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2022 (11) TMI 869 - AT - CustomsExport promotion schemes - forge/fake DEPB licences/scrips - denial of benefit on the ground of principle fraud vitiates everything - evidence of involvement of the appellant in the fraud or not - HELD THAT - The undisputed facts of the case are that Nidhi imported goods by 29 Bills of Entry as listed in the annexure to the show cause notice using various duty free scrips/licenses which were issued in the name of other persons/entities. Such licences/scrips were transferable. Nidhi had not obtained physical copy of any of the licences or scrips which it was supposed to have purchased. It was also not aware as to which licence or scrip, if any, it had purchased. The invoices which it received from firms of Shri Sharafat Hussain also did not indicate which scrip or licence was being sold. The SCN was issued by the jurisdictional Commissioner of Customs. This power of assigning any SCN for adjudication has been delegated to the Zonal Chief Commissioner by the Government. The Zonal Chief Commissioner had assigned this SCN to the Commissioner of Customs (Export), Air Cargo, New Delhi who passed the impugned order. Whether in a case where forged or manipulated scrips or licences have been used for clearance of goods and there is no evidence that the fraud was committed by the importer, demand can been raised for the duty on the importer and if so whether extended period of limitation can also be invoked? - HELD THAT - This issue is no longer res integra and it has been settled by the Supreme Court in M/S. MUNJAL SHOWA LTD. VERSUS COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE (DELHI IV) AND M/S. FRIENDS TRADING CO. VERSUS UNION OF INDIA AND ORS. 2022 (9) TMI 1076 - SUPREME COURT . The Supreme Court was seized of a matter where forge/fake DEPB licences/scrips were used to pay duty on imported goods. After completing investigation, show cause notices were issued invoking the extended period of limitation which were challenged both on the ground of limitation as well as on the ground that though the scrips were forged, the importers had no intention to evade the customs duty. Similarly in the case of M/S MERCEDES BENZ INDIA PRIVATE LIMITED, M/S O.A. ASSOCIATES, PASHUPATI ACRYLON LIMITED VERSUS COMMISSIONER OF CUSTOMS, DELHI, ADDITIONAL DIRECTOR GENERAL (ADJUDICATION) , NEW DELHI, DIRECTORATE OF REVENUE (INTELLIGENCE) OTHERS 2020 (2) TMI 437 - CESTAT NEW DELHI upheld the demand of duty on the importers where fraudulent/forged DEPB scrips or licences were used. There is no provision to transfer the benefit of any exemption either under the policy or any notification or any provision of the law. The licences and scrips are transferable and if they are transferred, the transferee consequently gets the benefit of the exemption notification. Without transferring the licence/scrip, the benefit of exemption cannot be transferred - Nidhi never had any licence/scrip with it nor was even aware as to the benefit available under which licence/scrip issued to whom and/or transferred who was used in the Bill of Entry was known to the appellant. The question of producing the scrip or licence at the time of clearing the goods does not arise as a consequence. As the appellant had not fulfilled the requirements of either getting the licence/scrip transferred to it or producing it at the time of clearance as required under exemption notifications, we do not find any reason to hold that the appellant is entitled to the benefit of exemption notifications even to the extent that the manipulated licence has covered part of the duty debited. Interest under Section 28AA of Customs Act - HELD THAT - Interest under Section 28AA follows from the demand under Section 28 of the Customs Act. As the duty is payable the interest liability follows. Imposition of penalty - HELD THAT - As far as the role of the officers in the matter is concerned, learned authorized representative submits that the matter has been sent to the CBI who are investigating the matter - in respect of the appellant only duty, interest, fine and penalty are relevant in this case but if any officers are involved, it will be a much more serious matter which will have to be investigated with respect to the violations of other laws such as Prevention of Corruption Act also. Investigation in this regard has been handed over to CBI. Even if the officers were involved, it does not, in any way, dilute the liability of the appellants in terms of duty, interest or penalties. Penalty of an amount equal to the duty not paid was imposed on Nidhi under section 114A. This is a mandatory penalty imposable when a demand invoking extended period of limitation and since we have upheld the confirmation of the demand invoking extended period of limitation, the imposition of penalty under section 114A is upheld - Penalty under section 112(a) (ii) on Jain (the partner) and penalty under section 114A on Nidhi (the partnership firm) in this case arise out of the same cause of action and therefore, penalty under section 112 cannot be sustained as penalty has been imposed under section 114A which is upheld - there is no evidence that Nidhi or its partner Jain had knowledge of the fraud/forged licences/ scrips being used to clear the goods and therefore, the penalty under section 114AA cannot be sustained. Appeal disposed off.
