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TMI Blog2009 (7) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the importation of restricted goods under forged REP licences is invalid and void ab initio and liable for absolute confiscation under Section 111(d) of the Customs Act, 1962? (b) Whether in the facts and circumstances of the case and in law the Hon'ble Tribunal was justified in reducing the penalty imposed under Section 112(a) of the Customs Act, 1962 upon the Respondents by the commissioner of Customs, in respect of rough diamonds imported on the strength of forged licences, which were ordered to be confiscated under Section 111(d) of the Customs Act, 1962 but were not available for confiscation?" 4. Facts in brief are that, M/s. Vijaybhav, M/s. Deepali Exports, M/s. Vaibhav Exports and M/s. Pushpak Impex used to import rough diamonds and get them cleared on the strength of replenishment licence. M/s. Vijaybhav Exports imported one consignment of rough diamonds bearing 1001.410 carrots valued at Rs. 59,26,545 (CIF) and filed bill of entry no. 100271 dated 3-2-2001 for clearance of the same for home consumption. M/s. Deepali Exports imported four consignments of rough diamonds and filed bills of entry on 5-2-2001, 6-2-2001 and 7-2-2001 -for the clearance of the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . When a doubt was created about that licence, another forged licence no. 03348094 dated 24-12-1999 for Rs. 7.18 crore was presented. However, that attempt also failed in view of the doubts, which were created. During the investigation, it was revealed that these four firms or their proprietors had used earlier 53 such forged licences and had cleared imported diamonds to the extent of about Rs. 332 crore. M/s. Vijaybhau Exports had utilised in all 29 forged licences in 288 bills of entries for clearance of imports to the extent of 144.39 crore. M/s. Deepali Exports had utilised 28 forged licences in 313 bills of entries for clearance of rough diamonds worth Rs. 157.39 crore. M/s. Vaibhav Exports had utilised four forged licences in 26 bills of entries for clearance of diamonds worth Rs. 11.98 crores. M/s. Pushpak Impex had utilised four forged licence in 22 bills of entries for clearance of the diamonds worth Rs. 14.02 crores. Some of the licences were fully utilised while some were partially utilised and shared by them. It was also revealed that three forged licences were partly utilised by M/s. Kiran Exports, M/s. Munjani Brothers and M/s. D.S.Brothers for import of diamonds of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licences because the goods were not available for confiscation. Similarly, he also directed absolute confiscation of the rough diamonds weighing 14,940 carrots valued at Rs. 2,28,08,628 seized under panchanama dated 28-2-2001 and imported by M/s. Deepali Exports by four consignments. He also imposed penalty of Rs. l crore on M/s. Deepali Exports for imports of diamonds valued at Rs. 157,62,25,055/- on the strength of 28 forged licences as the goods were not available for confiscation. He also imposed penalty of Rs. 80 lakh on M/s. Vaibhav Exports for import of diamonds valued at Rs. 13,99,96,773/- by using four forged licences as the goods were not available for confiscation. He imposed penalty of Rs. 1 crore on M/s. Pushpak Impex for import of rough diamonds valued at Rs. 12,02,65,343/- on the strength of four forged licences as the goods were not available for confiscation. He also directed absolute confiscation of rough diamonds weighing 21075.10 carrots valued at Rs. 75,41,148/- imported by M/s. Vijaybhav Exports and rough diamonds weighing 2088.42 cts. valued at Rs. 2,05,33,595/- imported by M/s. Deepali Exports in respect of which bills of entries were never submitted. Beside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposed on M/s. Vijaybhav Exports. Being agrieved by the order passed by the Tribunal, Revenue has preferred the appeals. 7. Heard the learned counsel for the Parties and perused the record. There is no dispute that under Section 3(2) of the Foreign Trade Development Regulations Act, 1992, Central Government may by order published in the official gazette make provisions for prohibiting, restricting or otherwise regulating in all cases or in specified classes of cases and subject to such exemptions, if any as may be made by or under the order. By virtue of the powers under the Foreign Trade Development Regulation Act, 1992, the Government of India framed Export and Import Policy from time to time. We are concerned with the said policy for the period from lst April, 1997 to 31st March, 2000. Chapter 15 of the said Policy provided negative list of imports which itself is divided into three parts. Part 1 gives description of prohibited items, about which there is complete prohibition on imports. Part 2, i.e. paragraph 15.2, deals with restricted items and