IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CUSAP No.27 of 2008 Date of decision: 1.9.2008 M/s Munjal Showa Ltd. -----Appellant Vs. Commissioner of Customs & Central Excise (Delhi-IV), Faridabad. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE AJAY TEWARI Present: Mr. A. Hadyatulla, Sr. Advocate with Mr. Pavit Singh Mattewal, Advocate and Mr. P.K. Ram, Advocate for the appellant. ----- Adarsh Kumar Goel, J 1. This appeal under section 130 of the Customs Act, 1962 (hereinafter referred to as ‘the Act’) has been filed by the assessee against the order dated 18.3.2008 passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’), confirming the demand of custom duty with interest. The appeal under the said provision lies to this Court only on a substantial question of law. In para 6 of the appeal, following substantial questions are sought to be raised:- “a. Whether Extended period of five years is available for the notice dated 3.10.2006 issued under section 28(1) of the Customs act, 1962 (hereinafter referred to as the Act) when the CUSAP No.27 of 2008 ingredients of “Fraud” and “with intent to evade payment of duty” are absent in the said Section? b. Whether demand raised under section 28(1) of the act, is not time barred in respect of Bill of Entry No.1289 dated 22.5.2003 and two Ex-Bonds Blls of Entry Nos.274 dated 23.6.2003 and 282 dated 26.6.2003 and consignments cleared on 27.5.2003, 23.6.2003 and 30.6.2003 respectively. c. Whether in the state of law, remand is at all necessary on the aspect on payment of duty and imposition of penalty and on time bar when all the aforesaid three issues are settled by judgments of this Hon’ble Court in”- 1) Commissioner of Customs v. Leader Valves Limited, 2007(83) RLT 921; 2) Commissioner of customs V. Vallabh Design Products- 2007 (219) ELT 73. Confirmed by Hon’ble Supreme Court in Commissioner of Customs v. Leader Valves in SLP (Civil) No.CC3493 of 2008 vide order dated 10.3.2008, 2008(227) ELTA 29.And on time bar in: 1) Commissioner of Customs v. Ballabh Design Products- 2007(219) ELT 73; 2) Commissioner of Customs v. Leader Valves Limited- 2007(83) RLT 921; 2 CUSAP No.27 of 2008 3) Aban Loyd Chiles Offshore Limited v. COC, Maharashtra reported as (2006) 6 SCC 482 at 489 Para 19. d) Whether Mr. Vijay Singh Bishnoi’s statement dated 24.11.2004 which is in violation of section 108 of the Act, can be relied upon in the proceedings? e) Whether interest under section 28AB of the act is leviable in absence of determination of short levy under section 28 of the Act? 2. Facts noted in the impugned order of the Tribunal or otherwise on record are that the appellant imported consignments through ICD Balabhgarh using transfer release advices (TRAs) issued by the Bombay Customs House. On verification, it was found that DEPB licensees on the basis of which TRAs were issued, were not genuine. The goods were cleared in May/June 2003 and vide letter dated 5.8.2003, the Assistant Commissioner, ICD, Faridabad informed the appellant that TRAs issued against the DEPB scrip’s were forged and that the DEPB were also forged. The appellant was required to deposit the duty with interest in lieu of DEPB benefit availed by it. The operative part of the notice is as under:- “In this connection, investigation made by SIIB, Jawahar Nehru Customs House, district Raigarh, Maharashtra have confirmed the RAs issued against the above DEPB scrip’s are forged. It has also been confirmed that DEPB scrip’s are also forged. In view of the above you are requested to deposit an amount of Rs.1,29,43,927/- as duty plus interest in lieu of DEPB benefit availed by you against the above DEPB and RAs 3 CUSAP No.27 of 2008 immediately, failing which action as deemed fit under the Customs Act will be taken to recover the said amount.” 3. The appellant vide letter dated 7.8.2003 wrote back, inter alia, to the effect that it was surprised to learn about the forgery and was taking steps to lodge FIR against the transferor and sought time to make payment. This letter was followed by deposit of the amount of duty on 12.8.2003 under protest. After completion of investigation, show cause notice dated 3.10.2006 was issued to the appellant alleging evasion of duty by seeking exemption against debits in releasing the advices which were forged and which were not genuinely issued by the competent authority. The notice further mentioned that duty was demanded on 5.8.2003 and was paid under protest on 12.8.2003. It was also alleged that the appellant had failed to verify genuineness of the transaction and the document being forged was void ab initio and the duty had been evaded unlawfully by submission of forged scrip’s and goods were illicitly removed for home consumption. The appellant was thus required to show cause as to why – a. the goods cleared under the bills of entries as mentioned under para 1 above should not be held liable for confiscation under section 111(m) of the Customs act, 1962; b. the Customs duty amounting to