2007 (12) TMI 52 - AT - Customs

DEPB scrip obtained on the basis of a forged document appellant is not a party to the fraud and had purchased the DEPB scrip from the open market in the bona fide belief of its being genuine - basic document i.e. DEPB itself is not a forged document appellant is allowed to take benefit - Revenue s appeal fails and accordingly dismissed

Summary

Issues:
Fraudulent substitution of export items for higher incentives under the DEPB Scheme, liability of buyers of fraudulently obtained DEPB scrips, validity of DEPB scrips obtained through fraud, applicability of judgments from different High Courts in similar cases.

Analysis:

1. The case involved M/s. Alfa International fraudulently substituting export items to avail higher export incentives under the Duty Entitlement Pass Book (DEPB) Scheme. The investigation revealed mis-declaration of export items and fraudulent acquisition of DEPB scrips. Show cause notices were issued for penalty and duty recovery. The adjudicating authority held goods liable for confiscation but allowed redemption on payment of a fine. Recovery of duty and penalties were ordered. The Commissioner (Appeals) upheld the duty demand but set aside the redemption fine. The appeal was filed against confiscation and duty levy by M/s. Flexo Polymers (P) Ltd., while the Revenue appealed against setting aside the redemption fine.

2. The authorities found that DEPB Scrips obtained fraudulently were void ab initio, relying on a Calcutta High Court judgment. However, the counsel for M/s. Flexo Polymers (P) Ltd. cited a Punjab & Haryana High Court judgment stating that if a DEPB scrip is purchased in good faith and not involved in the fraud, benefits should not be denied. The distinction was made between cases where the DEPB itself was forged versus cases where DEPB was obtained through a forged document. The judge found the Punjab & Haryana High Court judgments applicable to the present case, setting aside the impugned order and allowing the appeal.

3. Based on the above analysis, the judge dismissed the Revenue's appeal and allowed the appeal of M/s. Flexo Polymers (P) Ltd. The decision was made in line with the judgments cited from different High Courts, emphasizing the distinction between cases involving forged DEPBs and those where DEPBs were obtained through fraud. The judgment was pronounced on the 17th day of December, 2007.