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TMI Blog2022 (11) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... 114AA imposed on him. 2. The undisputed facts of the case are that Nidhi is in the business of importing and trading paper based articles. It imported goods under 29 Bills of Entry using various duty free licenses issued by the Directorate General of Foreign Trade (DGFT) to various persons under various export promotion schemes such as Duty Free Import Authorisation (DFIA), Focus Product Scheme (FPS) Focus Market Scheme (FMS), Village and Khadi Gramodyog Yojna (VKGUY) and Duty Entitlement Passbook (DEPB). These licences/scrips are transferable and after the exporter fulfils its export obligations under the licence, it can sell them to anyone else who can then import goods against the licence/scrip duty free. Usually, the licences/scrips are sold at a discount, say, at 95% of the value of the duty exemption available under the licence. For imports under each of the schemes under which the licences/scrips are issued by DGFT, there is a corresponding exemption notification under the Customs Act. Thus, when the licence issued by the DGFT is produced before the customs for clearance, appropriate value is debited from the licence/scrip and goods are cleared without the importer paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) I impose a penalty of Rs. 57,14,129/- (Rupees Fifty Seven Lakh Fourteen Thousand One Hundred and Twenty Nine only) under Section 114A of the Customs Act, 1962 on M/s Nidhi Enterprises, the Noticee No. 1. (iv) I do not impose penalty under Section 112(a)(ii) of the Customs Act, 1962, on M/s Nidhi Enterprises, the Noticee No. 1. (v) I do not impose any penalty under Section 114AA of the Customs Act, 1962 on M/s Nidhi Enterprises. (vi) I impose a penalty of Rs. 10,00,000/- (Rupees Ten Lakh only) under Section 112(a)(ii) of the Customs Act, 1962 on Shri Sudarshan Kumar Jain, Noticee No. 2 and Partner in M/s Nidhi Enterprises. (vii) I impose a penalty of Rs.1,00,000/- (Rupees One Lakh only) under Section 114AA of the Customs Act, 1962, on Shri Sudarshan Kumar Jain, Noticee No. 2 and Partner in M/s Nidhi Enterprises. (viii) I impose a penalty of Rs. 50,00,000/- (Rupees Fifty Lakh only) under Section 112(b)(ii) of the Customs Act, 1962, on Sh. Sharafat Hussain, 'G' Card holder of M/s Kirti Cargo. (ix) I impose a penalty of Rs. 2,00,00,000/- (Rupees Two crores only) under Section 114AA of the Customs Act, 1962 on Sh. Sharafat Hussain, 'G' Card holder of M/s Kirti Cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have taken place without the connivance of the officers. No investigation has been carried out regarding the role of the officers. h) Thus, the SCN was pre-mature as the role of the officers was not investigated. i) In respect of five Bills of Entry, the scrips which were used fully covered the imports even if the illegally enhanced value in the system is ignored. The demand must be dropped to that extent. This resulted in an error in quantification to the extent of Rs. 16,58,705/-. j) Extended period of limitation was wrongly invoked as there was no fraud, mis-statement or suppression on the part of the appellants. k) No penalty should have been imposed on the appellant - Nidhi as it had imported goods in good faith. l) The partner in a firm and the firm are not separate entities and hence, no separate penalty should have been imposed on Jain, partner of Nidhi since a penalty has already been imposed on Nidhi. m) The SCN was issued without jurisdiction as it has been issued by the Commissioner of Customs (Export) ICD, Tughalkabad, Delhi and it has been adjudicated by Commissioner of Customs (Exports) Air Cargo Export, New Custom House, New Delhi. n) For the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y authorisation either to M/s Zealous International owned by Sh Hussian or even to the Custom House Agent M/s Kirti Cargo for clearance of goods through customs. He had accepted that it was mistake on his part to rely on Shri Hussain. vii) Jain also confirmed that they never had a copy of the licences/scripts which were utilised for payment of Customs Import duty, let alone verified them. The debit Notes/tax invoices issued by Shri Sharafat Hussain also do not mention which DEPB/FPS/FMS licences were sold to Nidhi. All these prove that Nidhi had not even taken the basic care of finding which licence/scrip it had purchased and whether the licence covers its duty liability or not and in which Bill of Entry it has used the licence to pay duty. A bonafide buyer should follow the concept of Caveat Emptor (i.e., Buyer Beware). viii) As an importer, Nidhi could have filed its own Bills of Entry or authorised a licensed Customs Broker to file the Bills of Entry. In this case, the Bills of Entry were filed indicating M/s. Kirti Cargo as the Customs Broker. However, the Proprietor of M/s Kirti cargo Sh. Ramesh Chadha had accepted that he had sublet the CHA License to Shri Sharafat Hussai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is available subject to some conditions including that said scrip is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods, but for this exemption. xv) Similarly, imports under the Focus Market Scheme (FMS) are exempted by Notification No. 93 /2009 - Customs dated 11.09.2009. This exemption is available subject to some conditions including that said scrip is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods, but for this exemption. xvi) The Central Board of Excise and Customs (Board) issued circular no. 05/2010- Customs dated 16.03.2010 regarding Verification of genuineness, of duty credit scrips issued under Chapter 3 of