1999 (9) TMI 612 - AT - Customs

Summary

Issues Involved:
1. Validity of the import licence obtained through fraud or misrepresentation.
2. Liability of the appellant for penalty due to alleged collusion in obtaining the import licence.
3. Applicability of Supreme Court judgments regarding the validity of licences obtained by fraud.
4. Consequences of the cancellation of the import licence on the goods imported under that licence.

Detailed Analysis:

1. Validity of the Import Licence Obtained Through Fraud or Misrepresentation:
The appellant imported polyester filament yarn in September 1987 using a REP import licence issued to M/s. Overseas Enterprises, which was later found to be obtained based on false and forged documents. The Custom House declined to clear the goods pending enquiries, and the licensing authority eventually canceled the import licences on the grounds of fraud and misrepresentation, declaring the firm fictitious. The Collector held the goods not to be covered by the licence and ordered their confiscation.

2. Liability of the Appellant for Penalty Due to Alleged Collusion in Obtaining the Import Licence:
The notice issued to the appellant proposed confiscation of the goods and penalty on the grounds of collusion with Shyam Bihani and others in obtaining the import licence. The appellant argued there was insufficient evidence to show their connection with the fraudulent acts of Overseas Enterprises and contended that the mere association with the broker and the fact that the licence was purchased at a lower rate were not sufficient grounds for imposing a penalty. The Collector did not impose any penalty on the appellant's employee.

3. Applicability of Supreme Court Judgments Regarding the Validity of Licences Obtained by Fraud:
The appellant relied on Supreme Court judgments in East India Commercial Corporation v. C.C. and Union of India v. Sampat Raj Dugar, which held that a licence obtained by fraud is voidable and remains valid until canceled. The Departmental Representative argued that these judgments were not applicable as they did not concern a licence that had already been canceled. He cited the Supreme Court judgment in Fedco (P) Ltd. v. S.N. Bilgrami, which stated that a licence obtained by fraud or misrepresentation is void, and any imports made under such licences are unauthorized.

4. Consequences of the Cancellation of the Import Licence on the Goods Imported Under That Licence:
The Tribunal examined the Supreme Court judgment in Fedco Pvt. Ltd. v. S.N. Bilgrami, noting that the case did not address the issue of whether goods imported under a licence before its cancellation would be unauthorized. The Tribunal concluded that the principles laid down in East India Commercial Corporation and Sampat Raj Dugar, which stated that a licence remains valid until canceled, were of general applicability and not limited to the facts of those cases. The Tribunal also noted that the Imports (Control) Order did not provide for cancellation ab initio or invalidate imports made prior to the cancellation.

However, the Tribunal acknowledged that if the firm Overseas Enterprises was fictitious, the licence was issued to a non-existent party, resulting in no valid contract between the Government of India and the applicant. Consequently, the licence was not valid, and any imports made under such a licence were unauthorized, rendering the goods liable to confiscation.

Conclusion:
The Tribunal upheld the confiscation of the goods and found no reason to reduce the redemption fine of Rs. 4 lakhs, considering it commensurate with the value of the goods. The appeal was dismissed.