2010 (3) TMI 473 - AT - Customs

DEPB fraud - Overvaluation - misdeclaration of value of goods by over valuation thereof so as to fraudulently claim higher DEPB credits of Rs. 1,68,92,208 - The goods exported by all the three exporting concerns were revalued and DEPB credits were held to be inadmissible in addition to the consequences followed for the offence committed by the Exporters. Accordingly it was also held the credits so inadmissible were not transferable to the respective transferees for which the transferors are liable to pay the duty lost by Customs against the imports made using the credits. In addition to duty liability imposed, they were also subjected to fine and penalty followed by interest on the amount unpaid. Held that - Materials on record revealed that neither investigation nor process of investigation was challenged to be perverse or futile. Modus operandi of the group proved to be mala fide due to various dubious practices adopted and secret arrangements made by them to conceal source of procurement. Benami transactions came to light. What was apparent was not proved to be real. Chain of evidence established nexus of the persons involved and goods exported, to serve their ill will. Reasonable belief of Investigation followed by search brought entire deliberate acts and omissions of appellants to the fold of law. Nexus of each other and their close proximity to the goods exported and fraudulent claim of DEPB made came to light by niceties of investigation. - Crystal clear factual findings of the learned Adjudicating Authority and echoing evidence on record do not demonstrate that Adjudications were made suspiciously or under surmise. All pleadings of the appellants were ill founded.

Issues Involved:
1. Misdeclaration of value of goods.
2. Lawfulness of DEPB claims made by exporters.
3. Title on DEPB credits and their transferability.
4. Consequences of misdeclaration and unlawful DEPB claims.
5. Involvement and liability of various parties including exporters and customs officers.

Issue-wise Analysis:

1. Misdeclaration of Value of Goods:
The Tribunal found that the appellants exported goods with grossly inflated values to fraudulently claim higher DEPB credits. The investigations revealed that the declared values of the exported goods were significantly higher than their actual market values. For instance, Cheval brand microphones were declared at US $39.85 per piece in India but only US $0.26 per piece in the US. The Tribunal noted that the appellants failed to provide credible evidence to counter these findings, and the evidence gathered from various sources, including overseas enquiries, confirmed the overvaluation.

2. Lawfulness of DEPB Claims Made by Exporters:
The Tribunal held that the DEPB credits were fraudulently obtained by misdeclaring the value of the exported goods. The investigation revealed that the appellants did not have manufacturing facilities for the goods they exported, and the goods were procured from dubious sources. The DEPB credits were thus held to be inadmissible, and the appellants were found to have no lawful title to these credits. The Tribunal emphasized that the fraudulent nature of the DEPB claims nullified any entitlement to such benefits.

3. Title on DEPB Credits and Their Transferability:
The Tribunal ruled that the DEPB credits obtained through fraudulent means were ab initio void and not transferable. The appellants' argument that they were bona fide buyers of the DEPB scrips was rejected. The Tribunal relied on precedents that fraudulent claims do not confer any title to the claimant or others who use such credits. The DEPB credits were declared inadmissible, and the appellants were held liable for the duty lost due to the fraudulent use of these credits.

4. Consequences of Misdeclaration and Unlawful DEPB Claims:
The Tribunal imposed fines and penalties on the appellants for their fraudulent activities. For instance, Tejwant Singh was fined Rs. 5.00 lakhs and held liable for duty and interest on the unpaid amounts. The Tribunal also imposed penalties on other appellants, such as Rajiv Kumar Sharma and Jagmohan Singh, under Section 114 of the Customs Act, 1962. The Tribunal upheld the adjudicating authority's decision to impose these penalties, emphasizing the appellants' deliberate intent to defraud the revenue.

5. Involvement and Liability of Various Parties Including Exporters and Customs Officers:
The Tribunal found that the exporters, including Tejwant Singh, Rajeevan Thouvan Kandathil, and Narinder Pal Singh, were the main perpetrators of the fraud. The Tribunal also held that customs officers, such as Rajiv Kumar Sharma and B.K. Pabri, were involved in the fraudulent activities by endorsing examination reports and giving let export orders without proper verification. However, the Tribunal exonerated some officers, like V. Valte and G.S. Sohal, from charges due to lack of evidence of their deliberate involvement in the fraud.

Conclusion:
The Tribunal dismissed all appeals, affirming the adjudication orders that found the appellants guilty of misdeclaration and fraudulent DEPB claims. The Tribunal emphasized that fraud nullifies all claims and benefits derived from it, and the appellants were held liable for the consequences of their actions, including fines, penalties, and duty liabilities. The Tribunal also upheld the exoneration of certain customs officers who were not found to have acted with mala fide intent.

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