2017 (11) TMI 304 - AT - Customs

Genuineness of Focus License - it was alleged that appellant obtained from DGFT under fraud submitting fabricated and bogus shipping bill - Held that - To deter use of fraudulently obtained instrument by a transferee or beneficiary thereof under Customs Act, 1962 and make him liable to the duty lost by Revenue along with transferor under Section 28AAA of the said Act, suitable provision may be enacted with deterrent penal consequence and cognizance of such cases of money laundering may be taken by the proper officer appointed under Customs Act, 1962 at the first instance - if the Board considers it proper, such cases may be referred to Special Investigation Team (SIT - Black Money) for further investigation, so that Hawala Operators masquerading their identity shall be brought to the fold of economic offence and face trial - appeal dismissed - decided against appellant.

Summary

Issues:
Fraudulent use of Focus License obtained under fraud; Liability of appellant for duty free import; Denial of liability and plea for immunity from penalty; Principle of Caveat Emptor in cases of fraud; Need for deterrent provisions against fraudsters under Customs Act, 1962; Referral of cases to Special Investigation Team (SIT - Black Money).

Analysis:
The judgment deals with a case involving the fraudulent use of a Focus License obtained under fraud. The appellant used a license obtained through fabricated documents, resulting in a loss of customs duty amounting to ?5,54,224. Despite the appellant's denial of liability and plea for immunity from penalty, both authorities confirmed the lack of genuineness of the shipping bill and Bank Realization Certificate (BRC) submitted to obtain the license. The appellant failed to provide credible evidence to contradict the Revenue's proposition, leading to the consequence of adjudication for using a fraudulent instrument in duty-free import.

The judgment cites the principle of Caveat Emptor, emphasizing that a person using an instrument obtained under fraud should be aware of the risks involved. The order passed by the Commissioner (Appeals) was upheld as it did not require intervention in a case of fraud against Revenue. Furthermore, the judgment highlights the need for deterrent provisions under the Customs Act, 1962 to hold transferees or beneficiaries of fraudulently obtained instruments liable for the duty lost by the Revenue, along with the transferor.

To address such cases effectively, the judgment suggests enacting suitable provisions with penal consequences and taking cognizance of money laundering cases. It recommends preliminary investigations by the "proper officer" appointed under the Customs Act, 1962, and transmitting outcomes to the Enforcement Directorate for further investigation. The judgment stresses the importance of preventing fraudsters from jeopardizing the economy and directs the Registry to notify relevant authorities for necessary action.

The judgment reveals the existence of a fraudulent racket involving forged documents to obtain Focus Licenses, causing harm to the economy. It suggests referring such cases to the Special Investigation Team (SIT - Black Money) for further investigation to uncover and prosecute individuals involved in economic offenses. Ultimately, the appeal was dismissed, affirming the consequences of using fraudulently obtained instruments and the need for stringent measures to combat such fraudulent activities effectively.