2017 (12) TMI 245 - AT - Customs

FPS licence - it was alleged that the license was obtained by forging Telegraphic Release Advice (TRA) issued by customs authorities - whether the FPS License was valid or not? - Held that - The facts of the case that the appellants obtained a bonafide valid licence issued by the Competent Authority is not in dispute - similar issue decided in the case of M/s Deep Exports Versus CC, New Delhi 2016 (4) TMI 99 - CESTAT NEW DELHI , where it was 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. As long as the licences are valid, the customs authorities cannot refuse exemption on the allegation that there was misrepresentation. It is for the licensing authority to take up the question of misrepresentation. This has not been done in the facts of the present case. The licences were still valid and had not been cancelled by the licensing authority and the licences have not been questioned at all by the licensing authority. No duty demand can be made on such import made on the basis of valid and subsisting licence at the relevant time - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Validity of FPS license obtained by the appellant.
2. Allegation of license obtained by fraudulent means.
3. Duty liability on the appellant based on the fraudulent license.

Issue 1: Validity of FPS license obtained by the appellant:
The appellant contended that they obtained the FPS license in good faith and used it for importing goods, relying on the fact that the Licensing Authority did not cancel the license despite multiple requests. The appellant argued that duty liability cannot arise when exemption claims are based on a valid license issued by the Competent Authority, citing various precedents to support their stance.

Issue 2: Allegation of license obtained by fraudulent means:
The Revenue alleged that the license was obtained by M/s Krishnav Enterprises through forged documents, leading to the imposition of duty liability on the appellant. The AR supported this claim by referencing a Supreme Court decision stating that fraud vitiates subsequent actions, making the appellant liable for duty discharge due to the fraudulent acquisition of the license.

Issue 3: Duty liability on the appellant based on the fraudulent license:
The Tribunal examined various case laws, including Deep Exports, Indo Exim, and East India Commercial Co. Ltd., to determine the duty liability in cases of licenses obtained through fraudulent means. It was highlighted that the licenses in question were not forged but issued by the Competent Authority, remaining valid until canceled. The Tribunal emphasized that duty recovery from the transferee is only justified if there is evidence of lack of bona fide action or awareness of fraud by the original license holder. The Tribunal ultimately set aside the duty demand and penalty imposed on the appellant, noting the continued validity of the FPS license at the time of import.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the importance of a valid and subsisting license issued by the Competent Authority in determining duty liability. The judgment highlighted the distinction between licenses obtained through fraud and those issued by the appropriate authority, ultimately leading to the dismissal of duty demands and penalties against the appellant.