FTP, before registration. Paragraph 2(e) of this circular states as follows: As regards the duty credit scrips issued under Chapter 3 of FTP, the verification of genuineness of scrips in terms of Para 3.11.3 of the HBP v.1 shall be done before allowing registration of such scrips. Further, the Commissioner may cause random verification of the shipping bills based on which the said duty credit scrip has been issued to ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s practice a detailed procedure has been outlined to be followed for verification and registration of scrips under chapter3 of the FTP Reward/incentive Schemes of FTP 2009-14 like FPS, FMS, VKGUY, SFIS and assessment of BOEs under GP VII where duty is sought to be paid through use of theses Scrips. As per Para (a) of the said Order the Original Scrip issued by DGFT including its Annexure along with one photocopy and copies of BRCs shall be presented with Application in prescribed Format to the EA/TA in License section by License holder or his authorised representative. xxiii) Standing Order No 04/16 dated 30.05.2016 issued by The Commissioner of Customs ICD TKD (Export) as per Para(i) has also provided such mechanisms for verification of scrips at pre-Registration stage including verifying the genuineness of such scrips with backing shipping Bills. xxiv) Thus, the Foreign Trade Policy and the Handbook of procedures under which the duty free scrips were issued required the physical copies of the licences to be verified before allowing clearances. The corresponding exemption notifications issued under the Customs Act also required such verification. Various circulars issued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Act is only with respect to the duty, interest and penalties on the importer. 11. On the appellant's submission that the SCN was issued without jurisdiction as it has been issued by the Commissioner of Customs (Export) ICD, Tughalkabad, Delhi and it has been adjudicated by Commissioner of Customs (Exports) Air Cargo Export, New Custom House, New Delhi, learned authorised representative submits that ICD, Tughlakabad had only one Commissioner until Notification No. 77/2014-Customs (NT) dated 16th September 2014 was issued by the Government of India, inter alia, creating a separate Commissioner (Export) in ICD Tughlakabad. Commissioner (Export), ICD, Tughlakabad was, among others, assigned the work pertaining to imports of goods under various export promotion schemes such as the imports in dispute in this appeal. Later, by public notice No. 5/2018 dated 9 April 2018, the work pertaining to imports under the export promotion schemes was assigned to Commissioner (Imports), ICD, Tughlakabad. The period relevant to this case was 30 August 2013 to 30th June 2015 and the Show Cause Notice dated 17 March 2017 was issued by Commissioner (Export), ICD, Tughlakabad who was the jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of the licences was wrongly entered to a higher amount by Shri Sharafat Hussain along with Shri Vinod Pathror in the Customs EDI system and they were used to pay the duty. In respect of the remaining Bills of Entry, the licences did not exist at all or were registered multiple times. The fact that these frauds happened is undisputed. The submission of the learned counsel for the appellant is that since it had not committed the fraud and it had paid a percentage of the value of duty payable to Shri Sharafat Hussain it should not be required to pay the duty again and, therefore, the demand is not sustainable. It is also the contention of the learned counsel that since it had not committed the fraud the extended period of limitation has been wrongly invoked by the Department in the show cause notice. 16. As an alternative submission, learned counsel submits in respect of those Bills of Entry where the licence existed but its value was enhanced in the Customs EDI system it should be allowed the benefit of the scrips to the extent it was valid. 17. It is further the submission of the learned counsel that since the fraud was committed within Customs EDI system which cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s misplaced. The judgment in Cannon India Limited was with respect to the jurisdiction of the officers of the Directorate of Revenue Intelligence (DRI) to issue SCN under Section 28 of the Act. In this case, the SCN was issued by the jurisdictional Commissioner of Customs. This power of assigning any SCN for adjudication has been delegated to the Zonal Chief Commissioner by the Government. The Zonal Chief Commissioner had assigned this SCN to the Commissioner of Customs (Export), Air Cargo, New Delhi who passed the impugned order. We, therefore, find that the SCN was issued and the impugned order was passed by an officer who had the jurisdiction. We now proceed to deal with the substantive issues. 21. The first question to be answered is that whether in a case where forged or manipulated scrips or licences have been used for clearance of goods and there is no evidence that the fraud was committed by the importer, demand can been raised for the duty on the importer and if so whether extended period of limitation can also be invoked. This issue is no longer res integra and it has been settled by the Supreme Court in M/s Munjal Showa Ltd. Vs. Commissioner of Customs And Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Duty was paid under protest to avoid any further coercive action. Be that as it may, the fact remains that the DEPB licenses/Scripps on which the exemption was availed by the appellant(s) was/were found to be forged one and, therefore, there shall be a duty liability and the same has been rightly confirmed by the Department, which has been rightly confirmed by the Tribunal as well as the High Court. 