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TMI Blog2008 (9) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to clearance of the goods thereunder as the bona fide transferee of the licences for valuable consideration Though they are goods for purpose of sales tax and are transferable, rights of transferee can be decided without refrence to Negotiable Instruments Act, 1881 - Commissioner further holds that the transfer letters are forged - No format of a transfer letter has been prescribed in any statute. It is a creation of trade and commerce In absence of definition of forgery in Cusotms Act, 1962, definition in Section 463 of Indian Penal Code, 1860 can be used regarding the submission of the Revenue that the original licences surrendered to the DGFT were lost/stolen, Even if the licences were destroyed post utilisation, that by itself cannot, and will not incriminate him, for the reason that once the licences are fully utilised and the exchange control copies submitted to the bank for debiting the same, no purpose is served by keeping/retaining utilised/expired licences. - C/217, 291 and 419/2004 - A/1724-1726/2008-WZB/AHD - Dated:- 1-9-2008 - Ms. Archana Wadhwa, Member (J) and Shri M. Veeraiyan, Member (T) Third Member on Reference: Ms. Jyoti Balasundaram, Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Inc. purchased 22 SILs from one Ms. Sunita Goel of Ahmedabad, against consideration. The said Ms. Sunit Goel was working as a broker and had possessed the SILs through Ms. Vidya Mahadik, who in turn got it from Mr. Shrenik Mehta. Mr. Shrenik Mehta procured the licences from one Mr. Sanjay Rai, who in turn, claimed to have been got the same from one Mr. Ramesh Chandra. The statements of all these persons recorded during the investigations are to the effect that they were acting as a bona fide broker/purchaser of the SILs, which are transferable in the market and before acquiring the same, they have verified the fact of issuance of these licences by the office of the DGFT, which published a monthly bulletin in which the licence numbers are disclosed. However, the Department sought information from the office of DGFT, who vide their letter dt. 24-2-1998 addressed to the Asst. Commissioner, Customs Air-cargo Complex, Ahmedabad disclosed that the said SIL numbers were actually cancelled/defaced by their office. It was also disclosed in the said letter that the said SILs were not available in the office and were removed from the relevant files and as such the date of cancellation and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were procured by the appellant from the market against consideration and after the verification by the bank. The Revenue's entire case is based upon the letter dt. 24-2-1998 written by one Shri Sohan Chand, Foreign Trade Development Officer, New Delhi. We have seen the said letter, which does not disclose date of cancellation of the licences. Said Shri Sohan Chand did not appear for cross-examination, though summons were issued to him for the said purpose. During the course of hearing, it was queried as to how the licences, which were cancelled and defaced by DGFT, were circulated to the market without any indication to that effect. The Department's case is that the said licences were removed from the office file of the DGFT without showing the cancellation on the same. No further facts as to how the said licences were removed and who was responsible for the same and whether any action against such person has been taken, is available on record. The appellants have strongly contended that a bald and bare statements of Shri Sohan Chand, without any further particulars and without testing the veracity of his statement through the tool of cross-examination cannot be held against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in apparent tenor of such electronic image and the truncated cheque shall be a material alteration and it shall be the duty of the bank or the clearing house, as the case may be, to ensure the exactness of the apparent tenor of electronic image of the truncated cheque while truncating and transmitting the image. (3) Any bank or a clearing house which receives a transmitted electronic image of a truncated cheque, shall verify from the party who transmitted the image to it, that the image so transmitted to it and received by it, is exactly the same." Applying the principles contained in Section 89 mentioned above, it is clear that since the said licences do not on the face thereof bear any endorsement or alteration to prove cancellation/defacement thereof, the Appellants are not liable having acquired the said licences innocently and bonafidely for valuable consideration in the normal course of business, without notice of the alleged cancellation/defacement. As such in the absence of any other evidence implicating the appellant, who have acquired the licences bona fide, the untested, uncorroborated and unsubstantiated letter