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TMI Blog2024 (10) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... ustained and accordingly, the interest and penalty is not sustainable. The matter is no longer res integra in as much as the Hon ble Supreme Court in the case of M/S. MUNJAL SHOWA LTD. VERSUS COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE (DELHI IV) AND M/S. FRIENDS TRADING CO. VERSUS UNION OF INDIA AND ORS. [ 2022 (9) TMI 1076 - SUPREME COURT] observed ' it has been found that the DEPB licenses/Scrips, on which the exemption benefit was availed of by the appellant(s) (as buyers of the forged/ fake DEPB licenses/Scrips) were found to be forged one and it was found that the DEPB licenses/Scrips were not issued at all. A fraud was played and the exemption benefit was availed on such forged/fake DEPB licenses/Scrips.' There are no reason to interfere with the impugned order as far as the demand of duty is concerned. However, since the appellants were not aware of the fact that the goods imported by them were based on the fraudulently obtained DEPB scrips, the question of imposing penalty on them does not arise. Accordingly, the penalty is set aside. Appeal allowed in part. - HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) And HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of DEPB scheme which were obtained fraudulently and transferred to the appellant. Accordingly, confirmed demand of duty of Rs.22,09,428/- along with interest and imposed penalty equivalent to the extent of duty demanded under Section 114A of the Customs Act, 1962. On appeal before the Commissioner (A) by the appellant as well as the Department, the Commissioner (A) upheld the order of the original authority in demanding duty and allowed appeal filed by the department to impose penalty equivalent to total duty demanded and the interest amount. Aggrieved by the above orders the appellant is in appeal before us. 3. The learned counsel on behalf of the appellant submitted that the Appellant is a public limited company engaged in manufacturing of excisable goods. It is submitted that in terms of the provisions of the Foreign Trade Policy (FTP), DEPB Scrip/licence is freely transferable and tradable and Replenishment Licence (REP) or DEPB is construed as goods and is liable for payment of Sales Tax/VAT as per the judgments of the Hon ble Supreme Court in the case of Vikas Sales Corporation v. CCT, 2017 (354) ELT 6 (SC) and Yasha Overseas v. CST, 2015 (322) ELT 7 (SC). He Submits th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the DEPB licenses purchased by them was registered. Further, at the time of assessment of Bills of Entry, all the DEPB licenses were valid and duly registered by the Customs authorities at the Port of Registration and only after due verification of the DEPB licenses, the Customs department assessed the Bills of Entry and permitted clearance under Section 47 of the Customs Act, 1962. Nearly after lapse of more than 4 years, the Revenue issued show-cause notice dated 20.05.2013 against the Appellant on the premise that the exporter (M/s. Bilwa Labs) had obtained DEPB licenses by mis-declaring their export product and that the DEPB licenses were obtained incorrectly by mis- declaring their export product and that the Appellant by purchasing the said DEPB licenses utilized the same to pay duty on goods imported by them, by suppressing the facts and with intent to evade payment of duty. The Appellant denied and refuted the allegations in the notice and contested the proposals on various grounds. The Adjudicating Authority confirmed the demand of duty with interest and imposed penalty under Section 114A equal to the duty and interest. 3.3 It is further submitted that the Revenue does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the exporter had obtained DEPB licenses by mis- declaring their export product. It is well settled that subsequent cancellation of DEPB license, when license already stood utilized and exhausted, will not have any effect on imports already made on the basis of such licenses which were valid at the time of imports. The impugned order is therefore not tenable. The Revenue does not allege that the DEPB licenses were fake or forged documents as on the dates of Bills of Entry. On the contrary, these DEPB licenses were validly issued by JDGFT and were existing (till it was cancelled on 15.03.2012) and duly verified and registered by Customs at the Port of Registration (viz., ICD Bangalore). Thus, DEPB licenses were valid at the time of assessment of Bills of Entry filed by the Appellant. Duty cannot be demanded from the Appellant merely because the DEPB licenses purchased by the Appellant were cancelled subsequently. In support of this plea, the learned counsel placed reliance on the following decisions: (a) Pee Jay International v. CC, 2016 (340) ELT 625 (P H) (b) Deep Exports v. CC, 2016 (338) ELT 742 (Tri-Del.) (c) Supreme Castings Ltd v. JDGFT, 2016 (342) ELT 176 (P H) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty imposable under Section 114A of the Customs Act, 1962 is settled in favour of the assessee/importers vide judgment of the Hon ble Karnataka High Court in CC vs. Sony Sales Corporation: 2021 (376) ELT 472 (Kar.) and also this Bench s decision in IBM India Pvt Ltd v. CC, Bangalore: Final Order No.21331/2023 dated 01.12.2023 passed in C/26697/2013. The impugned order is, therefore, not sustainable. 4. The learned Authorised Representative on behalf of the Revenue submitted that the issue involved in the present appeal is whether the appellant who imported the goods by using DEPB scrips purchased, which were later found to be obtained by fraudulent means, are liable for payment of duty and interest; whether the demand is time barred; whether the appellants are liable for penalty under Section 114A of the Customs Act, 1962. It is stated that the appellant had cleared imported goods by debiting the duty payable by using transferable DEPB scrips issued in the name of M/s. Bilwa Labs, Bangalore. The DEPB scrips were transferred to the appellants in accordance with the Foreign Trade Policy. The Joint Director General of Foreign Trade (JDGFT), Bangalore vide Notice dated 10.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aud that had no title for transfer to the appellant. Adjudication was therefore upheld in appeal in all respect including extended period. The Tribunal held that when DEPB scrips have been obtained without undertaking exports, the question of granting duty benefit by the exchequer cannot arise. It was further held that the appellants are not entitled to duty benefit under the DEPB scheme against fraudulently obtained DEPB scrips. The appeal was consequently dismissed. 