2015 (2) TMI 463 - AT - Customs

Utilization of DEPB credit - Misrepresentation of facts - Respondent has denied any knowledge of the fraudulent activities of the said exporter; that the DEPB licences were purchased from a mediator and the same were duly verified by Revenue and found to be genuine - Revenue has demanded payment of Customs duty with applicable interest in addition penalty was imposed on the respondent under the provisions of the Customs Act, 1962 - Held that - Following decision of M/s Friends Trading Co. 2011 (2) TMI 382 - PUNJAB & HARYANA HIGH COURT - Decided in favour of assessee.

Summary

Issues involved:
1. Utilization of DEPB license allegedly obtained fraudulently.
2. Denial of knowledge regarding fraudulent activities.
3. Demand for payment of duty, interest, and penalty under the Customs Act, 1962.
4. Appeal against Order-in-Original for depositing Customs duty.
5. Interpretation of law regarding bona fide purchasers of DEPB scrips.
6. Application of the extended period of limitation in cases of fraudulent DEPB scrips.

Analysis:
1. The case involved the utilization of a DEPB license allegedly obtained fraudulently by the assessee-respondent. The license was purchased from a mediator and used for imports, leading to a show-cause notice demanding payment of duty amount along with interest and penalty under the Customs Act, 1962. The respondent denied knowledge of the fraudulent activities of the exporter and claimed that the licenses were genuine and verified by Revenue.

2. The Learned Commissioner (Appeals) allowed the appeal filed by the respondent, setting aside the Order-in-Original that required depositing the Customs duty paid using the DEPB scrips. The decision was based on established legal principles, citing previous judgments such as M/s Flexo Polymers vs. C.C., Amritsar, which held that bona fide purchasers of DEPB scrips obtained on the basis of forged documents are entitled to benefits.

3. The Revenue relied on subsequent decisions, including the case of M/s Friends Trading Co., where the Hon'ble High Court of Punjab & Haryana emphasized the distinction between non-existent and fraudulently obtained documents. The court held that even successors or purchasers of fraudulently obtained DEPB scrips cannot retain benefits illegally obtained, and the extended period of limitation can be invoked against them.

4. The Hon'ble High Court considered previous decisions like M/s Leader Valves Ltd. and M/s Vallabh Design Products, ultimately allowing the appeal filed by the Revenue based on the precedent set by M/s Friends Trading Co. The court emphasized that the taint of fraud or suppression continues if the document is not genuine, and purchasers of such documents stand in the same position as the original holders regarding liability.

In conclusion, the judgment highlighted the legal principles surrounding the utilization of DEPB licenses obtained fraudulently, the rights of bona fide purchasers, and the application of the extended period of limitation in such cases. The decision emphasized the importance of distinguishing between genuine and fraudulently obtained documents, ensuring that individuals cannot retain benefits obtained through fraudulent means.