dt. 24-2-1998 of the DGFT office cannot be made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R that though the licences were procured by the appellant from the broker Ms. Sunita Goel, the consideration for acquiring the same were made in the name of M/s. Kohinoor Enterprises and M/s. Mangalam Enterprises by way of cheque/demand draft. Ld. Jt. CDR stressed the said point in support of the findings that the procurement of the licences was not genuine. The above submission of ld. Jt. CDR stands clarified by the appellant by submitting that the same is in accordance with the normal commercial practice where payments are made in the name of the parties desired by the brokers or the transferor as the case may be. We further find that the said allegation was neither in the show cause notice nor an adverse inference on that account stands drawn by the Commissioner. We have been shown sample of other licences which were procured in the normal course of the business, where considerations were made in the name of third parties and no allegation of any fraud or fake nature of the licences was made there. 13. As such, we do not find any contravention as regards the payments. The fact that the payments made to the brokers/agents or their nominees is in keeping with the trade and indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6] Ch.D. 426, Jassel M.R. adopted the rule that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden. This rule has stood the test of time. It was applied by the Privy Council, in Nazir Ahmed v. Emperor L.R. 63 I.A. 372-AIR 1936 P.C. 253 and later by this Court in several cases Shiv Bahadul Singh v. State of UP [1954] SCR 1098 : Deep Chand v. State of Rajasthan [1962] SCR 662, to a Magistrate making a record under Sections 164 and 364 of the Cr.PC, 1898. This rule squarely applies "where, indeed, the whole aim particular manner did not imply a prohibition to do it in any other. Maxwell's Interpretation of Statutes, 11th Edn., pp. 362-363". The rule will be attracted with full force in the present case because non-verification of the surrender in the requisite manner would frustrate the very purpose of this provision. Intention of the legislature to prohibit the verification of the surrender in a manner other than the one prescribed, is implied in these provisions. Failure to comply with these mandatory provisions, therefore, had vitiated the surrender and rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EGAT-Delhi)], stands distinguished by the Tribunal in the above referred case. 19. In view of the above, we agree with the ld. Advocate for the appellant that they have acquired the licences against consideration from the open market, no duty can be demanded from them, inasmuch as they have been victim of the circumstances, which are on account of the non-action on the part of the DGFT authorities, who after cancellation of the same (if at all) have not followed the procedure and have not acted in accordance with law and have allowed the licences to be circulated in the market for transferability. As such, we hold that apart from imports of the goods, the demand is also barred by limitation. 20. In view of the foregoing, we do not find any reason to confirm the demand of duty, to confiscate the goods or to impose personal penalties upon the appellants. We, accordingly, set aside the same and allow all the appeals with consequential relief. (Pronounced in Court on ..) Sd/- Archana Wadhwa Member (Judicial) 21. [Order per: M. Veeraiyan, Member (T)]. - I have perused the order proposed by my ld. Sister Mrs. Archana Wadhwa, Member (Judicial) and as I am not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent these licences on sale to the market. At any rate, there is no claim by Sh. H. Kumar Gadecha or any of the intermediaries that the consideration for the licences have gone to the licence holders. It is rather unusual that the consideration for these licences were shown to have been paid to the accounts of total strangers without any knowledge or concurrence on the part of the original licence holders. It is also on record the intermediaries have shared the money withdrawn from the accounts of the above two firms and such amounts have been claimed to be their shares of their commissions. 23.5 15 out of the above 22 SILs were submitted to the DGFT authorities for cancellation and they were either cancelled or were in the process of cancellation. There was no reason for these licences to be available in the market. The communication dt. 24-2-1998 from the DGFT office confirms that these 15 licences were cancelled and but they were not available in their records. Obviously some mischief/fraud has happened which lead to the licences being available in the market. There could be possible failure/collusion on the part of some in the office of DGFT authorities. One of these licences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on par with a "holder in due course" of negotiable instruments. 