Rs.1,29,43,927/- should not be demanded under proviso to section 28(1) of the Act ibid; c. the amount of Rs.1,29,43,927/- paid by them vide challan No.1611 dated 12.08.2003 should not be appropriated under the Section 28(2) of the Act ibid; d. interest on duty amount as payable above should not be demanded under section 28 AB of the Act ibid; 4 CUSAP No.27 of 2008 e. penalty should not be imposed on them under section 114 A of the Act ibid; 4. After considering the reply of the appellant, the Commissioner of Customs passed order dated 17.10.2007 holding that DEPB scrip’s were forged and thus ab initio void. Exemption availed of was inadmissible. Goods were liable to confiscation and noticees were liable to interest and penalty. The importer who claimed benefit on the basis of forged DEPB scrips stood at par with his predecessor and could not get benefit of forged documents. Immediately, after the clearance of goods, the assessee itself realized that DEPB scrips were not good enough and paid the duty under protest. The protest was liable to be discharged. The Commissioner, therefore, confirmed the demand and directed appropriation of the amount already deposited. In addition, confiscation was also ordered under section 111(m) of the Act apart from redemption fine, penalty and interest. 5. The appellant preferred an appeal to the Tribunal and made a statement that the appellant now knew that DEPB scrip’s were forged but denied intention to evade custom duty and also challenged demand of duty on the point of limitation. The Tribunal rejected the plea of the appellant on the issue of liability of duty but remanded the matter to the original authority on the issue of penalty. Redemption fine was set aside. Relevant observations are as under:- “We have carefully considered the submissions from both sides. We take note of the fact that immediately on communication of the results of verification by the Custom authorities, the appellant company paid on 12th August, 2003 the entire duty involved. The appellants claimed that they have purchased the scrips through the broker Shri Bishnoi which has been denied by the said agent. We 5 CUSAP No.27 of 2008 find that the appellants have entered into transactions for purchase of the DEPB scrips with M/s ACME and Ankur Impex, Mumbai both of whom are reportedly not traceable. They have made payments to these firms by cheques. It is their contention that Mr. Bishnoi also acted as an agent of M/s ACME and Ankur Impex, Mumbai. It was claimed that after commencement of the investigation, the representatives of the appellant company approached Mr. Bishnoi to inform them about the nature of DEPB i.e. whether they were genuine or otherwise, that Bishnoi visited their factory at Gurgaon and discussed with them and their advocate on the recovery of the licence value they had paid and that later Mr. Bishnoi has denied everything he promised to them. From these one thing is clear. The appellant company themselves have come to a conclusion that the licences are forged. They are not contesting that the licenses are forged. They are claiming that they were not having knowledge when they used those licences and that they are only victims of fraud by others. Forged licences have no legal sanctity or validity. On a forged licence, the benefit of exemption notification cannot be allowed as it will amount to legalizing fraud. We are of the considered view that no benefit arising out of fraud cannot be claimed by the appellant company. 61. It is one thing to deny the benefit of exemption on the ground that licences used were fake licences. It is entirely a different thing to take a penal action. Penal action, in our opinion, is warranted only when there is knowledge or intention on the party of the appellants about the fraud committed.” 6. We have heard learned counsel for the appellant and perused the record with a view to satisfy whether any substantial question of law was involved. 6 CUSAP No.27 of 2008 7. We are of the view that no substantial questions of law arise which may call for entertaining this appeal. We proceed to consider the questions proposed in the appeal as under:- Re. Questions (a) & (b): 8. Learned counsel for the appellant submitted that there was no liability to pay duty as the licence had not been cancelled on the date of clearance and the documents on the basis of which exemption from duty was claimed, could not be treated as void. The appellant was not aware of forgery having obtained the documents for consideration and in good faith. Moreover, duty could be demanded only within a period of six months and extended period of five years under proviso to Section 28 of the Customs Act, 1962 (for short, “the Act”) was available only if there was collusion or willful misstatement or suppression of facts by the appellant. Forgery, if any, was by the transferor. The appellant could not be held responsible for the same. 9. Learned counsel sought to support his submissions by the observations of the Hon’ble