By TIOL News Service

CHANDIGARH, 15 SEPT, 2016: THE appellant purchased one DEPB scrip dated 10.10.2000 from M/s Beni Exports, Jalandhar . The same was utilised for discharging duty liability on goods imported by the appellant vide Bills of Entry dated 12.10.2000 and 19.10.2000. The DGFT, finding that DEPB obtained by M/s Beni Exports, Jalandhar , which was purchased by the appellant, was obtained by using certain forged documents, cancelled the same vide order dated 24.10.2001.

Thereafter, SCNwas issued on 14.11.2002 to the appellant proposing to recover the benefit of duty payment availed of by the appellant on the basis of that DEPB.

The adjudicating authority confirmed the demand and this order was upheld by the first appellate authority as well as the Tribunal.

The appellant is before the High Court and raises the following substantial questions of law:

(a) Whether duty can be demanded from an importer who is not a party to fraud committed by an exporter?

(b) Whether demand against the appellant is sustainable when demand against identically situated persons has already been dropped?

(c) Whether extended period of limitation can be invoked, in view of various judgments of this Hon'ble Court?

(d) Whether impugned order is perverse and contrary to record?

After considering the submissions made by both sides, the High Court observed thus –

++ In Vallabh Design Products' case, this court dismissed the appeal filed by the revenue involving identical issue finding that the importer therein was not a party to the fraud and there was categorical finding that he had purchased DEPB from the open market in bonafide belief of its being genuine. Reliance was placed upon an earlier judgment of this Court in Leader Valves Ltd.'s case (2007-TIOL-701-HC-P&H-CUS). There also, similar findings were recorded.The same view was later followed in Fertichem India and M/s Deebee Marketing Pvt. Ltd.'s cases (2009-TIOL-225-HC-P&H-CUS ).

The judgments cited by the Revenue were distinguished on the grounds that in those cases there was no finding recorded by the Tribunal or the authorities that the assessee acted bonafide.

Distinguishing the case of Aafloat Textiles India Private Limited and others -2009-TIOL-42-SC-CUS where the maxim "caveat emptor" was applied, the High Court observed that in cases, where scrip itself is forged, the fact could be found out in case the buyer seeks to verify this from the office issuing the scrip. However, it was not possible in a case where the scrip is genuine, but for the purpose of issuance thereof, the party concerned may have used some forged documents.

Noting that in the case in hand there is a specific finding recorded by the first appellate authority and even by the Tribunal that the appellant was not party to the fraud with the seller of DEPB; thatDEPB was found to be a genuine document, though obtained by seller by producing some forged documents, to which the appellant was not a party, the appeals were allowed by answering the first substantial question in favour of the assessee and against the revenue.

(See 2016-TIOL-2136-HC-P&H-CUS)