11. Now, so far as the submission on behalf of the buyer(s) - appellant(s) relying upon the decision of this Court in the case of Aafloat Textiles India Private Limited and Ors. (supra) is concerned, whether the buyer(s) had a knowledge about the fraud or the forged / fake DEPB licenses/Scripps and whether the appellant(s) - buyer(s) was/were to take requisite precautions to find out about the genuineness of the DEPB licenses/Scripps which they purchased, would have a bearing on the imposition of the penalty, and has nothing to do with the duty liability. It is to be noted that in the present case so far as the penalty proceedings are concerned, the matter is remanded by the Tribunal to the adjudicating authority, which is reported to be pending. 12. In view of the above and for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 95/2009-Cus. exempts goods imported against a duty credit scrip issued under the Vishesh Krishi and Gram Udyog Yojana (VKGUY) as per paragraphs 3.1 and 3.2 of Foreign Trade Policy. Condition No. 1 of this exempts reads; "that the scrip has been issued to an exporter of products specified in paragraphs 3.13.2 of the Foreign Trade Policy by the Licensing Authority or Regional Authority and it is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods." 25. Similarly Notification No. 93/2009-Cus. exempts the goods imported against a duty credit scrips issued under the Focus Market Scheme (FMS) as per paragraph 3.14 of the Foreign Trade Policy. Condition 2 of this exemption notification also states "that the said scrip is produced before the proper officer of customs at the time of clearance of the duties leviable on the goods, but for the exemption." 26. Likewise, all exemption notifications under various schemes require the scrip or licence to be presented before the proper officer of customs at the time of clearance of the goods. It is also undisputed that the scrips and licences were fully transferable. After ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orged or value enhanced scrips to clear the goods. There is no evidence of the transfer of scrips to the appellant and certainly there is no evidence whatsoever that the scrips/licences have been produced for physical verification before the proper officer at the time of clearance of goods. 28. The question which needs to be answered is what has actually been purchased by the appellant from Shri Sharafat Hussain's firm in these cases if it had not purchased the licences/scrips. None of the invoices produced before us indicate any licence/scrip. They mention only the Bill of Entry number and an amount which is a percentage of the amount of duty not paid in that Bill of Entry. Effectively, the appellant purchased the benefit of an exemption notification from Shri Sharafat Hussain and not scrip/licence. 29. There is no provision to transfer the benefit of any exemption either under the policy or any notification or any provision of the law. The licences and scrips are transferable and if they are transferred, the transferee consequently gets the benefit of the exemption notification. Without transferring the licence/scrip, the benefit of exemption cannot be transferred. An example w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the role of such officers has not been investigated. As far as the role of the officers in the matter is concerned, learned authorized representative submits that the matter has been sent to the CBI who are investigating the matter. We find that in respect of the appellant only duty, interest, fine and penalty are relevant in this case but if any officers are involved, it will be a much more serious matter which will have to be investigated with respect to the violations of other laws such as Prevention of Corruption Act also. Investigation in this regard has been handed over to CBI. Even if the officers were involved, it does not, in any way, dilute the liability of the appellants in terms of duty, interest or penalties. 32. Regarding the submission of learned counsel that since it is a bonafide importer, no penalty should be imposed on it, we find that the Supreme Court in the case of M/s Munjal Showa Ltd. has dealt with this issue and in paragraph 11 of the judgment held that the question as to whether the buyers had the knowledge about the fraud or forged licences and whether buyers were required to take precautions to find out about the genuineness of the licences whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand invoking extended period of limitation and since we have upheld the confirmation of the demand invoking extended period of limitation, we also uphold the imposition of penalty under section 114A. 36. Penalty of Rs.10,00,000 under section 112(a) (ii) and penalty of Rs. 1,00,000 under section 114AA were imposed on Jain, partner of Nidhi. The fifth proviso to section 114A reads as follows: Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114. 37. Penalty under section 112(a) (ii) on Jain (the partner) and penalty under section 114A on Nidhi (the partnership firm) in this case arise out of the same cause of action and therefore, penalty under section 112 cannot be sustained as penalty has been imposed under section 114A which we have upheld. 38. Penalty under section 114AA is imposable only if knowingly or intentionally a false declaration, statement or document is made, signed or used. This section reads as follows: Section 114AA. Penalty for use of false and incorrect material If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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