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TMI Blog2014 (3) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... herefrom. It is also settled principle of common law that a purchaser does not acquire better title if transferor had no title or title is ab initio void. Appellant acquired non est, unlawful and illegitimate DEPB scrip from market without causing enquiry with the issuing authority thereof to avoid evil consequence of fraud. Since fraud was involved, in the eye of law such documents had no existence. Since the documents have been established to be forged or fake, obviously fraud was involved and that was sufficient to extend the period of limitation. - Decided against the assessee and in favor of revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... that fraud or misrepresentation only renders a licence voidable and it becomes inoperative before it is cancelled. In the present case the licences were cancelled by order dated December 18, 1986 after the goods had been imported and cleared. The Tribunal was, therefore, right in holding that the import of the goods was not in contravention of the provisions of Import and Export Order, 1955 and Import and Export (Control) Act, 1947 and the goods were not liable to be confiscated on that basis under Section 111(d) of the Act. 6. The ld. Advocate further relies on 25 decisions of Tribunal, different High Courts and the Apex Court. Since the Revenue is relying on one decision of the Apex Court in this matter in the case of Friends Trading Company, I propose to list and examine only the decisions of the Apex Court cited by the Appellant which are the following: S. No. Case Law 1 East India Commercial Co. Ltd. v. CC-1983 (13) ELT 1342 (SC) 2. CC vs. Sneha Sales Corp. - 2000 (121) ELT 577 (SC) 3. CC vs. Ajay Kumar - 2009 (92) RLT 883 (SC) 4. CC vs. Leader Valves Ltd. - 2007 (227) ELT A29 (SC) 5. CC vs. Hico Enterprises - 2008 (228) ELT 161 (SC) 6. CC vs. Aafloat Textiles - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of time under section 28 was held to be applicable. The Respondents case is that he had made enquires with JDGFT and hence the extended period of time should not apply in his case. 14. The facts of the case of Larson and Toubro is very different. It is cited only to argue how the Respondent is protected from invoking extended period of time because of his bonafide belief and actions. 15. A DEPB script is similar to a cheque drawn on the Government exchequer and is transferrable by endorsement. However it is not a negotiable instrument enjoying the protection of section 120 of the Negotiable Instruments Act. So the transferee, even for bonafide consideration, cannot get a better claim than the transferor against government, the drawee. So a transferee in such transaction has to exercise the well known maxim caveat emptor, though this maxim is relevant strictly for his right against the transferor and not against the drawee. If he has not exercised due care about the bonafides of the transferor while purchasing scripts, adverse consequence due to such negligence will follow, as is the consequence of the decisions of the Apex Court in the cases of Aafloat Textile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Casting has not taken note of Larger Bench decision of the Tribunal in the case Hico Enterprises vs. CCE Mumbai [2005 (189) ELT 135 (LB)] as confirmed by the Hon'ble Supreme Court as reported in [2008 (228) ELT 161 (SC)]. 21. As against the above, I find that there are catena of judgements laying down that if the DEPB scrips are valid at the time of import of the goods, the transferee cannot be held liable for consequences, on subsequent cancellation of the scrips by the DGFT authorities. I would like to refer to the detailed order of the Larger Bench of the Tribunal in the case of Hico Enterprises. It stands concluded by the Larger Bench, after examining the various precedent decisions of various jurisdiction as also quasi judicial authorities that the licences issued by DGFT authorities are issued after arriving at the satisfaction of various conditions / export obligations of the original licence holder. Such satisfaction arrived at by the DGFT authorities is binding on the customs department. The transferee of such licence cannot prove, once again, fulfilment of the obligations on the part of the original licence holder. It stands held by the Larger Bench that the maxim that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent transferee of the same. As such, I am of the view that the issue in the present appeal stands fully covered by the decision of the Larger Bench of the Tribunal as confirmed by the Hon'ble Supreme Court. 23. I further find that the reliance placed on the Honble Supreme Court decision in the case of CCE vs. Aafloat Textile (I) Pvt. Ltd. may not be appropriate inasmuch as the licences in that case were admittedly forged licences. The effect of the same would be as if the licence never existed in the eyes of law. In the present case, admittedly the licensces are not forged but the same stands issued by DGFT in accordance with the law and were valid at the time of import of the goods. Subsequent cancellation of the same by DGFT would not effect the appellants right to import the goods free of duty, at the time, when the licence were admittedly valid licence. The appellant could not have forecast that the bonafide purchase of the licence from the market is going to be cancelled subsequently by the DGFT. Once the DGFT authorities issued the licence, it has to be presumed that the same were issued after satisfying the genuineness of the documents presented before them by the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provision of this section shall have the effect as if for the word one year and 6 months, the words five years were substituted. Such and only such reasons as mentioned in the said proviso enables the Revenue to invoke the extended period of limitation. The duty in the present case is being demanded from the importer on the ground that licence used by him were procured by the original licence holder / seller by mis-representing facts before the DGFT authorities. There is no allegation of any mis-representation or fraud or collusion or suppression of facts on the part of the importer. The fraud committed by a third party cannot result in availability of longer period to the Revenue so as to raise the demand against the importer i.e. the person to whom the show cause notice is being issued. The various factors detailed in the said proviso must relate to the person to whom the show cause notice is being issued. Inasmuch as in the present case it is not the Revenues stand that the present appellant mis-stated or suppressed any facts with intent to evade payment of dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the impugned order of Tribunal. The appeal is accordingly dismissed. 