2016 (12) TMI 378 - AT - Customs

Confiscation of goods and imposition of redemption fine and penalty - doubtful nature of REP licence - forged shipping bills - the appellant had purchased the said licences at a premium of 3-4% which was less than the market rate of premium which was 6% - Held that - The licences have transferred hands a number of times in open market without endorsement of DGFT before it reached the appellant. The appellants have paid a premium of 3.4% of these licences. There is no allegation on the appellant of being involved in the fraudulent issue of licence. The licences were valid at the time of import of goods. Hon ble apex court in the case of East India Commercial Co. Ltd. 1962 (5) TMI 23 - SUPREME COURT OF INDIA has examined the issue in similar set of facts, where it was held that Nor is there any legal basis for the contention that licence obtained? by misrepresentation makes the licence non- est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause (8) of Section 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable it is good till avoided in the manner prescribed by law. In the instant case the goods which were imported against the licence have been processed and disposed of by the appellant. The goods are not available for confiscation. The goods have not been seized or released against a provisional bond. In these circumstances, the decision of the Hon ble High Court of Bombay in Finesse Creation Inc. 2009 (8) TMI 115 - HIGH COURT OF JUDICATURE AT BOMBAY is squarely applicable in the said decision, the Hon ble High Court has observed that the concept of redemption fine arises in the event the goods are available and are to be redeemed. Appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Procurement of REP license from the open market without involving the office of DGFT.
2. Allegations of purchasing licenses at a premium below market rate and being aware of their doubtful nature.
3. Confiscation of diamonds imported against REP licenses and imposition of penalties under Customs Act.
4. Arguments regarding the validity of licenses at the time of import, limitation period, and lack of awareness about forged documents.
5. Interpretation of legal precedents regarding the validity of licenses obtained through fraud or misrepresentation.
6. Applicability of redemption fines when goods are not available for confiscation.

Analysis:
1. The appellants, engaged in diamond manufacturing and export, obtained REP licenses from the open market without involving the DGFT office. Allegations of purchasing licenses at a premium below market rate raised concerns about their awareness of the licenses' dubious nature.

2. The authorities sought to confiscate imported diamonds against REP licenses and impose penalties under the Customs Act. The appellants argued that they were unaware of any fraudulent activities and highlighted the licenses' validity at the time of import.

3. Legal arguments centered around the limitation period for issuing notices, the absence of mens rea, and the applicability of penalties even without direct involvement in fraudulent activities. References to legal precedents, such as the East India Commercial Co. Ltd. case, were made to support the appellants' claims.

4. The Tribunal examined the facts, emphasizing that the licenses were valid at the time of import and that the appellants were not directly involved in fraudulent activities. Citing precedents, the Tribunal concluded that the import of goods was not in contravention of relevant laws, leading to the setting aside of the impugned order.

5. The Tribunal referenced the decision in Deep Exports, highlighting the distinction between genuine licenses obtained through competent authorities and fraudulent representations by original exporters. The applicability of redemption fines was discussed concerning the availability of goods for confiscation.

6. Based on legal interpretations and the specific circumstances of the case, the Tribunal allowed the appeals and set aside the impugned order, emphasizing the inapplicability of redemption fines when goods are not available for confiscation.