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TMI Blog2024 (9) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in terms of the CBEC instructions too, the impugned order directing the recovery of demand has no legal basis and is contrary to the directions contained in the aforesaid circular. Therefore, the impugned order confirming the duty on the appellants and imposition of penalty on them is not sustainable. The Tribunal in similar matter of the self-same appellant M/s Lark Chemicals Pvt. Ltd. [ 2019 (5) TMI 924 - CESTAT MUMBAI ] have held that inasmuch as the facts of the case establish that the VABAL license has not been obtained by fraud, the ratio of the COMMNR. OF CUSTOMS (PREVENTIVE) VERSUS M/S AAFLOAT TEXTILES (I) PVT. LTD. [ 2009 (2) TMI 75 - SUPREME COURT] decided by the Hon ble Supreme Court in the case of licenses obtained forged documents does not apply for the case involving issue of amendment in the license. The three VABAL licenses relate to amendment in respect of quantity etc., which have been subsequently considered by the jurisdictional DGFT authorities. In the case of three VABAL licenses relevant to the present appeals necessary amendments have been issued as follows: License No. P/K/491011 dated 31.03.1995, amendment was issued on 11.08.1995; License No. P/K/2145 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead with the provisions of Export Import Policy, 1992-1997. 2.2 On the basis of information received by Customs authorities informing them that certain merchant exporters based in Ahmedabad are misusing VABAL scheme by exorbitantly over invoicing their exports, thereby claiming duty free benefits on imports in collusion with manufacturers, search operations were conducted on various premises and certain incriminating documents were recovered pertaining to exports. 2.3 On further investigation by the Customs authorities, it was found that M/s Robinson had resorted to over-valuation of the exported goods to avail higher/undue VABAL benefit. M/s Robinson procured the exported goods for Rs.1,33,64,004/- from different manufacturers of the pharmaceutical products; the export price of the said goods was declared as Rs. 8,91,90,375/- in the shipping bills; on the basis of said exports, M/s Robinson got eighteen VABAL licenses from the DGFT on post-export basis. As the export obligation was already completed, the said licenses were made transferable by the DGFT. Some of the said licenses were sold to various importers and both the appellants are one of the transferees of such licenses. 2.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate Ltd. Vs. Collector of Customs, Mumbai - 2006 (197) E.L.T. 471 (SC). 4.3 He further submitted that learned adjudicating authority had placed reliance on Sravani Impex P Ltd. 2010(252) E.L.T. 19(A.P.), wherein it was held that when the DEPB scrips have been sold to third parties, the only course open to the Customs is to demand repayment of DEPB Credit from the original licensee-exporter under Section 28 of the Customs Act 1962. Learned Advocate further supported his stand that duty cannot be demanded from the transferees, by claiming that this position was perhaps recognized by the Government when it introduced Section 28 AAA in the Customs Act with effect from 28.05.2012. Section 28AAA provides that in such cases duty shall be recovered from the person to whom the instruments (such as DEPB, VABAL-Advance license) are issued. Learned Advocate argued that since the law has not been so clear that duty could be demanded from the transferee, it has been amended in order introduce a separate provision as Section 28AAA in the Customs statute. As such provisions apply w.e.f. 28.05.2022 by a new insertion in the Customs Act, 1962 by the Finance Act, 2012, these do not have retrospectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial of benefit of Value Based Advance Licenses (VABAL) to the appellants-transferee of such Licenses is permissible? and whether recovery of customs duty under Section 28 ibid, which was foregone on import on utilizing the VABAL Licenses, that were alleged to have been obtained by the transferor M/s. Robinson by resorting to overvaluation; and whether penalty imposed on the appellants under Section 114A ibid, are legally sustainable or not? 8.1 In the impugned order, the learned Commissioner had examined the various issues involved in the case as referred above and confirmed the adjudged demands on the appellants as well as imposed penalty on them. 8.2 In arriving at the conclusions for passing the above stated order, the Commissioner of Customs in the impugned order, have discussed the issued and given his views as follows: 6.1 I have carefully gone through the contents of the Show Cause Notice, the documents relied upon therein and the submissions by the notices in writing and during the course of hearing. It is alleged in the notice that:- a. M/s Robinson Impex (I) Ltd. (formerly known as Jyoti Exports / Jyoti Exports (India) Ltd ) have resorted to gross over valuation of