2004 (1) TMI 230 - AT - Customs

Stricture against Customs, DGFT and Bank officials - EXIM - Stay/Dispensation of pre-deposit - Financial hardship

Issues Involved:
1. Requirement of pre-deposit under Section 129E of the Customs Act, 1962.
2. Validity of Duty Exemption Pass Book (D.E.P.B.) credits and the conditions for duty exemption.
3. Role of the appellants in the fraudulent acquisition and use of D.E.P.B.s.
4. Financial hardship claims by the appellants for waiver of pre-deposit.
5. Investigation into the role of Customs, DGFT, and Bank officials in the fraudulent grant of D.E.P.B.s.

Issue-wise Detailed Analysis:

1. Requirement of Pre-deposit under Section 129E of the Customs Act, 1962:
Section 129E mandates appellants to pre-deposit the duty, interest, and penalties demanded unless the Tribunal finds that such pre-deposit would cause undue hardship and decides to waive it. The Tribunal ordered M/s. De-Nocil to make a pre-deposit of Rs. 50 Lakhs towards duty and furnish a Bank Guarantee for the balance duty within 8 weeks. Other appellants were directed to pre-deposit 25% of the penalties levied on them within the same timeframe. Failure to comply would result in the dismissal of the appeals.

2. Validity of Duty Exemption Pass Book (D.E.P.B.) Credits and Conditions for Duty Exemption:
The D.E.P.B. scheme allows duty exemption against export of goods, with credits earned based on the export product's notified rates. The scheme requires realization of export proceeds within six months, failing which the D.E.P.B. holder must pay the equivalent credit amount in cash. In this case, no exports were made, and the shipping and bank documents submitted were forged, invalidating the duty exemption under Notification No. 34/97-Cus. The Tribunal emphasized that the conditions of the exemption notification must be strictly applied, and since no exports occurred, the duty exemption could not be granted.

3. Role of the Appellants in the Fraudulent Acquisition and Use of D.E.P.B.s:
The appellants argued that as transferees, they purchased the D.E.P.B.s in good faith, and these were genuinely issued by the DGFT authorities. However, the Tribunal found that the D.E.P.B.s were issued based on fraudulent documents, and the transferers were non-existent and fictitious. The Tribunal noted that the appellants received substantial commissions from the illegal acquisition and sale of D.E.P.B.s, indicating their involvement in the fraud.

4. Financial Hardship Claims by the Appellants for Waiver of Pre-deposit:
The appellants claimed financial hardship and submitted Income Tax Returns showing meager incomes. However, the Tribunal found these claims unconvincing, noting that the appellants had received substantial amounts from the fraudulent activities. The Tribunal concluded that the appellants had not made a case for a complete waiver of the pre-deposit of duty, interest, and penalties.

5. Investigation into the Role of Customs, DGFT, and Bank Officials in the Fraudulent Grant of D.E.P.B.s:
The Tribunal directed the Chief Commissioner of Customs, Nhava Sheva, to conduct an immediate inquiry into the acts and omissions of the concerned Customs, DGFT, and Bank officials that resulted in the duty loss. The inquiry was to determine the officials' involvement in the fraudulent grant of D.E.P.B.s and initiate necessary action under the Customs Act, 1962. The Tribunal emphasized that public exchequer should not be defrauded due to the negligence or collusion of officials, and appropriate actions should be taken against the defaulting officials.

Conclusion:
The Tribunal ordered specific pre-deposit requirements for the appellants and directed an investigation into the role of officials in the fraudulent grant of D.E.P.B.s. The judgment underscores the importance of adhering to the conditions of duty exemption notifications and the need for accountability among officials to prevent fraudulent activities.

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