9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (10) TMI 577 - AT - CustomsValid DEPB scrips or not - whether the DEPB scrips utilised by the appellant for payment of duty which were later declared as obtained fraudulently, which is not disputed, can be considered as valid DEPB scrips? - Imposition of penalty under Section 114A of the Customs Act, 1962 - HELD THAT - The exporter M/s. Bilwa Labs had obtained the DEPB scrips fraudulently by declaring Muriate of Potash as Industrial Salt at the time of export for claiming the benefit of DEPB scheme is not under dispute. However, the claim of the appellant is since these DEPB scrips are freely available in the open market for purchase and they had purchased valid DEPB scrips and at the time of import, they were considered to be valid DEPB scrips, hence there cannot be demand of duty on them. It is also claimed that since the demand is time barred, the demand of duty cannot be sustained and accordingly, the interest and penalty is not sustainable. The matter is no longer res integra in as much as the Hon ble Supreme Court in the case of 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 observed ' it has been found that the DEPB licenses/Scrips, on which the exemption benefit was availed of by the appellant(s) (as buyers of the forged/ fake DEPB licenses/Scrips) were found to be forged one and it was found that the DEPB licenses/Scrips were not issued at all. A fraud was played and the exemption benefit was availed on such forged/fake DEPB licenses/Scrips.' There are no reason to interfere with the impugned order as far as the demand of duty is concerned. However, since the appellants were not aware of the fact that the goods imported by them were based on the fraudulently obtained DEPB scrips, the question of imposing penalty on them does not arise. Accordingly, the penalty is set aside. Appeal allowed in part.
Issues Involved:
1. Eligibility of DEPB scrips obtained fraudulently for duty benefits. 2. Applicability of extended limitation period under Section 28 of the Customs Act, 1962. 3. Imposition of penalty under Section 114A of the Customs Act, 1962. 4. Bona fide purchaser defense for DEPB scrips. 5. Validity of duty demands based on subsequently canceled DEPB scrips. Issue-wise Detailed Analysis: 1. Eligibility of DEPB Scrips Obtained Fraudulently for Duty Benefits: The core issue was whether DEPB scrips obtained fraudulently could be used to avail duty benefits. The appellant argued that the DEPB scrips were valid at the time of import and were purchased from the open market. However, it was established that the DEPB scrips were obtained by the original holder through mis-declaration, rendering them void ab initio. The Tribunal upheld the principle that fraud vitiates everything, and thus, the DEPB scrips could not be considered valid for duty benefits. The Tribunal referenced the Supreme Court's observation in similar cases, affirming that such scrips, being void, could not confer any legal benefit. 2. Applicability of Extended Limitation Period: The appellant contended that the demand was time-barred. However, the Tribunal noted that the extended period of limitation under the proviso to Section 28 of the Customs Act was applicable due to the fraudulent nature of the DEPB scrips. The principle that fraud extends the limitation period was reaffirmed, citing precedents where the extended period was justified in cases involving fraudulent documents. The Tribunal emphasized that the taint of fraud attached to the document persists, allowing the invocation of the extended period. 3. Imposition of Penalty Under Section 114A: The Tribunal examined whether penalties under Section 114A were justified. While the duty demand was upheld, the Tribunal set aside the penalty, recognizing that the appellant was not aware of the fraudulent nature of the DEPB scrips at the time of purchase. The Tribunal acknowledged the bona fide nature of the appellant's actions, distinguishing between duty liability and the imposition of penalties, which require knowledge or intent to defraud. 4. Bona Fide Purchaser Defense: The appellant argued that as a bona fide purchaser, they should not be penalized for the fraudulent acts of the original holder. The Tribunal acknowledged the appellant's bona fide status, noting that the DEPB scrips were valid and registered at the time of purchase and import. However, the Tribunal clarified that while this defense mitigated penalty imposition, it did not absolve the appellant from duty liability, as the underlying scrips were fraudulently obtained. 5. Validity of Duty Demands Based on Subsequently Canceled DEPB Scrips: The appellant claimed that duty demands could not be sustained since the DEPB scrips were valid at the time of import and only canceled later. The Tribunal disagreed, holding that subsequent cancellation of the scrips did not affect the duty liability, as the fraud rendered the scrips void from the outset. The Tribunal cited precedents confirming that duty demands are valid even if the scrips were deemed valid at the time of import but later found fraudulent. Conclusion: The Tribunal upheld the duty demand, affirming that DEPB scrips obtained fraudulently could not confer duty benefits, and the extended limitation period was applicable. However, it set aside the penalties under Section 114A, recognizing the appellant's lack of knowledge about the fraudulent nature of the scrips. The appeals were partly allowed, confirming the duty demand with interest and setting aside the penalty.
|
