2018 (9) TMI 201 - HC - Customs

Penalty u/s 114A of CA - Whether the doctrine of Caveat Emptor would deem a victim of fraud, to be guilty of fraud and liable to penal consequences under Section 114A of the Customs Act, 1962? - Held that - The Investigating Agency as well as the Adjudicating Authority have recorded a clear factual finding that there is sufficient material to show that fake TRAs were presented and clearance of imports were made without genuine DEPB. However, the Tribunal, after recording such a finding, has set aside the penalty against such importers/appellants. We are not fully convinced by the reasons assigned by the Tribunal for setting aside the penalties presumably because, the Tribunal pointed out certain negligence on the part of the officers - the appeals are allowed in part, insofar as it levies penalty on the appellants and set aside the same - appeal allowed in part.

Summary

Issues:
1. Interpretation of the doctrine of Caveat Emptor in fraud cases under the Customs Act, 1962.
2. Invocation of the extended period under Section 28(1) of the Customs Act, 1962 without accusations of suppression, misrepresentation, or fraud.

Analysis:

Issue 1: Interpretation of Caveat Emptor in Fraud Cases
The primary issue before the court was whether the doctrine of Caveat Emptor would hold a victim of fraud accountable under Section 114A of the Customs Act, 1962. The Tribunal had found sufficient evidence to show that fake TRAs were presented and imports were cleared without genuine DEPB. Despite this, the Tribunal had set aside penalties against the importers. The court expressed dissatisfaction with the Tribunal's reasoning, particularly noting negligence on the part of officers. The court emphasized the importance of justice and ordered a full investigation by the DG (Vigilance), CBEC to take disciplinary action against Custom House and DRI officials involved or negligent in the frauds. The court referenced a previous decision in K.I.International Ltd. where penalties were waived for similar importers, and based on the finality of that decision, the court decided to grant identical relief to the assesses in the present case.

Issue 2: Invocation of Extended Period under Section 28(1)
The second issue involved the invocation of the extended period under Section 28(1) of the Customs Act, 1962 without specific accusations of suppression, misrepresentation, or fraud. The court, while not directly addressing the substantial questions of law framed for consideration, relied on the precedent set by the Tribunal in a previous case to grant relief to the appellants by setting aside the penalties imposed. The court confirmed the findings of the Tribunal and the Order-in-Original, allowing the appeals in part by overturning the penalties levied on the appellants. The court highlighted the importance of consistency in decisions and granted relief based on the previous decision where penalties were waived for similar importers.

In conclusion, the judgment focused on the interpretation of legal principles such as Caveat Emptor in fraud cases under the Customs Act, 1962, and the invocation of the extended period without specific accusations of suppression or misrepresentation. The court's decision to grant relief to the appellants was influenced by previous rulings and the need for consistent application of legal principles in similar cases.