26. There can be no purchase without sale. There is no buyer when there is no seller. It is clearly established that the licence holders have not sold these 22 licences. The licences have not come legitimately to the market from the licence holders. The claim of bona fide purchase and bona fide acquisition is not acceptable. The purchase of these licences is a deception practiced through questionable documents like transfer letters. When the holders of the licence have not sold the licences, the acquisition of licences by Sh. H. Kumar Gadecha through intermediaries, some of whom identified and some not traceable is clearly steeped in fraud. In some cases the letter head in which the transfer letters were prepared were not genuine; in some cases, signatures of transferors forged; in some cases, signatures of bankers and rubber stamp were faked; in some cases, there has been manipulation in the value of licences presented to the customs. In the light of the above, the 22 SILs presented to the Customs for the purpose of clearance of goods valued over Rs. 28 crores were born out of fraud and they are not valid for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Technical)? Sd/ M. Veeraiyan Member (Technical) Sd/- Archana Wadhwa Member (Judicial) 29. [Order per: Jyoti Balasundaram, Vice-President]. - I have heard both sides on the difference of opinion referred to me. 30. The two issues which arise in this case are (1) whether the licences are cancelled or valid for imports and (2) if the licences are not valid, whether the appellant, Shri Hitendra Kumar Gadecha, is liable to pay duty under the proviso to Section 28(1) of the Customs Act, 1962 and whether he is liable to penalty along with the other appellants. 31. Before addressing these two issues, it is necessary to clear the air with regard to one more aspect of the matter, viz., as to whether the licences are forged/fake. These two expressions have been used in different context, and different meaning has been ascribed thereto, in the show cause notice as well as in the impugned order. The two words have been used loosely and interchangeably. At times, these two words have been used with reference to the licences while also using the same words in relation to the transfer letter. The Commissioner also uses the word "forged" in the impugned order. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it is left to the realm of common knowledge to proceed on the basis that any cancellation must be borne out from the licence itself. Such is not the position in the present case, as the licences did not bear any endorsement of cancellation and in fact were accepted by the customs authorities and debited at the time of allowing clearance of the consignments. The theory that the licences in question were removed, as claimed by Mr. Sohan Chand in his letter dated 24-3-1998, is not proved. If the licences were indeed removed, what action was taken thereafter? Was there an enquiry or investigation? These vital questions have remained unanswered. It cannot be left to imagination as to how the licences were available in the market for transfer. It is not possible to arrive at a conclusion that the licences were forged merely on the basis of the fact that the licences were issued and the fact that Mr. H.K. Gadecha acquired the licences for payment and produced the same in original to the customs authorities who debited the same while allowing clearance of the imported goods. Nothing in between has been proved in accordance with law. 32. Mr. Shrenik Mehta, proprietor of M/s. S.M. Enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of licences have implicated Shri H.K. Gadecha. There is no material on record to establish that he was aware of, or had any knowledge about the fraud or about any defect in the licences at the time when he made the payment therefor or had any subsequent information until the commencement of the investigation. It is pertinent to note that the Commissioner does not hold him to be a party involved in any fraud or theft of licences as claimed by Mr. Sohan Chand. Mr. H.K. Gadecha is, therefore, a bona fide transferor of the licences in question for valuable consideration and without notice of any defect in the licences. 35. The Commissioner further holds that the transfer letters are forged. The basis for arriving at this conclusion is the statement of the original licensees and transferors stating that they have neither sold nor transferred licences to Mr. H.K. Gadecha. At the same time, the transfer letters bear all the details which are normally contained in a transfer letter. This has also been admitted by one of the witnesses after seeing the transfer letter in question. No format of a transfer letter has been prescribed in any statute. It is a creation of trade and commerce. