2023 (10) TMI 121 - AT - Customs

Recovery of duty by invoking extended period of limitation - fabricated DEPB scrips - dispute pertains to the period Jan 2004 for which the show cause notice was issued on 21.05.2008 - existence of mens rea or not - levy of penalty - HELD THAT - In view of the definite findings of the Apex Court in M/S. MUNJAL SHOWA LTD. VERSUS COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE (DELHI IV) AND M/S. FRIENDS TRADING CO. VERSUS UNION OF INDIA AND ORS. 2022 (9) TMI 1076 - SUPREME COURT that fraud vitiates everything and it having been considered and decided that for the fake scrips, no right accrues, same holds good for the appellant in the present matter too. However, since in the decision of Division Bench from the same facts cited by the appellant, it has already been decided that there is no allegation of fraud against the importer, penalty cannot be invoked in the absence of mens-rea, therefore regarding penalty party is entitled to relief. The duty demand is sustained on the basis of fake scrips and not vested any right in the appellant. However, since there is no intention to the fraud/ forgery, the penalty imposed is set-aside. The appeal is partly allowed.

Summary

Issues involved:
The issues involved in this case are the purchase of DEPB scrips from the open market on a bonafide belief, the discovery of fabricated DEPB scrips, the invocation of extended period to recover duty, and the imposition of penalty.

Summary:

Issue 1: Purchase of DEPB scrips and discovery of fabrication
The appellant purchased DEPB scrips from the open market on a bonafide belief, later found to be fabricated, leading to the department seeking to recover the duty availed by invoking the extended period. The dispute pertains to the period Jan 2004, with a show cause notice issued on 21.05.2008.

Issue 2: Invocation of extended period and imposition of penalty
The Revenue sought to rely on a decision regarding the invocation of the extended period, citing fraud vitiates everything, leading to the justification of invoking the extended period of limitation. The Apex Court held that the department was justified in invoking the extended period due to the forged nature of the DEPB licenses. The penalty proceedings were remanded to the adjudicating authority for further action.

Judgment:
The Tribunal found that the duty demand is sustained based on the fake scrips, which did not vest any right in the appellant. However, as there was no intention to commit fraud or forgery, the penalty imposed was set aside. The appeal was partly allowed based on these findings.

This judgment highlights the importance of verifying the authenticity of documents such as DEPB scrips to avoid liability, while also emphasizing the consequences of fraud in such transactions.