27. Reliance can also be placed upon the decision of Hon'ble Punjab and Haryana in the case of CC Amristsar vs. Vallabh Design Products [2007 (219) ELT 73 (P&H)] wherein the Hon'ble High Court held that show cause notice, invoking the longer period, could not be issued to the importer because the period of six months stipulated by Section 28 of the Customs Act stood already expired and the rights of the parties have been crystallised, the imports having been affected before cancellation of exports. The Hon'ble Court further observed that the Revenue cannot avail the extended period because the transferee importer has not been accused of mis-representation or collusion or suppression of facts within the meaning of proviso to Section 28 of the Customs Act. To the similar effect is the other decision of the Tribunal in the case of CCE Leader Valves Ltd. [2007 (218) ELT 349 (P&H)] laying down that the assessee not being party to the fraud committed by the original licence holder and having purchased the DEPB scrips from the market in the bonafide belief of its being genuine after paying full price. The extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) himself has held that no penalty is leviable on the importer. The said part of the impugned order of the appellate authority stands agreed upon by the learned Member (Technical). Once it is held that no penalty is required to be imposed on the appellants, the same reflects upon the fact of absence of any malafide intention to evade payment of duty on the part of the appellants. If that be so, the invokation of longer period, which also includes factum of malafide, cannot be permitted. In this regard I may refer to Tribunal's decision in the case of Indian Petrochemicals Corpn. Ltd. vs. CCE, Vadodara as reported in [2009 (237) ELT 317 (Tri-Ahmd)] laying down that once penalty does not stand imposed on the ground that there was no malafide on the part of the appellants, it has to be held that there was no intention to evade payment of duty and the same criteria would apply for the purpose of limitation. 30. For the reasons recorded as above, I am of the view that the appeal filed by the appellant is required to be allowed. However, as already observed, I agree with my learned brother Member (Technical) that the Revenue's appeal are required to be rejected. Difference of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eni Exports, Jalandhar under fraud. M/s.Pee Jay International, Ludhiana was beneficiary of the said scrips as a transferee. It was admitted fact that none of the Shipping Bills, invoices, packing list as well as Bank realizations by Beni exports were credible evidence entitling it to DEPB scrips. Balbir Chand deliberately avoided investigation and left India to Canada. 35. Aforesaid material facts remained unrebutted during adjudication as well as is in appeal hearing before Tribunal as is appellant from the order referred. So also that remained uncontroverted in the course of reference hearing. It was conclusively evident from record that DEPB scrips were fraudulently obtained by M/s Beni Exports without any lawful title thereon. M/s Beni Exports having no title over the non est DEPB scrips transferred that to the appellant who failed to acquire any good title over the same. Such scrips were used by appellant to discharge customs duty on imports made by it. 36. Above act of the appellant caused prejudice to Revenue since the scrips were non est and obtained under fraud. It is settled principle of law that no Court in this country can allow any benefit of fraud to be enjoyed by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market. Anyone can purchase it from the market and avail of the credit out of it. But, ultimately if that is found to be forged, fake or not acquired lawfully nor legitimate, credit cannot be derived therefrom. It is also settled principle of common law that a purchaser does not acquire better title if transferor had no title or title is ab initio void. Similarly title not acquired legitimately is also void. Therefore a purchaser of non est or ungenuine DEPB scrip fails to acquire any good title over the same being ab initio void as has been held by Hon'ble High Court of Punjab & Haryana in the case of Friends Trading Co. and Another v. Union of India - 2010 (254) E.L.T. 652 (P&H) and affirmed by Apex Court as reported in 2010 (258) E.L.T. A72 (S.C.). This principle has also been recognized under Section 27 of the Sales of Goods Act, 1932. In a batch of cases reported as CC, Mumbai v. M/s. Vaibhav Exports, Mumbai & Others - 2009-TIOL-673-HC-MUM-Cus. = 2009 (244) E.L.T. 527 (Bom) it has been held by Hon'ble High Court of Bombay that forged licensees, in law are no licensees. 41. Appellant acquired non est, unlawful and illegitimate DEPB scrip from market without causing enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson committing the fraud is precluded from deriving any benefit. Similar view was also expressed by Tribunal in the case of Kamala Metachem v.CC-2007-TIOL-2247 CESTAT-KOL, so also in the case of M/s.Synotex Industries v.CC - 2008-TIOL-777-CESTAT-KOL. 42. While upholding the decision of the Tribunal in the case of R.S. Trade Link v. CC, New Delhi - 2010 (255) E.L.T. 572 (Tri.-Del.), Hon'ble High Court of Delhi has held in the case of Rahuljee & Company Ltd. v. CC, New Delhi - 2011 (267) E.L.T. 313 (Del.) as under:- 15. We do not find any illegality in the reasoning recorded by the Tribunal in this regard which is as under :- 6.1.1. As regards the duty liability, since there is no dispute about the fact that the advance licence against which duty fee imports of copper/brass scrap have been made by these importers, are forged and had never been issued by DGFT, in view of - (a) Hon'ble Madras High Court's judgment in case of East West Exporters v. AC, Customs reported in 1993 (68) E.L.T. 319 (Mad.) (b) Hon'ble Calcutta High Court's judgment in case of ICI India Limited v. CC, Calcutta reported in 2005 (184) E.L.T. 339 (Cal.), the SLP to Hon'ble Supreme Court against which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of commission on his part so as to render silver or gold liable for confiscation. 28. As noted above, SILs were not genuine documents and were forged. Since fraud was involved, in the eye of law such documents had no existence. Since the documents have been established to be forged or fake, obviously fraud was involved and that was sufficient to extend the period of limitation. In view of the above, reference can be answered as follows:- 1) Appeals filed by M/s. Pee Jay International are required to be rejected and Revenues appeal to be allowed. 2) In view of the judgement of Apex Court in Friends Trading Co. reported in 2010(258) ELT A72 (SC) the decision of Larger Bench does not govern the field. 3) Demand is not time barred in view of fraud committed against Revenue and lager period of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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