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2008 (9) TMI 479 - AT - CustomsExport and Import Policy - Special Import Licence investigation revealed that SIL submitted by the said appellant were defaced and cancelled by the DGFT authorities on the request of the actual owner of the respective SILs. - The bonafide purchaser of the same cannot be deprived of any benefits arising out of the said licences, when on the face of the said licences there is no indication of the same having been cancelled. The licence is a documentary evidence and are admittedly freely transferable in the market. The investigations conducted at each and every level showed that neither of the persons was aware of the fact of cancellation, if at all. Not only licence numbers were appearing in the list of validly issued licences in the monthly bulletin published by DGFT, there was no indication, whatsoever to show that the licences were cancelled. transferee held to be bonafide purchaser of licence for valuable consideration Extended period could not be invoke against purchaser held that transferee was not liable to penalty appellant is entitled to clearance of the goods thereunder as the bona fide transferee of the licences for valuable consideration Though they are goods for purpose of sales tax and are transferable, rights of transferee can be decided without refrence to Negotiable Instruments Act, 1881 - Commissioner further holds that the transfer letters are forged - No format of a transfer letter has been prescribed in any statute. It is a creation of trade and commerce In absence of definition of forgery in Cusotms Act, 1962, definition in Section 463 of Indian Penal Code, 1860 can be used regarding the submission of the Revenue that the original licences surrendered to the DGFT were lost/stolen, Even if the licences were destroyed post utilisation, that by itself cannot, and will not incriminate him, for the reason that once the licences are fully utilised and the exchange control copies submitted to the bank for debiting the same, no purpose is served by keeping/retaining utilised/expired licences.
Issues Involved:
1. Validity of Special Import Licenses (SILs) used for import. 2. Liability of the appellant for customs duty under the proviso to Section 28(1) of the Customs Act, 1962. 3. Imposition of penalties on the appellants under Sections 112 and 114A of the Customs Act, 1962. 4. Confiscation of goods and imposition of fine in lieu of confiscation. Issue-wise Detailed Analysis: 1. Validity of Special Import Licenses (SILs) Used for Import: The primary issue was whether the 22 SILs used by the appellant for importing gold and silver were valid. The Customs Department argued that 15 out of the 22 SILs were defaced or canceled by the DGFT authorities, and the remaining 7 were invalid due to unsigned transfer letters. The appellant contended that they procured the SILs from the market through recognized brokers and that the licenses did not bear any indication of cancellation or defacement. The Tribunal found that the SILs were validly issued and did not bear any endorsement of cancellation. The letter from the DGFT dated 24-2-1998, which stated that the licenses were canceled, did not provide specific dates of cancellation, and the officer who issued the letter did not appear for cross-examination. The Tribunal concluded that the appellant, having acquired the licenses bona fide and for valuable consideration, could not be deprived of the benefits arising from the licenses. The principle that "law does not compel a man to do that which he cannot possibly perform" was applied, emphasizing that the appellant could not have known about the cancellation in the absence of any indication on the licenses themselves. 2. Liability of the Appellant for Customs Duty Under the Proviso to Section 28(1) of the Customs Act, 1962: The Tribunal examined whether the extended period of limitation under the proviso to Section 28(1) could be invoked against the appellant. It was determined that there was no suppression or willful misstatement on the part of the appellant, as they had procured the licenses bona fide in the ordinary course of business without knowledge of any defect. The Tribunal referenced previous decisions, including the case of Scientific Pharmacy v. CC, ACC, Mumbai, which held that the extended period could not be invoked against a transferee who acquired licenses in good faith. The Tribunal concluded that the demand for customs duty was barred by limitation. 3. Imposition of Penalties on the Appellants Under Sections 112 and 114A of the Customs Act, 1962: The Revenue argued that the appellant was guilty of producing defaced or canceled licenses, thereby vitiating the entire import transaction. However, the Tribunal found that the appellant had acted in good faith and acquired the licenses without any indication of their cancellation. The Tribunal held that the untested and uncorroborated letter from the DGFT could not be the basis for imposing penalties. The Tribunal also noted that the payments for the licenses were made in accordance with normal commercial practices, and there was no evidence of fraud or fake transactions. Consequently, the Tribunal set aside the imposition of penalties on the appellants. 4. Confiscation of Goods and Imposition of Fine in Lieu of Confiscation: The Tribunal addressed the issue of confiscation of goods and the imposition of a fine in lieu of confiscation. The Member (Technical) argued that the goods were liable for confiscation due to the fraudulent nature of the transactions. However, the Tribunal found that the goods were imported based on valid licenses, and the appellant could not be held responsible for any alleged fraud committed by others in the chain of transactions. The Tribunal set aside the order of confiscation and the imposition of a fine. Separate Judgments: - Member (Judicial): Concluded that the appellant had acquired the licenses bona fide and for valuable consideration, and the demand for customs duty was barred by limitation. The imposition of penalties and confiscation of goods was set aside. - Member (Technical): Disagreed with the Member (Judicial) and argued that the transactions were fraudulent, justifying the demand for customs duty, imposition of penalties, and confiscation of goods. - Vice-President (Third Member): Concurred with the Member (Judicial) and held that the licenses were valid, the demand for customs duty was barred by limitation, and the imposition of penalties and confiscation of goods was unjustified. Final Order: In view of the majority order, the impugned order passed by the Commissioner was set aside, and the appeals were allowed with consequential relief.
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