2008 (3) TMI 159 - AT - Customs

Even if appellant themselves paid entire duty on realizing that DEPB licenses are forged benefit of exemption notification can t be allowed on those forged license because allowing of exemption will amount to legalizing the fraud since there is no wrong intention of appellant they can t be penalized Goods already cleared not available for confiscation even if goods are liable to confiscation redemption fine is not imposable

Summary

Issues:
1. Verification of DEPB licenses issued by Mumbai Customs.
2. Duty payment by the appellant company.
3. Show cause notice for duty confirmation and penalties.
4. Commissioner's order confirming duty demand, penalties, and redemption fine.
5. Appellant's submission of being victims of circumstances.
6. Allegations of fraud and penalties imposed by the Commissioner.
7. Imposition of redemption fine under Section 125 of the Customs Act.
8. Tribunal's decision on duty demand, interest, and redemption fine.
9. Remand of the matter to the original authority for reconsideration of penalties.

Analysis:
1. The case involved the verification of DEPB licenses issued by Mumbai Customs, which were found to be not genuine. The appellant company paid the duty amounting to Rs. 1,29,43,927 following the verification results.

2. A show cause notice was issued proposing duty confirmation, penalties, and redemption fine. The Commissioner's order confirmed the duty demand, imposed penalties under Section 114A of the Customs Act, and a redemption fine of Rs. 10 lakhs in lieu of confiscation of goods cleared without valid DEPB scrips.

3. The appellant claimed to be victims of circumstances, procuring DEPB licenses through brokers and paying for them through cheques. They denied knowledge of the licenses being forged and contested the penalties imposed by the original authority.

4. The Commissioner argued that fraud vitiates transactions, and penalties were warranted due to the calculated risks taken by the appellants. The Tribunal noted that the appellant company themselves concluded that the licenses were forged, thus denying them any legal sanctity.

5. The Tribunal found that penal action should be based on the party's knowledge or intention regarding the fraud committed. Adverse findings without allowing cross-examination of crucial witnesses were deemed a violation of natural justice.

6. Regarding the redemption fine, as the goods were already cleared and not available for confiscation, the Tribunal set aside the redemption fine imposed under Section 125 of the Customs Act.

7. The Tribunal confirmed the duty demand along with interest, set aside the redemption fine, and remanded the matter to the original authority for reconsideration of penalties after allowing cross-examination of witnesses and providing a reasonable opportunity for a personal hearing to the appellants.

8. The appeals were disposed of with the above terms, emphasizing the importance of natural justice and proper consideration of penalties in cases involving fraud and duty evasion.