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Cus – Focus licence obtained by fraud - Tribunal advises Board to refer case to SIT - Black Money so that Hawala Operators masquerading their identity are brought to fold of economic offence and face trial: CESTAT

By TIOL News Service

MUMBAI, OCT 26, 2017: RECORDS revealed that a Focus License was obtained by the appellantfrom DGFT under fraud by submitting fabricated and bogus shipping bill, which were never submitted to NhavaSheva Customs, Mumbai to occasion export of goods nor also any Bank Realization Certificate (BRC) was ever issued by UCO Bank, Ghaziabad.

The license so issued was used by the appellant as a transferee thereof for duty free import of goods involving customs duty of Rs.5,54,224/-.

Both the lower authorities by their concurrent findings confirmed that neither shipping bill nor the BRC presented to DGFT were genuine to get the Focus Licence.

In appeal, the Appellant has denied its liability and also pleaded immunity from levy of penalty.

The Revenue emphasized that when fraudulent instrument was used to make duty free import, appellant has to suffer consequence of adjudication.

The Member (Judicial) observed –

++ It is a settled principle of law that a person who makes use of an instrument obtained under fraud should be aware that it carries risk with it following the doctrine of Caveat Emptor. [Aafloat Textiles (I) Pvt. Ltd – 2009-TIOL-42-SC-CUS relied upon] Present case being a case of fraud against Revenue, the order passed by the Commissioner (Appeals) does not require any intervention.

The Bench also offered the following suggestion to the Ministry of Finance -

"To deter use of fraudulently obtained instrument by a transferee or beneficiary thereof under Customs Act, 1962 and make him liable to the duty lost by Revenue along with transferor under Section 28AAA of the said Act, suitable provision may be enacted with deterrent penal consequence and cognizance of such cases of money laundering may be taken by the "proper officer" appointed under Customs Act, 1962 at the first instance. Authority for preliminary investigation by such "proper officer" into the matter under Prevention of Money Laundering Act, 2002 and transmission of outcome of his enquiry to the Enforcement Directorate for further in depth investigation shall serve a long way. Such measure shall save the economy from the hands of fraudsters."

After extracting paragraphs from the adjudication order, the CESTAT noted that a racket was operating to forge documents and cause jeopardy to the interest of the economy and, therefore, it was incumbent that the Board referred such cases to Special Investigation Team (SIT – Black Money) for further investigation, so that Hawala Operators masquerading their identity are brought to the fold of economic offence and face trial.

The Registry was directed to send a copy of the order to the Secretary, Department of Revenue, Ministry of Finance, Government of India and Chairman of CBE&C.

The appeal was dismissed.

(See 2017-TIOL-3796-CESTAT-MUM)


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