2009 (4) TMI 30 - HC - Customs

Fraud benefit of DEPB scrips - It has been categorically found by the Tribunal and the authorities below that although the DEPB scrips were issued on the basis of forged documents and were indeed cancelled by the authorities but the assessee is not at fault. The assessee is not party to the fraud and had purchased the DEPB scrips from the open market in the bonafide belief of its being genuine - Merely because at a later stage, the DEPB has been found to be fabricated and fake the assessee-respondent could not be deprived of the benefits which were legitimately available to them decision of Division Bench of this court in case of Commissioner of Customs v. Leader Valves Ltd., which has also been upheld by SC, squarely covers the present case

Summary

Issues:
Appeals under Section 130 (1) of the Customs Act, 1962 against Tribunal's orders based on DEPB scrips issued on forged documents, assessee's innocence in fraud, applicability of benefits to genuine purchasers, reliance on Division Bench judgment, dismissal of appeals by Supreme Court, and dismissal of current appeals.

Analysis:
The High Court considered appeals filed by the revenue under Section 130 (1) of the Customs Act, 1962 against Tribunal's orders regarding DEPB scrips issued on forged documents. The Tribunal and authorities found that although the DEPB scrips were cancelled due to being based on forged documents, the assessee was not involved in the fraud. The assessee had purchased the DEPB scrips in good faith from the open market, believing them to be genuine. The Court noted that the assessee should not be deprived of legitimate benefits due to later discoveries of fraudulence in the DEPBs.

In a related matter, the Court mentioned similar appeals, CUSAP Nos. 1 and 2 of 2009, where the Tribunal relied on a Division Bench judgment in a case involving similar findings. The Division Bench had emphasized that the assessee was not at fault, having purchased the DEPB in good faith, and should not be denied benefits due to subsequent revelations of fraud. The Court also highlighted that the assessee had not been issued a show cause notice before the DEPB was canceled, and the revenue could not avail the extended period under Section 28 of the Customs Act due to lack of misrepresentation, collusion, or suppression of facts by the assessee.

The Division Bench's view was upheld by the Supreme Court in a Special Leave Petition, where the SLP was dismissed on grounds of delay and merits. Consequently, the High Court, following the legal precedent, dismissed CUSAP Nos. 1 and 2 of 2009. Applying the same reasoning to the current appeals, the Court concluded that the appeals did not merit admission and were liable to be dismissed. Therefore, the appeals were dismissed, as the benefits should extend to genuine purchasers who were not involved in the fraud.

Given the dismissal of the appeals on merits, the Court deemed it unnecessary to pass any orders on applications seeking condonation of delay in refiling the appeals. The decision was based on the established legal principles regarding the innocence of the assessee in the fraud related to DEPB scrips and the rightful entitlement of genuine purchasers to benefits under the Customs Act.