2022 (9) TMI 1076 - SC - Customs

DEPB Scheme - forged DEPB Scrips - intent to evade Customs Duty or not - evasion of duty by seeking exemption against debits in releasing the advices, which were forged and which were not genuinely issued by the competent authority - time limitation - HELD THAT - It is found from the findings recorded by the Department, it has been found that the DEPB licenses/Scripps, on which the exemption benefit was availed of by the appellant(s) (as buyers of the forged/ fake DEPB licenses/Scripps) were found to be forged one and it was found that the DEPB licenses/Scripps were not issued at all. A fraud was played and the exemption benefit was availed on such forged/fake DEPB licenses/Scripps. In that view of the matter and on the principle that fraud vitiates everything and such forged/fake DEPB licenses/Scripps are void ab initio, it cannot be said that the Department acted illegally in invoking the extended period of limitation. In the facts and circumstances, the Department was absolutely justified in invoking the extended period of limitation. The Customs Duty was paid under protest to avoid any further coercive action. Be that as it may, the fact remains that the DEPB licenses/Scripps on which the exemption was availed by the appellant(s) was/were found to be forged one and, therefore, there shall be a duty liability and the same has been rightly confirmed by the Department, which has been rightly confirmed by the Tribunal as well as the High Court. As the penalty proceedings are reported to be pending pursuant to the remand order passed by the Tribunal, we direct the adjudicating authority to complete the penalty proceedings on remand, at the earliest preferably within a period of six months from today - appeal dismissed.

Issues involved:
1. Appeal against the High Court's order confirming demand of Customs Duty with interest.
2. Challenge of invoking extended period of limitation by the Department.
3. Validity of availing exemption benefit against forged DEPB Scripps.
4. Confirmation of duty liability by the Tribunal and High Court.
5. Pending penalty proceedings and remand order by the Tribunal.

Issue 1: Appeal against the High Court's order confirming demand of Customs Duty with interest:
In Civil Appeal No. 2576 of 2010, the appellant, M/s. Munjal Showa Ltd., challenged the order passed by the High Court of Punjab and Haryana confirming the demand of Customs Duty with interest. The appellant imported consignments through TRAs issued by the Bombay Custom House, which were later found to be based on forged DEPB Licenses. The Commissioner of Customs held the exemption availed was inadmissible, leading to duty liability, interest, and penalty. The Tribunal confirmed the duty liability, and the High Court upheld the decision citing that fraud vitiates everything, justifying invoking the extended period of limitation.

Issue 2: Challenge of invoking extended period of limitation by the Department:
The appellant contended that the Department was not justified in invoking the extended period of limitation. The appellant argued that even in cases of fraud, it must be established whether the buyers had knowledge of the forged documents. However, the Department, represented by the ASG, maintained that since the DEPB licenses were found to be forged and fake, the duty liability stands. The High Court and Tribunal affirmed this position, emphasizing that fraud vitiates everything, and hence, the extended period of limitation was rightly invoked.

Issue 3: Validity of availing exemption benefit against forged DEPB Scripps:
In Civil Appeal No. 5608 of 2011, the appellant imported goods and availed exemption from Customs Duty against a DEPB Scrip procured fraudulently by the predecessor. The Tribunal and High Court confirmed the duty liability, relying on the earlier decision in a similar case. The appellant's argument that the Department was not justified in invoking the extended period of limitation was rejected, emphasizing that the forged/fake DEPB Scrips were void ab initio, justifying the duty payment.

Issue 4: Confirmation of duty liability by the Tribunal and High Court:
Both Civil Appeals failed as the Tribunal and High Court confirmed the duty liability based on the forged/fake DEPB Scrips. The authorities found that the exemption was availed on forged documents, leading to duty payment obligations. The principle that fraud vitiates everything was crucial in upholding the duty liability, dismissing the appeals.

Issue 5: Pending penalty proceedings and remand order by the Tribunal:
The Tribunal remanded the penalty proceedings to the adjudicating authority, which is pending. The imposition of penalty hinges on whether the buyers had knowledge of the fraud or took precautions while purchasing the forged/fake documents. The Tribunal directed the completion of penalty proceedings within six months, separate from the duty liability confirmation.

In conclusion, the Supreme Court dismissed both appeals, upholding the duty liability due to availing benefits against forged/fake DEPB Scrips. The principle that fraud vitiates everything justified invoking the extended period of limitation by the Department. The penalty proceedings, separate from duty liability, were remanded for completion within six months.

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