it provides that the goods mentioned in this paragraph 15.2 may be imported only against licence or permit. Part 2 is again divided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Regulation Act. Chapter 15 of the said policy shows that there is no strict or absolute prohibition on the import of the diamonds but there was restriction, therefore, diamonds could be imported either against the Diamond Imprest Licence or against the Replenishment Licence. If the diamonds were imported without such licence, import would be in violation of restriction. In Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Others - 1983 (13) E.L.T. 1439 (S.C.), the Supreme Court observed as follows in paragraph 14: "14. This takes us to the question whether by importing the mare "Jury Maid" the appellant contravened Section 111(d) read with Section 125 of the Act. It was urged on behalf of the appellant that expression "prohibition" in Section 111(d) must be considered as a total prohibition and that expression does not bring within its fold the restrictions imposed by Clause 3 of the Imports Control Order, 1955. According to the learned counsel for the appellant clause 3 of that order deals with the restrictions of import of certain goods. Such a restriction cannot be considered as a prohibition under Section 111(d) of the Act. While elaborating his argument the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forged one, and therefore there was no licence at all, and that being so, the import of the goods was unlawful and the goods even though cleared from the Customs barrier, were liable to confiscation and the petitioner who was responsible for using a forged licence for clearing the goods was in addition liable to an order of penalty. In support of this contention reliance was placed on a decision of the Supreme Court, Fedco (P) Ltd. v. S.N. Bilgrami, AIR 1960 SC 415. In that case it was held that the entire scheme of control and regulation of imports by licences was on the basis that the licence was granted on a correct statement of relevant fact and that if the grant of the licence was induced by fraud or misrepresentation that basis disappeared. It was also held that it would be absolutely unreasonable that such licence should be allowed to continue. In my view this contention of the learned counsel for the respondents is well founded. The import of goods on a licence, in the case of goods the import of which is prohibited, must be confined be imports made on a licence lawfully obtained. If a licence is forged, and I wish to make it clear that in this case I do not say that it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence including the record from Customs Authorities and verification from the Office of the Director General Foreign Trade to show that in all 53 forged replenishment licences were used for import of rough diamonds by the four concerns. Record clearly reveals that M/s. Vijaybhav Exports had used 29 forged licences (20 for full value and 9 for part value) in 288 bills of entries and got clearance of diamonds valued at Rs. 144.39 crore. Gyanchand Jain is shown to be the proprietor of the same. M/s. Deepali Exports, which purported to be owned by Rajesh Jain, used 28 forged licences (23 for full value and 5 for part value) in 313 bills of entries for clearance of diamonds valued at Rs. 157.39 crore. Vaibhav Exports owned by Hiralal Jain used four forged licences (one for full value and 3 for part value) in 26 bills of entries for clearance of imports of diamonds valued at Rs. 11.98 crore. M/s. Pushpak Impex, of which Kamlesh Khicha is the proprietor, used four forged licences (two for full value and two for part value) in 22 bills of entries for clearance of imports valued at Rs. 14.02 crores. Besides this, there is sufficient evidence on record to prove that in the first weeks of Febr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of the consignments imported by their respective concerns. They also stated that they had constituted Hiralal Jain and Kamlesh Khicha as their authorised signatory and they used to carry on several activities on their behalf. Kamlesh also made confessional statement admitting all the facts including that he was aware that the forged licences were procured and and were used for clearance of imports. Hiralal Jain also admitted in his statement that he had purchased two genuine licences bearing nos. 03345531 for Rs. 5,36,863/- and no. 03348094 for Rs. 25,39,760/- from the open market by paying premium at the rate of 3.05% on the said replenishment licences. According to him, he had handed over genuine licences to Gautam Bagri and Gautam Bagri supplied to him forged licence with the same name, number and date but with greater value. He admitted that this was beneficial to him because the expenditure on getting such licence from Gautam Bagri would be much less than on purchasing replenishment