4.3 An appeal filed against the order of the Tribunal was dismissed by the High Court of Punjab and Haryana [2011 (267) ELT 33 (P H)]. The court held as follows: In any case, the proviso is not limited to action of an importer who comes forward to take advantage on the basis of fraudulently obtained or forged DEPB, it also covers action of the predecessor of the importer. Importer who steps into the shoes of seller of forged document does not stand on better footing and cannot be allowed to retain benefit illegally obtained. Taint attaching to the document on the basis of which benefit is taken is not washed of. Fraud or suppression continues if document is not genuine. Any other interpretation will defeat the intendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Afloat 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/Scrips and whether the appellant(s) buyer(s) was/were to take requisite precautions to find out about the genuineness of the DEPB licenses/Scrips 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 reasons stated above, both the appeals fail and are accordingly dismissed. As the penalty proceedings are reported to be pending pursuant to the remand order passed by the Tribunal, we direct the adjudicating authority to complete the penalty proceedings on remand, at the earliest preferably within a period of six months from today. 4.5 It is further submitted that in the case of Eastern Silk Industries Limited: 2016 (336) E.L.T. 141 (Tri. - Kolkata), it was held as under : 9.1 A script obtained from the Licensing aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also. State cannot be deprived of its share of duty if the same is claimed exemption by fraudulent acts of the exporters in the present proceedings. Since, the present case is similar to the case of Eastern Silk Industries Limited cited above, the appeal is liable to be dismissed. 6. Heard both sides. The only issue to be decided is whether the DEPB scrips utilised by the appellant for payment of duty which were later declared as obtained fraudulently, which is not disputed, can be considered as valid DEPB scrips. The exporter M/s. Bilwa Labs had obtained the DEPB scrips fraudulently by declaring Muriate of Potash as Industrial Salt at the time of export for claiming the benefit of DEPB scheme is not under dispute. However, the claim of the appellant is since these DEPB scrips are freely available in the open market for purchase and they had purchased valid DEPB scrips and at the time of import, they were considered to be valid DEPB scrips, hence there cannot be demand of duty on them. It is also claimed that since the demand is time barred, the demand of duty cannot be sustained and accordingly, the interest and penalty is not sustainable. 6.1 The matter is no longer res integra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew expressed orders passed by CESTAT, Mumbai as several case laws, including some recently decided by the Apex Court, were not brought to the notice of CESTAT, Mumbai. On this issue Delhi CESTAT in the case of C.C., Amritsar v. Sona Castings [2010 (259) E.L.T. 693 (Tri.-Del.)] held that fraud vitiates everything and transferee is also responsible to pay duty against such scripts obtained fraudulently. This conclusion drawn is based on several quoted case laws of Apex Court and High Courts of Kolkata Punjab Haryana. The ratio laid down by Calcutta High Court in the case of ICI India Ltd. v. C.C. (Port), Calcutta [2005 (184) E.L.T. 334] is squarely applicable to the facts of the present appeal. This order of the Calcutta High Court has also been affirmed by Apex Court as reported at 2005 (187) E.L.T. A31 (S.C.) where invocation of extended period was also justified. Jurisdictional Calcutta High Court in the case of ICI India Ltd. v. CC (Port), Calcutta (supra) held as follows : 2. Relying on the judgment of the learned CEGAT in Appeal No. C/358/2000-NB(D), dated 26th September, 2002 [2003 (151) E.L.T. 336 (T)] Dr. Pal contends that there is a finding that there was no collusion on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the issue of the DEPB licences/scrips becomes absolutely immaterial and irrelevant since no credit can be derived from a forged DEPB. The credit is made available on the strength of a valid DEPB. If the DEPB is forged, then the same is non est and therefore, there is no valid DEPB. As such no credit can be derived thereunder. In such circumstances, one may defend his case that one may not be liable for collusion or fraud and exposed to other penalties therefor, but still then one would be liable to pay the duty and interest and for other statutory consequences which one cannot avoid. 9.1 A script obtained from the Licensing authority fraudulently cannot give licence to any transferee to avail any Customs duty exemption. Fraud in common parlance means dishonest dealing, deceit or cheating etc. It makes no difference whether fraud is committed by outrightly forging of documents or by willful misdeclaration/misrepresentation. A fraud is a fraud and there are no categories of mild frauds and severe frauds in taxation matters. Further in a recent case of Tata Iron Steel Co. Ltd. v. C.C., Mumbai [2015 (319) E.L.T. 546 (S.C.)] on the issue of applicability of extended period in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective from 28-5-2012 and cannot be made applicable to the present proceedings for the periods prior to 28-5-2012. This provision has been made to give the department a tool also to recover Customs duty even from a person other than the importer of the goods. It is also observed that proviso to Section 28AAA(1) does not absolve the actual importer from payment of duty. Further Hon ble Apex Court in the case of Tata Iron Steel Co. Ltd. v. C.C., Mumbai (supra) has held that extended period is available to the Revenue for demanding duty from the transferres also. State cannot be deprived of its share of duty if the same is claimed exemption by fraudulent acts of the exporters in the present proceedings. 11. In view of the above observations duty demands and interest have been correctly confirmed by the Adjudicating authority against all the appellants. However, we are of the considered opinion that penalties are not imposable upon the transferee appellants as they have no knowledge of the nature of goods used and exported by the manufacturers/exporters. Accordingly, penalties imposed upon the transferee appellants are set aside. 7. In view of the above, we do not find any reason to in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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