By TIOL News Service

MUMBAI, MAR 30, 2017: THE appellant M/s Apar Industries Limited presented DEPB scrips dated October/November 1998 for clearance of goods against which bills of entry had been assessed to 'nil' basic customs duty in terms of exemption notification no. 34/97-Cus.

It was established that, without executing any export orders, some individuals had floated bogus firms to secure scrips by furnishing forged shipping bills and bank realisation certificates to the licencing authority.

These scripswere thereafter nullified ab initio by the licencing authority. The original authority rendered a finding that imports had been effected without payment of basic customs duty leading to order of recovery of such duties and confiscation for that offence with attendant penalties.

The appellants are before the CESTAT.

Claiming that they had no reason to suspect any fraudulent origins of the said scrips, appellant-importer claims asserts that the licence was invalidated only after the import and hence not liable to be held to their detriment on a later date. They rely on the following decisions in support of their stand that no duty liability/penalty can be imposed on them - Alpha Chemie Sapthagiri 2016-TIOL-2504-CESTAT-MUM, Pee Jay International - 2016-TIOL-2136-HC-P&H-CUS and Jimit Diamonds 2016-TIOL-3267-CESTAT-MUM .

The AR pointed out to the specific findings in the impugned order such as lower than prevalent premium paid for procurement and the extensive operations of the perpetrators of the fraud which should have alerted the importer to the illicit manner of obtaining of the scrips. The following decisions were also cited to buttress the stand adopted by the department - Friends Trading Company 2006-TIOL-886-CESTAT-DEL, 2008-TIOL-788-HC-P&H-CUS, JM Tex P Ltd [Order no. A/2156-2160/13/CSTB/CI dated 17th October 2013] and Sun Chemicals & Anr [Order no. A/93181-181/16/CB dated 17th October 2016].

Commenting that it finds itself placed in a dilemma, the Bench observed -

+ We cannot but note that the lack of diligent support from both sides of the bar has led to decisions supra of ours that are not conformity with earlier decisions of the Tribunal with alternate conclusions.

+ We also take note that the aspect of duty liability stands settled by the seal of approval stamped on the decision of the Tribunal in Friends Trading Co by Hon'ble High Court of Punjab & Haryana and the Hon'ble Supreme Court.

+ With the Hon'ble Supreme Court upholding the duty liability in these circumstances, we are merely concerned with the correctness of deeming the goods to be offending with consequential resort to section 111 and 112 of Customs Act, 1962 against the importer and its officials. And it has been held in earlier disputes that these provisions are liable to be invoked but the recent decisions are otherwise.

+ Propriety demands that contrarian views having been placed on record, we must take recourse to time-tested institutional mechanism to resolve the predicament. In our view, a uniform and consistent approach is mandated even though instinctive sympathies, as human beings, may lie with an innocent party in a business transaction of sale and purchase ; but even conscious that, since the dawn of commercial engagement, the doctrine of caveat emptor must stand to handicap a buyer in transaction if chaos and mayhem are not to prevail. That uniformity and consistency can be consummated only with a resolution that brooks no contrarian view. A larger bench alone can settle the issue.

The Division Bench, therefore, referred the following issue to be determined by the Larger Bench -

'Whether a scrip, entitling imports without payment of duty, if found to be of sinister provenance, though acquired in the normal course of trade should be held against the importer for imposition of penalty.'

The Registry was directed to place the matter before the President.

(See 2017-TIOL-1053-CESTAT-MUM)