2016 (4) TMI 99 - AT - Customs

Bonafideness of appellant in buying and utilising the REP licences issued - Obtained on the basis of fabricated forged documents by others - Whether or not the appellant has a knowledge of fraud by which the licence was obtained from the licensing authority by the transferer - held that - the REP licences transferred were genuine documents issued by the competent authority. Even if the appellants had made any enquiry with the DGFT themselves as the issuing authority at the time of purchase or utilisation for import of gold, there is no way the validity of REP licence could have been put to question. This is clear from the fact that the fraudulent submission of forged bank document/ shipping bills by the original exporters who obtained the REP licence was unearthed much later by the detailed enquiry of the officers. Here, the REP licences were issued by the competent authority and as such were genuine documents. However, the original parties/ exporters made fraudulent representation by giving forged documents to obtain such REP licences. Demand of duty from the transferers - Held that - by examining the judgment of Mumbai Tribunal in the case of Sumit Wool Processors Vs. CC 2015 (10) TMI 329 - CESTAT MUMBAI , the duty cannot be demanded from the transferers, where the licences were genuine but obtained by fraudulent representation, they can be made only voidable and imports which happen prior to the cancellation cannot be held as improper. Therefore, duty cannot be demanded. - Decided in favour of appellant

Issues Involved:

1. Validity of REP licenses obtained through fraudulent means.
2. Liability of the appellant for importing gold using REP licenses obtained fraudulently.
3. Determination of the appellant's knowledge of the fraud.
4. Assessment of the bonafide nature of the appellant's transactions.
5. Consequences of using licenses that were subsequently cancelled.

Issue-wise Detailed Analysis:

1. Validity of REP licenses obtained through fraudulent means:

The case involves 62 Replenishment Licenses (REP) issued by the DGFT, New Delhi, to two firms, which were obtained using forged bank realization certificates and export shipping bills. These licenses were used to import approximately 350 kgs of gold without paying customs duty amounting to about ?5.23 crores. The appellant used 21 of these licenses for importing gold.

2. Liability of the appellant for importing gold using REP licenses obtained fraudulently:

The Commissioner of Customs held that the goods imported against these licenses were liable for confiscation under Section 111(o) of the Customs Act, 1962, and confirmed a demand of ?2,38,14,129/-. A penalty equal to the duty was imposed under Section 114A of the Act. On appeal, the Tribunal remanded the matter for fresh adjudication, focusing on whether the appellant had knowledge of the fraud.

3. Determination of the appellant's knowledge of the fraud:

The Tribunal directed that the issue of whether the appellant had knowledge of the fraud would depend on the material presented before the adjudicating authority. The appellant's responsibility was to prove the bonafide nature of the transaction and produce contemporaneous records showing the genuineness thereof.

4. Assessment of the bonafide nature of the appellant's transactions:

The Commissioner found several indicators suggesting the appellant's knowledge of the fraud:
- Debit notes did not indicate the premium rate or amount.
- Delivery challans lacked the recipient's signature.
- Premium was paid in gold, which was not mentioned in the debit notes.
- The appellant did not make any inquiry about the transferor firms.

The appellant contested these findings, providing detailed explanations and supporting documents, including statements from involved parties and a Chartered Accountant certificate verifying the transactions. The Tribunal found that the appellant's explanations and evidence sufficiently demonstrated the bonafide nature of their transactions.

5. Consequences of using licenses that were subsequently cancelled:

The Tribunal noted that the REP licenses were genuine documents issued by the competent authority and were valid until their cancellation. It distinguished this case from others involving forged licenses, stating that a license obtained by misrepresentation is voidable, not void ab initio. The Tribunal referred to several Supreme Court decisions supporting the view that imports made under a valid license at the time of import cannot be retrospectively rendered illegal due to subsequent cancellation.

Conclusion:

The Tribunal concluded that the duty demand confirmed by the impugned order could not be sustained. The appeal was allowed, and the impugned order was set aside. The Tribunal emphasized that the appellant's transactions were bonafide and that the licenses were valid at the time of import. The decision was pronounced on 22.03.2016.

← Previous Next →