Issues Involved:
1. Confirmation of demand of customs duty along with interest and penalties. 2. Legitimacy of the importer's claim of being a bona fide purchaser of duty credit scrips. 3. Validity of the extended period of limitation for demand. 4. Jurisdiction of the officers issuing and adjudicating the show cause notice. 5. Imposition of penalties on the importer and its partner. Detailed Analysis: 1. Confirmation of Demand: The Tribunal upheld the demand of Rs. 57,14,129/- from the importer, M/s. Nidhi Enterprises, along with applicable interest under Section 28(4) of the Customs Act, 1962. The demand was based on the use of forged or manipulated duty-free scrips/licenses for clearing goods without paying the appropriate duty. The Tribunal noted that the importer did not possess or produce the physical copies of the scrips/licenses at the time of clearance, which is a mandatory requirement under the relevant exemption notifications. The Tribunal rejected the importer's claim that it was not aware of the fraud, emphasizing that "fraud vitiates everything." 2. Bona Fide Purchaser Claim: The Tribunal dismissed the importer's claim of being a bona fide purchaser of the duty credit scrips. It was found that the importer did not take reasonable precautions to verify the genuineness of the scrips/licenses. The invoices provided by the importer did not indicate the specific scrips/licenses purchased, and the importer relied entirely on the fraudster, Shri Sharafat Hussain, to clear the goods. The Tribunal emphasized the principle of "caveat emptor" (buyer beware) and concluded that the importer was not a genuine buyer of the scrips/licenses. 3. Extended Period of Limitation: The Tribunal upheld the invocation of the extended period of limitation, citing the Supreme Court's decision in M/s Munjal Showa Ltd. Vs. Commissioner of Customs And Central Excise (Delhi-IV) And M/s Friends Trading Co. Vs. Union of India And Ors. 2022 (9) TMT 1076 - Supreme Court. The Supreme Court had held that in cases involving fraud, the extended period of limitation is justified. The Tribunal found that the importer's failure to produce the scrips/licenses and reliance on manipulated documents justified the invocation of the extended period of limitation. 4. Jurisdiction: The Tribunal addressed the issue of jurisdiction raised by the importer. It clarified that the show cause notice was issued by the Commissioner of Customs (Export), ICD, Tughlakabad, who had the jurisdiction at the relevant time. The adjudication was later assigned to the Commissioner of Customs (Export), Air Cargo Export, New Custom House, New Delhi, by the Chief Commissioner of Customs (Delhi Zone) as per Notification No. 91/2018-Cus (NT) dated 5.11.2018. The Tribunal found that the show cause notice and the impugned order were issued and adjudicated by officers with the appropriate jurisdiction. 5. Imposition of Penalties: The Tribunal upheld the penalty of Rs. 57,14,129/- imposed on M/s. Nidhi Enterprises under Section 114A of the Customs Act, 1962, as it followed the confirmation of the demand invoking the extended period of limitation. However, the Tribunal set aside the penalties imposed on Shri Sudarshan Kumar Jain, partner of Nidhi Enterprises, under Sections 112(a)(ii) and 114AA of the Customs Act, 1962. The Tribunal found no evidence that Jain had knowledge of the fraud or intentionally made false declarations. Consequently, the penalties of Rs. 10,00,000/- under Section 112(a)(ii) and Rs. 1,00,000/- under Section 114AA imposed on Jain were set aside. Conclusion: The Tribunal upheld the demand and penalty on M/s. Nidhi Enterprises but set aside the penalties on its partner, Shri Sudarshan Kumar Jain, due to the lack of evidence of his involvement in the fraud. The Tribunal emphasized the importance of adhering to the conditions of exemption notifications and taking reasonable precautions when purchasing duty-free scrips/licenses.
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