licence from the market where premium of more than 3% was required to be paid. The learned counsel for the respondents contended that statements were retracted by all of them. It appears that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her such a violation was intentional or not. On a careful perusal of Section 15-D(b) and Section 15-E of the Act, there is nothing which requires that mens rea must be proved before penalty can be imposed under these provisions. Hence once the contravention is established then the penalty is to follow." In Commissioner of Customs (Preventive) v. Aafloat Textiles (I) P. Ltd. - 2009 (235) E.L.T. 587 (S.C), the Supreme Court held that principles of "Caveat Emptor", that is the buyer be aware, is applicable even when a person makes any imports under the forged licence. Their Lordships observed as follows in Paragraph 27 as follows: "27. Whether the buyer had made any enquiry as to the genuineness of the licence is within his special knowledge. He has to establish that he made enquiry and took requisite precautions to find out about the genuineness of the SIL which he was purchasing. If he has not done that consequences have to follow. These aspects do not appear to have been considered by the CESTAT in coming to the abrupt conclusion that even if one or all the respondents had knowledge that the SIL was forged or fake that was not sufficient to hold that there was no omission or comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties. Even though under Section 111(d), there is provision of confiscation, in case of import which is prohibited under the Customs Act or under any other law, under Section 125 an option to pay fine in lieu of confiscation is given in certain circumstances. Section 125 reads as follows: "125. Option to pay fine in lieu of confiscation. - (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods [or, where such owner is not known, the person from whose possession or custody such goods have been seized,] an option to pay in lieu of confiscation such fine as the said officer thinks fit: Provided that, without prejudice to the provisions of the proviso to sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. [(2) Where any fine in lieu of confiscation of goods is imposed under sub-section (1) the owner of such go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipe out the profits but it should be more than that. If the person is required to pay only the amount which he has saved by not paying the premium for securing genuine replenishment licence, he will never feel pinch of being caught. He may commit same wrongs repeatedly and as and when he is caught, he may pay amount equivalent to the premium. In our considered opinion, redemption fine should be more than that. As pointed out earlier, there was difference of opinion between the members of the Tribunal in respect of this confiscation fine as well as penalty. In view of the fact that import of diamonds was not completely prohibited under the Export and Import Policy but was only restricted and by purchasing replenishment licence from the open market by paying a premium of 1.5 to 4.75 % as noted by the Tribunal, one could import diamonds. In such circumstances, if the respondents imported using the forged licence or to say in other words, without any licence, in our considered opinion, in stead of absolute confiscation, discretion of redemption may be given to them but that redemption fine should be sufficient so that the respondents should not find it profitable to make the imports wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities would be justified to verify the genuineness of the documents and then to take action as per law. The Tribunal has taken the same view and held that diamonds could not be confiscated particularly when bill of entry was yet to be submitted by any of the parties. Commissioner observed in his order that Rajesh Jain, proprietor of M/s. Deepali Exports and Gyanchand Jain proprietor of Vijaybhav had admitted that they were not owners and they had not claimed the same and, therefore, they being not bona fide importers, these consignments could be confiscated. However, the record reveals that these two persons had consistently maintained that the goods were being imported by Hiralal Jain and they were only employees of said Hiralal Jain. If it is so, these two persons could not have any personal claim or stake in those imports. Claimant could submit replenishment licence for the clearance of the same. In fact, admittedly, parties had submitted replenishment licence of Rs. 32 crore but genuineness of the same was never verified and those licences were not even returned to him. In such circumstances, we find no fault with the findings of the Tribunal that these consignments could not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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