the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Some noticees have initially raised the question of non-receipt of relevant documents - relied as well as non-relied which were later provided to them as per the records and therefore, that issue has been taken care of and does not call for any further discussion. xxx xxx xxx xxx 6.8.1 M/s Lark Chemicals Pvt. Ltd have raised the specific issue that in one of their licences Advance Licence No. P/K/2145479 dated 19.07.1994 for US$180000, the SCN was issued and later proceedings dropped vide an Order-in-Original No. CAO/No.117/97- CAC/CC-1 dated 19.05.1997 on the issue of availability of Notn No. 203/92; that the Order had attained finality; and that without challenging the Order dated 19.05.1997, no demand could be raised on the Noticees by simply issuing a fresh Show Cause Notice. However, I find that the earlier adjudication was on a different issue and the new issue of procuring of Advance Licences in fraudulent manner had not come to light till then. Therefore, those proceedings were different and independent of the present case, and do not come in the way of the adjudication in this matter in respect of the said licence. 6.8.2 M/s Lark Chemicals Pvt. Ltd further stated that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cro Labs Ltd., Bangalore, M/s Romit International, Mumbai, M/s Milind Associates, Madras, M/s Robinson Pharma, Ahmedabad and M/s Lark Chemicals, Mumbai to the extent the duty exemption was availed by them along with the applicable interest. 6.15 Having discussed as above, I conclude that M/s Robinson Impex (1) Ltd have acquired VABAL Licence fraudulently by way of suppressing/ mis-stating the correct value of goods exported and accordingly, has rendered the export goods liable for confiscation under Section 113 (d) of the Customs Act 1962. M/s Robinson Impex (1) Ltd themselves and the other importers, viz. M/s Micro Labs Ltd., Bangalore, M/s Romit International, Mumbai, M/s Milind Associates, Madras, M/s Robinson Pharma, Ahmedabad and M/s Lark Chemicals, Mumbai who have bought the licences from the said merchant exporter and have imported the goods duty free under the licence so fraudulently obtained, I hold them liable to pay the Import duty amounting to Rs.2,80,80,388/- (Rupees Two Crore Eighty Lakh Eighty Thousand Three Hundred Eighty Eight only) at appropriate rate of duty on CIF value of duty free imports along with interest @ 20% per annum invoking extended period under provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as they are able to meet the value addition prescribed. The licences so obtained are, subsequently used for importing inputs at prevailing international prices with the result that quantities far in excess of requirements for export production, based on which the entitlement to CIF was calculated, can be imported. Thus, in addition to the flexibility permitted under the scheme for importing any one or more inputs upto full CIF value of licence except for sensitive items, the exporters through above modus operandi take unintended benefits under the Scheme. 2. In terms of Rule 2(1) of the Foreign Trade (Regulation) Rules, 1993, value has the same meaning assigned to it as under Section 2(41) of the Customs Act, 1962. Therefore, for the purpose of obtaining Value Based Advance Licence, the exporters are required to declare prevailing international prices which correspond to valuation as per Customs Act. Since the Licencing authorities while issuing VABAL indicate quantity and value of all inputs in the DEEC Book (though quantity restrictions apply only for sensitive items), the unit price declared for obtaining licence can be determined from the DEEC Book. In all such cases where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se No. P/K/2145479 dated 19.07.1994 File No. of the JDGFT is 429-am95 and status is BCW/Transferability allowed (ii) License No. P/K/2145480 dated 19.07.1994 File No. of the JDGFT is 42..-am95 and status is BCW/Transferability allowed (iii) License No. P/K/491011 dated 31.03.1995 File No. of the JDGFT is 1854-am95 and status is File to be trace out position will be intimated later on. It is also found that such reply of DGFT authorities covered 44 licenses dealing with four different license holders including M/s Robinson. Some of the licenses have been shown with the status of cancellation issued , SCN issued for cancellation etc. However, in respect of the three licenses related to the appeals in the present case, there is no such action was indicated in the DGFT s reply letter. Thus, from the above reply, it transpires that DGFT authorities have taken action on certain licenses, where they found it fit for taking further necessary action as per the merits of the case. In the three VABAL licenses, relating to the appeals before us there is no indication of such action for cancellation having taken by DGFT authorities or any information provided by Revenue that such an action was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 10. Therefore, following the ratio of the various decisions relied upon by the appellants, we find that the Commissioner of Customs has no jurisdiction to question Value Based Advance License whether such license was obtained by misrepresentation or otherwise as has been held by the Supreme Court in the above cited cases. 