Supreme Court in East India Commercial Company limited v. Collector 1983 (13) ELT 1342 (SC)=AIR 1962SC 1893. He submitted that the said view was followed by the Hon’ble Supreme Court in Collector of Customs, Bombay v. Sneha Sales Corporation 2000 (121) ELT 577 (SC) and Sampat Raj Dugar 1992(58) ELT 163(SC), by the Bombay High Court in Taparia Overseas (P) Limited v. UOI, 2003161) ELT 47and K.Uttamlal (Exports) Pvt. Limited v. UOI 1990(46) ELT 527 and by the Allahabad High Court in Coolade Beverages Limited v. Commissioner of Central excise, Meerut 2004 (172) ELT 451 and H.Guru Investment (North India) Pvt. Limited v. CEGAT, New Delhi 1998 (104) ELT 8. The 7 CUSAP No.27 of 2008 submission is that even if a licence is void on account of fraud, this did not affect the rights of transferee unless the transferee had not acted bonafide. He also relied on judgment of the Hon’ble Supreme Court in Aban Loyd Chiles Offshore Ltd. and others v. Commissioner of Customs, Maharashtra (2006) 6 SCC 482 and judgments of this Court in Commissioner of Customs, Amritsar v. Vallabh Design Products (2007) 219 ELT 73 and Commissioner of Customs v. Leader Valves Ltd. (2007) 218 ELT 349. 10. We are unable to accept the submission. The judgments relied upon are clearly distinguishable. 11. In East India Commercial Company Ltd. (supra), infringement of licence was alleged in importer selling the goods to third party and in obtaining the licence by misrepresentation. The majority held that a licence obtained by misrepresentation was not non est so as to consider the goods imported without licence to be liable to confiscation. The specified authority did not cancel the licence till its term expired. The goods were imported under a valid licence. 12. We do not find any applicability of the above judgment to the facts of the present case. In the present case, DEPB Scrip’s were forged, which has been admitted even by the appellant before the Tribunal. Benefit of a forged document cannot be allowed to be retained. The judgment relied upon does not in any manner lay down that benefit of a forged document could be allowed to be retained. The principle laid down in the judgment relied upon which has been followed in other judgments cannot, thus, apply to the case of the present nature where benefit has been taken on the basis of a forged document. 8 CUSAP No.27 of 2008 13. In Sneha Sales Corporation (supra), import licence was cancelled after the import and following the judgment in East India Commercial Company (supra), it was held that on the date of clearance of goods, the licence was not non est. Both the judgments deal with the confiscation and not with the payment of duty. In Sampat Raj Dugar (supra) also the situation was identical as in East India Commercial Company (supra). 14. In Aban Loyd Chiles Offshore Ltd. (supra), the Court was not concerned with taking of exemption by forged documents and the assessee being confronted with the forgery within three months and having paid the duty under protest, as in the present case. 15. We may also make a brief reference to the judgments of this Court in Vallabh Design Products (supra) and Leader Valves Ltd. (supra), wherein a finding was clearly recorded that the importer had acted bonafide which finding was affirmed. 16. On the other hand, a Division Bench of this Court in Golden Tools International v. Joint DGFT, Ludhiana 2006(199) ELT 213 after referring to the judgments of the Hon’ble Supreme Court in S.P.Chengalvaraya Naidu v. Jagannath, AIR 1994 SC 853 and Commissioner of Customs v. Essar Oil Ltd. (2004) 11 SCC 364 observed:- “12. We are of the view that both the petitions are bereft of any merit. The entire claim of the petitioners was based on falsehood. It is not in dispute that furnishing of bank certificate of exports and realisation of export proceeds was a pre-requisite for issue of DEPB. Admittedly, the bank certificates furnished were 9 CUSAP No.27 of 2008 fabricated documents. The observations of the former Lord Chief Justice of England, Sir Edward Coke, more than three centuries ago, that “fraud avoids all judicial acts, ecclesiastical or temporal”, noticed by the Supreme Court in S.P.Chengalvaraya Naidu v. Jagannath, AIR 1994 SC 853, are apt for the instant case. The Apex Court has also observed that an act of deliberate deception with the design of securing something by taking unfair advantage of another is a “fraud”. “Fraud” is a cheating intended to get an advantage. A person whose case is based on falsehood has no right to seek relief in equity. Recently in Commissioner of Customs v. Essar Oil Ltd., (2004) 11 SCC 364, their Lordships of the Supreme Court have observed that it is a fraud in law if a party makes representations, which he knows to be false, and injury enures therefrom although the motive from which the representations proceeded may not have been bad. Therefore, at the outset, we reject the stand of the petitioners that since the goods were in fact, exported, and the proceeds were realised, no contumacious conduct could be attributed to them and perhaps it was a misadventure on the part of their representatives. It does not matter whether the forged certificates were furnished by the petitioners or their representatives. What is material is that representations were made to the Directorate of Foreign Trade either by them or on their behalf; the Joint Director of Foreign Trade acted on these representations and issued the DEPBs. The petitioners were fully aware that remittances had not been received, through the bankers whose certificates had been furnished. It clearly shows the fraudulent 10 CUSAP No.27 of 2008 motive. Being the ultimate beneficiaries of the DEPBs, they cannot be heard to say that they are innocent. 