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TMI Blog2011 (1) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... an agent, when the liability to confiscation of goods has not been upheld. For the foregoing reasons, it cannot be said that the Tribunal has committed any legal infirmity so as to warrant interference. No question of law, much less, a substantial question of law can be stated to arise out of the impugned order of the Tribunal. The appeal is accordingly dismissed. - Tax Appeal No. 1263 of 2006 - - - Dated:- 27-1-2011 - Harsha Devani and H.B. Antani, JJ. Ms. Amee Yajnik, for the Appellant. Shri Mihir Joshi, Sr. Advocate with Nanavati Associates, for the Respondent. ORDER This appeal arises from the common order dated 24th March, 2006 passed by the Customs, Excise and Service Tax Appellate Tribunal in seven appeals. However, the appellant has filed a consolidated appeal against the common order, instead of filing seven different appeals. In the circumstances, this appeal is treated as an appeal filed in respect of the first respondent M/s. Rajnarayan Jwalaprasad only. 2. In this appeal under Section 130 of the Customs Act, 1962 (the Act), the appellant - Commissioner of Customs, Kandla has challenged order dated 24th March, 2006 passed by the Customs, Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the omission and commission on the part of the licence holder for getting the advance licence transferred on the basis of forged/fake export documents, and penalty of ₹ 25,00,000/- imposed under Section 112(a) on M/s. Rajnarayan Jwalaprasad as also penalties of ₹ 25,00,000/- on Shri Sailesh Agarwal, ₹ 5,00,000/- on Shri Prakash Agarwal, ₹ 5,00,000/- on Shri Brijesh Agarwal, ₹ 2,00,000/- on M/s. Kuppi Uttpadan, ₹ 2,00,000/- on Shri Balkishan Devidayal and ₹ 2,00,000/- on M/s. ACT Shipping Ltd., imposed under Section 112(a) of the Customs Act, 1962? 3. The facts of the case stated briefly are that intelligence was gathered by the Directorate of Revenue Intelligence (DRI) that the respondent M/s. Rajnarayan Jwalaprasad, a partnership firm had allegedly inflated the net weight of consignments while exporting plastic articles made of High Density Polyethylene (HDPE), namely casseroles, to get unentitled benefit under DEEC Scheme. Investigations revealed that in respect of two advance licences, forged documents were filed to get the licences endorsed as transferable. The present appeal relates to Advance Licence No. P/K.2073568, dated 5th Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, not justified in holding that since the respondent had not imported the goods in question, it was not liable to pay the tax on the duty evaded. It was urged that the impugned order of the Tribunal does give rise to questions of law as proposed or as may be formulated by the Court and that the appeal deserves to be admitted. 5. On the other hand, Mr. Mihir Joshi, Senior Advocate, learned counsel appearing on behalf of the respondent invited the attention of the Court to the decision of the Supreme Court in the case of Collector of Customs, Bombay v. Sneha Sales Corporation, 2000 (121) E.L.T. 577 (S.C.) wherein the Supreme Court in view of the law laid down in its earlier decision in the case of East India Commercial Company Ltd. v. Collector of Customs, Calcutta, 1983 (13) E.LT 1342 (S.C.) held that where the licence is obtained by misrepresentation or fraud it is not rendered non est as a result of its cancellation so as to result in the goods that were imported on the basis of the said licences and being treated as goods imported without a licence in contravention of the order passed under Section 3 of the Import and Export Act that fraud or misrepresentation only renders a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 204/92-Cus., dated 19th May, 1992, the material imported into India against Advance Licence are exempted from the whole of the duty of customs and additional duty subject to fulfilment of the conditions laid down in the said notification. According to the department no export had taken place against the Advance Licence in question and export obligation was shown as fulfilled on the basis of forged and fake documents which were created by the respondent M/s. Rajnarayan Jwalaprasad. LUT was redeemed and the licence was got endorsed transferable by the respondent firm on the basis of such fake and forged documents. The licence was thereafter transferred to M/s. Kuppi Utpadan for a consideration of ₹ 7,50,000/- who in turn, allegedly re-transferred the licence to M/s. Aar Vee Plastics, Delhi on 6th September, 1996 without any consideration. The licence was utilised by M/s. Aar Vee Plastics, Delhi, for clearance of 132.3 M.T. of HDPE, with declared CIF value of ₹ 29,77,027/- duty free on 17th September, 1996. These goods were, however, already bought from M/s. Aar Vee Plastics, Delhi on high sea basis on 17th July, 1996 by M/s. Kuppi Utpadan. According to the department the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or redemption of LUT and obtaining endorsement of transferability, which has resulted in the endorsement of transferability. The show cause notice does not allege contravention of Section 113 of the Act and imposition of penalty under Section 114 which pertains to commission and omission, if any, that occurred at the point of export at Chennai Port. Since no action had been taken by the Chennai Customs for the alleged irregular exports at that port, even if the respondent had made forged endorsement of transferability of the licence, it could not be held liable to penalty under Section 112 of the Act. It was found that Shri Prakash Agarwal and Shri Brijesh Agarwal, the other partners of the respondent had no role to play. The Commissioner imposed penalties on the ground that the two partners were beneficiaries of the fraud and they had omitted to keep a check on the activities of the third partner. The Tribunal was of the view that for such default no penalty under Section 112 can be imposed. 9. Tribunal found that M/s. Kuppi Utpadan had obtained the advance licence which had been issued to the respondent with the endorsement of transferability for valuable consideration which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration after obtaining the endorsement of transferability from the licensing authority in terms of the EXIM Policy. M/s. Kuppi Utpadan in turn transferred the said Advance Licence to M/s. Aar Vee Plastics, who actually filed the Bill of Entry and cleared the imported goods and sold them thereafter to M/s. Kuppi Utpadan. What is alleged against the respondent is that the respondent knowingly and intentionally submitted forged export promotion copy of shipping bill and false statement/self declaration to the office of Joint D.G.F.T., Mumbai in order to show fulfilment of the export obligation against the said licence and thereby fraudulently obtained the waiver of bond condition as well as the endorsement of transferability of the said licence, in violation of the provisions of Para 67 of the EXIM Policy 1992-97 with the ulterior motive of evading customs duty on imports of HDPE which could be effected duty free against the said licence under the DEEC Scheme. Since no export obligation had been fulfilled against the licence and the licence had been transferred before fulfilment of export obligation, the goods imported against the licence had not been used for fulfilment of expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licence obtained by misrepresentation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause (8) of Section 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable: it is good till avoided in the manner prescribed by law. On May 1, 1948, the Central Government issued an order in exercise of the power conferred on it by Section 3 of the Act to provide for licences obtained by misrepresentation, among others, and it reads : The authorities mentioned in the Schedule hereto annexed may under one or other of the following circumstances cancel licences issued by any officer authorised to do so under clauses (viii) to (xiv) of the notification of the Government of India in the late Department of Commerce, No. 23-ITC/43, dated July 1, 1943, or take such action as is considered necessary to ensure that the same is made ineffective, namely :- When it is found subsequent to the issue of a licence that (i) the same had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14. In Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi, (supra), the contention of the Department was that the appellant therein was not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority. The Supreme Court took note of the fact that the licensing authority had not taken any steps to cancel the licence and that the licensing authority had not claimed that there was any misrepresentation and held that once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf. 15. The aforesaid decisions would apply with full force to the facts of the present case, inasmuch as the endorsement of transferability had been made by the licensing authority. It is not the case of the licensing authority that ..... 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