEPB by Joint Director of Foreign Trade.
5. Commissioner's order holding M/s. Leader Valves not liable for penal action.
6. Tribunal's reliance on Commissioner's findings and judgment of Bombay High Court.
7. Argument regarding duty payment liability post cancellation of DEPB.
8. Arguments on behalf of both parties regarding DEPB transfer and utilization.
9. Applicability of Section 28 of the Customs Act and limitation period.
10. High Court's decision on the appeal's merit and dismissal of all three appeals.

Analysis:

1. The High Court of Punjab & Haryana heard three appeals filed by the revenue challenging the Tribunal's orders under the Customs Act. The appeals were consolidated due to common facts and legal issues.

2. The DEPB scheme, part of the Import and Export Policy, allows duty exemption for exports. DEPB is a transferable scrip enabling duty-free import of goods.

3. M/s. Parker Industries fraudulently acquired a DEPB scrip through forged documents. Subsequently, M/s. Leader Valves utilized this DEPB for duty-free imports.

4. The Joint Director of Foreign Trade cancelled the DEPB issued to M/s. Parker Industries upon discovering the fraud.

5. The Commissioner's order absolved M/s. Leader Valves of penal action under the Customs Act, as they were not involved in the fraud.

6. The Tribunal relied on the Commissioner's findings and a Bombay High Court judgment to set aside the duty recovery order.

7. The revenue argued that duty payment liability arises post-DEPB cancellation, citing legal precedents on fraud nullifying legal acts.

8. Counsel for M/s. Leader Valves contended that the DEPB was acquired in good faith, and no notice could be issued post the limitation period.

9. The High Court found M/s. Leader Valves not liable for duty payment post-DEPB cancellation, as they acted in good faith and the limitation period had expired.

10. Consequently, the High Court dismissed all three appeals, upholding the Tribunal's decision in favor of M/s. Leader Valves.