2007 (12) TMI 34 - AT - Customs

Export items have been mis-declared and that M/s Tiwari Brothers obtained DEPB scrips by making fraudulent representation/mis-statement/substitution of shipping bills to avail higher DEPB benefit - assessee is not a party to the fraud and had purchased the DEPB scrip from the open market in the bonafide belief of its being genuine, then even if at a later stage the DEPB scrip has been found to be fabricated, the assessee could not be deprived of the benefits legitimately available to them.

Summary

Issues:
1. Mis-declaration of export items for higher export incentives under DEPB Scheme.
2. Allegation of fraudulent means in obtaining DEPB Scrips.
3. Confiscation and penalty imposition on involved parties.
4. Interpretation of legal precedents regarding the validity of DEPB Scrips obtained through fraud.
5. Applicability of judgments from different High Courts in similar cases.

Analysis:
1. The case involved M/s Tiwari Brothers mis-declaring export items to avail higher export incentives under the Duty Entitlement Pass Book (DEPB) Scheme by substituting 'Crank Shafts for High Speed Compressor' as 'Timing Shafts for Mercedes Truck'. The investigation revealed mis-declaration and fraudulent practices in obtaining DEPB Scrips, which were then sold to importers for customs duty payment and exemption from Special Additional Duty of Customs.

2. The adjudicating authority held M/s Paramount Steels Ltd. liable for confiscation and recovery of duty, but refrained from imposing a penalty due to lack of evidence of collusion with the exporter. The Commissioner (Appeals) upheld the duty demand but set aside the redemption fine, leading to an appeal by M/s Paramount Steels Ltd. against confiscation and duty levy, while the Revenue appealed against the setting aside of the redemption fine.

3. Both authorities confirmed that DEPB Scrips were obtained through fraud, rendering them void ab initio. The decision relied on the Calcutta High Court case of M/s ICI India Ltd. vs Commissioner of Customs, which was upheld by the Supreme Court. However, counsel for M/s Paramount Steels Ltd. cited judgments from the Punjab & Haryana High Court, emphasizing that if an assessee purchases DEPB Scrips in good faith without involvement in the fraud, they should not be deprived of legitimate benefits.

4. The Tribunal noted the distinction between cases where the DEPB Scrip itself was forged versus cases where it was obtained based on forged documents. Following the Punjab & Haryana High Court's reasoning, the Tribunal found that the DEPB itself was not forged in the present case, aligning with the judgments in similar cases from the same High Court.

5. Consequently, the Tribunal set aside the impugned order, allowing M/s Paramount Steels Ltd.'s appeal and rejecting the Revenue's appeal. The judgment highlighted the applicability of specific legal precedents in determining the validity of DEPB Scrips obtained through fraudulent means, ultimately favoring M/s Paramount Steels Ltd. in this case.