2007 (8) TMI 204 - HC - Customs

DEPB availed fraudulently Once the finding of fraud have come on record then order of imposing penalty cannot be set aside on basis of technical grounds Fraud vitiates all acts Technical ground that Sec. 112 was not mentioned in SCN is to be ignored when no prejudice is suffered by assessee

Issues Involved:
1. Liability for penal action under Section 112(b) of the Customs Act, 1962.
2. Fraudulent availment of Duty Entitlement Pass Book (DEPB) benefits using forged Bank Certificate of Export and Realisation (BCER).
3. Validity of penalties imposed without specific invocation of clauses (a) or (b) in the show cause notice.
4. Admissibility of evidence and admissions in establishing fraud.
5. Applicability of principles of natural justice and procedural technicalities.

Issue-wise Detailed Analysis:

1. Liability for Penal Action under Section 112(b) of the Customs Act, 1962:
The Tribunal and the Commissioner (Appeals) held that penalties under Section 112 of the Act could only be imposed on the importer or any person who abets the importer. The Tribunal accepted the view that the penalties were not sustainable as the specific clauses (a) or (b) of Section 112 were not invoked in the show cause notice. However, the High Court concluded that the finding of fraud and forgery by the Adjudicating Authority was sufficient to impose penalties under Section 112, regardless of the specific invocation of clauses (a) or (b).

2. Fraudulent Availment of DEPB Benefits Using Forged BCER:
The Adjudicating Authority found that the DEPB scrips were obtained fraudulently using forged BCERs, which were signed by one of the respondents and later admitted to be forged. The fraudulent DEPB scrips were used to obtain credits amounting to Rs. 27,22,013/-. The High Court upheld the Adjudicating Authority's findings, emphasizing that fraud vitiates all acts, and thus the penalties were justified.

3. Validity of Penalties Imposed Without Specific Invocation of Clauses (a) or (b) in the Show Cause Notice:
The Commissioner (Appeals) and the Tribunal had set aside the penalties on the grounds that the show cause notice did not specifically mention clauses (a) or (b) of Section 112. The High Court disagreed, stating that the absence of specific invocation did not render the penalties illegal, especially when no prejudice was shown to have been suffered by the respondents. The principles of natural justice were deemed to have been followed adequately.

4. Admissibility of Evidence and Admissions in Establishing Fraud:
The Adjudicating Authority relied on the admissions made by the respondent who signed the forged BCERs. The High Court emphasized that self-harming statements are considered admissions and are regarded as the best piece of evidence under Sections 17, 18, and 19 of the Evidence Act, 1872. The Court found that such admissions, supported by other evidence, could not be ignored on technical grounds.

5. Applicability of Principles of Natural Justice and Procedural Technicalities:
The High Court noted that detailed opportunities for hearing and submission of replies were provided to the respondents. The Court held that the mere omission to mention specific clauses of Section 112 in the show cause notice did not constitute a violation of natural justice, as the respondents failed to demonstrate any prejudice suffered due to this omission. The Court also referenced the Supreme Court's stance that fraud avoids all judicial acts, reinforcing the validity of the penalties imposed.

Conclusion:
The High Court allowed the appeal, setting aside the views of the Appellate Authority and the Tribunal, and restored the order of the Adjudicating Authority. The Court affirmed that the penalties under Section 112 were validly imposed despite the technical omission in the show cause notice, given the established fraud and forgery.

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