2017 (7) TMI 627 - AT - Customs

Penalty u/s 112 of CA - invalid DFRC licences - Held that - there is no dispute as to the fact that when the appellant purchased DFRC licence from M/s Ria Impex Pvt. Ltd., those licence were transferrable as per the endorsement of DGFT authorities. The appellant in bonafide belief that these licences are validly procured licences resold them in the market. The provisions of Section 112 of the Customs Act, 1962 would apply in any case, if the appellant has played any role in the import of the goods which were liable for confiscation - the appellant having played no role in export of the goods a fraudulent DFRC licence was procured by M/s Ria Impex Pvt. Ltd., and had no role in importing the goods under transferred DFRC licences cannot be visited with penalty u/s 112 of the CA, 1962. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appellant's liability under Section 112 of the Customs Act, 1962 for transferring DFRC licenses.

Analysis:
The appeal in question was against an Order-in-Appeal dated 19.08.2015. The primary issue for consideration was whether the appellant could be penalized under Section 112 of the Customs Act, 1962. The appellant had purchased DFRC licenses from a company and subsequently sold them in the market. It was revealed that the original company had exported goods in violation of laws, rendering the licenses invalid. The appellant was then penalized under Section 112 for transferring these licenses to other entities who used them for import. The appellant argued that they had purchased the licenses in good faith and had not imported any goods under them.

The Tribunal found that the appellant had purchased transferrable licenses in good faith, believing them to be valid. The appellant was not directly involved in the export, import, or procurement of the licenses. While a penalty was imposed by the adjudicating authority, no evidence was presented to show the appellant's involvement in the import of goods subject to confiscation. The lower authorities' findings indicated that the appellant was merely a buyer and seller of the licenses, not directly involved in the fraudulent transactions.

The Tribunal held that since the appellant had no role in the fraudulent procurement and import of goods under the DFRC licenses, they could not be penalized under Section 112 of the Customs Act, 1962. The Tribunal distinguished this case from a previous judgment where the appellant had directly imported goods using a DFRC license obtained from the market. As a result, the impugned order imposing a penalty on the appellant was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, finding that they were not liable to be penalized under Section 112 of the Customs Act, 1962 due to their lack of involvement in the fraudulent transactions related to the DFRC licenses. The decision highlighted the importance of distinguishing between direct involvement in illegal activities and mere purchase and sale transactions, ultimately leading to the setting aside of the penalty imposed on the appellant.