By TIOL News Service

AHMEDABAD, SEPT 01, 2015: THE importer purchased transferable DEPB scrips on 25.08.2000 from open market, which was originally issued to M/s. Supreme Castings Limited (exporter) against their export. The importer imported chemicals through Kandla Port on the basis of the said DEPB scrips, without payment of duty. In 2004, it was found that the exporter had obtained the transferable DEPB scrips fraudulently by ante-dating the shipping Bill No. 2216 dated 30.03.2000, pertaining to cargo against shipping bill, which was received in CFS on 04.04.2000, when the value applicable cab to grant of DEPB for export was reduced. The said DEPB scrip was cancelled by DGFT authority.

A SCN dt.18.04.2005 was issued by the Commissioner of Customs, Kandla proposing demand of Customs duty of Rs.12,35,362/- alongwith interest; impose penalty on the importer and confiscate the goods.

The demand was confirmed; equal penalty was imposed on importer. Penalties were inter alia also imposed on the exporter, its Director, Supdt. CE and the CHA.

The aforesaid five appellants are before the CESTAT, however, only the importer and the Superintendent are represented.

It is submitted that the importer is a bonafide purchaser of the DEPB scrips from the open market as per the provisions of the Policy and payment was made by cheques; there is no material available of fraud, collusion etc. against the Importer and, therefore, the extended period of limitation cannot be invoked. Case laws relied upon are M/s Sneha Sales Corporation - 2002-TIOL-440-SC-CUS, M/s Patiala Castings Pvt. Ltd. - 2011-TIOL-2005-CESTAT-DEL, Leader Valves Ltd - 2007-TIOL-701-HC- P&H upheld by Supreme Court.

In the matter of penalty imposed on the Superintendent u/s 112 (a) of the Act, it is submitted that there is no evidence that the Appellant was involved in forging of the export documents. On an identical issue in the Appellant's own case, the Tribunal had set aside the penalty (D.R. Ahuja Vs Commissioner of Customs, Amritsar) - 2009-TIOL-2284-CESTAT-DEL. Other case laws relied are of P.N. Ram - 2008-TIOL-2521-CESTAT-DEL, Khem Singh Lalas - 2014-TIOL-1166-CESTAT-AHM.

The AR submitted that once it is established that the export documents are forged and the DEPB licence was cancelled, the entire transaction is treated as void; that it is immaterial as to whether the Appellants were involved in the fraud and, therefore, the extended period of limitation would be invoked. Regarding the imposition of penalty on the Superintendent it is submitted that the Appellant countersigned the documents without any verification and, therefore, penalty on him and the other appellants is rightly imposed.

The Bench considered the submissions and while distinguishing the decision cited by the AR observed -

+ The Adjudicating authority had not given any finding that the importer had not paid the duty by reason of collusion or any willful mis-statement or suppression of facts.

+ In the present case, at the time of importation of the goods, the DEPB licence was valid, which was cancelled after about 4 years. The Tribunal in the case of M/s Patiala Castings Pvt. Ltd (supra), in the identical situation, dismissed the appeal filed by the Revenue.

+ It has been observed that there is neither any allegation nor any evidence to show that the Appellant had knowledge about the fraudulent mis-representation of the exporter in obtaining DEPB scrips and duty cannot be recovered from transferee.

+ There is no dispute that, the appellant availed credit on the basis of said DEPB scrip, which was issued by the Customs authorities. Thus, at the time of import of goods, the DEPB scrips were not found forged. It is the case of the Department that exporter manipulated the export document to avail the extra benefit and on this ground, the DGFT cancelled the DEPB scrips in 2004.

+ In the present case, there is no dispute that the Importer imported the goods on the basis of the documents, which were valid at the time of importation and therefore, such document is valid, till it is not set-aside, extended period cannot be invoked. The demand of duty along with interest is not sustainable as barred by limitation. As the demand of duty is not sustainable, imposition of penalty is also not warranted.

In the matter of penalty imposed on the Superintendent, the Bench observed that there is no material available that the appellant abetted the exporter for their gain and, therefore, he would not come within the ambit of imposition of penalty under Section 112 (a) of the Act;that there is no evidence that the Appellant was involved in any manner in respect of manipulation of the export documents;that in an identical situation, in the Appellant's own case, the Tribunal - 2009-TIOL-2284-CESTAT-DEL set aside the penalty and allowed the appeal filed.

So also, in the very same case - 2009-TIOL-2284-CESTAT-DEL the penalty on the CHA was set aside and being an identical situation, the penalty on Shri Quimti Lal Sharma was held as not warranted.

As for the penalties imposed on the exporter and its Director, who had committed the offence, the Bench noted that both had not submitted their reply to Show Cause Notice and also not appeared in the personal hearing; that as the exporter and its Director had committed the fraudulent activities by manipulating the Let export order and Bill of Lading, they were the actual beneficiary and, therefore, imposition of penalty on the Exporter and its Director are justified, legal and proper.

Conclusion -

+ Demand of duty along with interest and penalty imposed on the Appellant M/s Indian Acrylics Limited, set aside as barred by limitation.

+ Penalty on Shri D.R. Ahuja (Superintendent) and Shri Quimti Lal Sharma (CHA) are also set aside.

+ Penalty on M/s Supreme Castings Ltd (exporter) and its Director Shri Gurkirpal Singh are upheld.

(See 2015-TIOL-1828-CESTAT-AHM)