17. In The Commissioner of Customs, Commissionerate, The Mall, Amritsar v. M/s. Parker Industries, Jalandhar (2007(207) ELT 658, a Division Bench of this Court after referring to judgment of the Hon’ble Supreme Court in Delhi Development Authority v. Skipper Construction Company (P) Limited, AIR 1996 SC 2005 observed:- “In Delhi Development Authority v. Skipper Construction Company ()P) Limited, AIR 1996 SC 2005, the Hon'ble Supreme Court considered the concept of resulting trust and equity. It was held that where a person earned properties by smuggling or other illegal activities, all such properties whether standing in his name or in the name of his relations or associates will be forfeited to the State. Though, the question herein is not of forfeiture of property illegally acquired but on parity, a person committing fraud is required to restore the benefits taken and cannot be heard to say that since the benefit was transferred to an innocent person and since an innocent person cannot be punished, such a person should also be exonerated.” 18. Coming to the admitted facts of the present case, the appellant availed exemption from duty in May-June, 2003. Within three months, the appellant was informed about the forgery and the fact that the appellant was not entitled to the benefit of exemption. Even as per scheme of exemption, exemption was subject to export proceedings being realised within six months, which in the present case, were never realised. The appellant paid the duty under protest and has never denied that the documents were forged. Having 11 CUSAP No.27 of 2008 come to know that the documents were forged and having been confronted with that fact, the appellant was under an obligation to disclose the true facts and by not doing so, the appellant was guilty of willful suppression of facts, within the meaning of proviso to Section 28 and thus, extended period of limitation could certainly be availed in the present case. 19. It is settled principle of common law that a purchaser steps into the shoes of the seller and does not acquire better title than the seller. This principle has also been recognized under Section 27 of the Sales of Goods Act, 1932. 20. The charge of duty is on the goods under Section 12 of the Act unless a case of exemption is made out, irrespective of intention of any person. 21. Even though the word ‘fraud’ and “with intent to evade payment of duty” are absent in Section 28(1) of the Act, willful suppression or misstatement do find mention in proviso to Section 28 of the Act, which is clearly attracted to the present case. 22. For the above reasons, we are of the view that proposed questions of law (a) and (b) are not substantial questions of law. Re. Question (c): 23. For the reasons already mentioned, it cannot be held that the appellant had not suppressed the facts and was not covered by proviso to Section 28 of the Act. As held in Division Bench judgment of this Court in Parker Industries, Jalandhar (supra), question of penalty stands on different footing. The Tribunal has not recorded any finding that the appellant acted bonafide, as was the case in the judgments relied upon in Vallabh Design Products (supra) and Leader Valves Ltd. (supra). 12 CUSAP No.27 of 2008 24. For the purpose of duty, the Tribunal has clearly held that the documents being forged, the appellant could not be allowed to take advantage of exemption. The Tribunal noticed that the firm with whom the appellant entered into the transaction was not traceable. The appellant itself had come to the conclusion that the documents were forged. In these circumstances, if further opportunity has been given to the appellant on its own asking and for its own benefit, we do not find any error in the course adopted by the Tribunal so as to give rise to substantial question of law sought to be raised. Re. Question (d): 25. No argument has been addressed on this question. We are, thus, unable to hold that the substantial question of law arise. Re. Question (e): 26. The short levy has clearly been determined. This question does not, thus, arise on facts. 27. There is thus, no merit in the appeal. 28. The appeal is dismissed. ( ADARSH KUMAR GOEL ) JUDGE September 1, 2008 ( AJAY TEWARI ) gs/ashwani JUDGE 13