11. We also find that the correspondence between the Commissioner of Customs and JDGFT, Calcutta was neither disclosed to the appellants nor they were given any opportunity to present their case before the JDGFT. We also find that no proceedings for amendment of the license were initiated by the JDGFT, Calcutta. The appellants have imported LAM Coke within the value limit of VABAL. There is no charge that they had undervalued LAM Coke at the time of importation. They had also completed their export obligation. Therefore, there is no violation of the provisions of Customs Act. Customs authorities cannot go into the domain of licensing authority fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred above it was for Customs Authorities after noting the mismatch in the declared unit value on Bill of Entry and that arrived on the basis of quantity and value mentioned in Value Based Advance Licence to refer the matter to licensing authority and seek corrections. In absence of any correction/amendments in the licence, the value of imported goods sought to be exempted by the said licence cannot be suo motu altered by the Customs Authorities. In our view order of Commissioner (Appeals) and adjudicating authority is not only contrary to the decisions referred above but also contrary to Circular No. 23/96-Cus. issued by C.B.E. C. and which has been used as basis for raising the demand. 5.8 In case Aafloat Textile (I) Pvt. Ltd. [2009 (235) E.L.T. 587 (S.C.)] relied upon by the Commissioner (Appeals), Hon ble Supreme Court has held as follows : 19. It was for the buyer to establish that he had no knowledge about the genuineness or otherwise of the SIL in question. 20. The maxim caveat emptor is clearly applicable to a case of this nature. As per Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edn. 2005 at page 721 : Caveat emptor means Let the purchaser beware. It is one of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin 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 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. From the above paras referred from the said decision it is quite evident that the case under consideration was in respect of a licence that was obtained by fraud. When this licence obtained by fraud, was presented by the buyer of said licence Supreme Court held as above. In the case under consideration the issue is not in respect of licence obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n contravention of the provisions of Imports and Exports (Control) Act, 1947. In the case of Taparia Overseas (P) Ltd. v. Union of India [2003 (161) E.L.T. 47 (Bom.)] it was held that transfer of licence to transferee for value without notice of fraud by original licence holder is governed by common law and not by provisions of any statute. As such, transaction cannot be held to be void ab initio but voidable at the instance of party defraud. The Hon ble Court observed that inasmuch as, the procedure was followed by the transferee while getting the licence transferred in their names and the petitioner had obtained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holder while obtaining licences. If that be so, the concept that fraud vitiated everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions, governed by common law and not by provisions of any statute. Accordingly, the Hon ble Court held that goods imported and Bill of Entry filed prior to cancellation of licence has to be held as having been made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M/s. HICO Enterprises [2008 (11) SCC 720] similar view was taken. The appeal is dismissed. 10.4 We further that in the case of Hico Enterprises (supra), the Larger Bench of the Tribunal has held that benefit of notification cannot be denied to the transferee on the ground of breach of conditions of the notification. The relevant paragraphs of the said order are given below: 42 . As seen from the material on record, the Duty Exemption Scheme, which is part of the EXIM Policy 1992-97, is administrated by the Directorate General of Foreign Trade. Notification No. 203/92-Cus. has been issued to effectuate the exemption scheme laid down in Chapter 7 of the EXIM Policy. For this reason, issuing VBAL or QBAL, DEEC, execution of bond, legal undertaking, monitoring of import and export item, fulfilment of export obligation, realization of export proceeds, discharge of bond and legal undertaking have all been vested with the licensing authority. Certain special powers have been given to the DGFT/or the licensing authority to exercise the same in public interest. The Customs officers, while implementing the Notification 203/92-Cus., cannot question or appear to question the decisions and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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