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question as to whether the licences were cancelled. At the cost of repetition, I find that the licences on the face thereof do not bear any endorsement of cancellation and, therefore, Mr. H.K. Gadecha is entitled to clearance of the goods thereunder as the bona fide transferee of the licences for valuable consideration. This issue has been settled in favour of the importers by the Larger Bench of the Tribunal in Hico Enterprises v. CCE - 2004 (167) E.L.T. 530, which has been upheld by the apex court vide its order dated 18-6-2008. The Revenue places reliance on the judgment of the Apex Court in Yash Overseas Ors. v. CST - 2008-TIOL-97 (S.C.) wherein the Court has held that a DEPB like REP licence, is "goods" for the purpose of levy of sales tax. This judgment has been cited to support the Revenue's contention that licences are goods and are not negotiable instruments. While there can be no dispute that for the purpose of sales tax, licences are goods, nonetheless they are transferable and the issue before me is not whether tax is leviable thereon, but relates to the rights of a transferee who acquires the same for consideration. For the same reason, the decision of the Hon'ble B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Customs Act. Relevant extracts of the aforesaid judgment are reproduced herein below:- "16. Now coming to the question of notification and rate of duty at the time of clearance, and its demand of differential duty, and invoking of extended period of limitation, it is necessary to consider the notification first. As already discussed above clause 15.1 of policy of relevant period, regarding the duty leviable on Silver and Gold imported under SIL is at concessional rate under Notification No. 117/94-Customs. As per the above notification and Explanatory note thereunder the condition to be complied to get benefit there-under is that the "goods are covered by Special Import Licence issued in terms of Export and Import Policy from 1-4-1992 to 31st March, 1997 of Ministry of Commerce, Govt. of India. In this case there is no dispute about the issue of SIL's in accordance with the above policy. At the time of Import as per the clarification of DGFT under clause 4.15 of the policy, goods covered by SIL's produced afresh, and they were valid. So regarding duty element, the appellant M/s. H. Kumar Gems has complied the above condition and is eligible to concessional rate of duty. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement and collusion on the part of M/s. H. Kumar Gems inasmuch as they tried to clear the goods under an invalid licence and claimed concessional rate of duty under Notification No. 117/94 dated 24-7-1994 which was not applicable". As argued by the appellants M/s. H. Kumar Gems, the demand of differential duty is not substantiated by cogent reasons. The show cause notice dated 2-2-1998 was silent. 4-6-1998 corrigendum demanded it. 10-6-1998 tried to bring the case of suppression in very vague terms. Impugned order discussion regarding the terms of proviso to Section 28(1) of Customs Act is highly exaggerated without any supporting material. Invoking of extended period to demand differential in duty under corrigendum and in the Impugned order is not based on sound and firm footing. The department's case is highly developed in the Impugned, order from the show cause notice dated 2-2-1998 for the clearance of 11-8-1997 and earlier same consignment of 6-8-1997 and 8-8-1997, after a lapse of nearly 10 months by the corrigendum dated 10-6-1998, and blown beyond proportion in the Impugned order with the sole object of recovering duty. This cannot be upheld. The contention of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability of this provision, the ingredients therein have to be complied. From the facts of the case the benefit of Notification No. 117/94-Customs, 27-4-1994 is availed by the appellant, while clearing the 4 consignments under the 4 bills of entry covered by the SIL, valid at the relevant time. So concessional rate of duty is claimed and paid, which is below the Tariff rate. So there is a short levy. Under corrigendum dated 10-6-1998 suppression of the facts regarding the Licence is alleged. But, in view of the finding already arrived at in the above paras, that in view of production of afresh SIL - Subsequent to seizure of goods, and its acceptance and clearance of above goods, on the clarification of DGFT, New Delhi, that SILs were valid at relevant time. There is no liability to pay differential duty as claimed on the appellant, and even if there is any such liability, it is time barred, and extended period cannot be applied. What should have been disclosed regarding the Licence is not clear. Department cannot expect any person to disclose that fake SIL was produced for the clearance of goods, in the normal course of Human conduct, that too before tax recovery authority. So ..... X X X X Extracts X X X X X X X X Extracts X X X X
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