2007 (3) TMI 245 - AT - Customs

DEPB script were utilized for discharge of duty liability in respect of goods imported - subsequently alleging procurement of said licences fraudulently, the said DEPB licences were cancelled - demand was made against the respondent under the provisions of Section 28(1) on ground of wilful misstatement or suppression of facts, is not justified - setting aside of demand on the point of limitation by Commissioner (Appeals) is legal and proper.

Summary

Issues:
1. Whether imports made by the respondent before the cancellation of licences are entitled to duty-free importation benefits.

Analysis:
The appeal arises from a dispute where the Revenue challenged the Commissioner (Appeals) order setting aside a demand based on the points of limitation. The case involves M/s. Beni Exports transferring DECB licences to M/s. Benani Cement Ltd., who utilized the DEPB script for duty liability discharge. Subsequently, the DEPB licences were cancelled ab initio, leading to the question of whether imports made before the cancellation are eligible for duty-free benefits. The Commissioner (Appeals) denied the benefit under Notification No. 34/97-Cus due to the licences' cancellation but allowed it based on the time-bar, noting no misrepresentation or suppression of facts during import clearance.

The Revenue, in their appeal, did not allege misstatement or suppression of facts by the respondent but claimed fraud by the exporter resulting in duty-free clearances. The duty demand was made under Section 28(1) of the Customs Act, allowing a longer period in cases of collusion or wilful misstatement. However, the Tribunal found that such circumstances must be present with the importer, not the exporter who procured the DEPB passbook. Thus, the setting aside of the demand by the Commissioner (Appeals) on the point of limitation was deemed legal and appropriate.

Furthermore, referencing a previous ruling by the Larger Bench of the Tribunal in M/s. Hico Enterprises v. CCE, Mumbai, it was established that imports made on a valid license, even if originally procured by the exporter through fraud, are not invalidated. Therefore, the Tribunal rejected the Revenue's appeal, emphasizing that the fraud committed by the exporter does not impact the validity of the imports made by the respondent based on the valid license.

This judgment clarifies the legal principles surrounding duty-free importation benefits, the impact of license cancellation on past imports, and the distinction between the responsibilities of importers and exporters in cases of fraud or misrepresentation.