Commnr. Of Customs(Preventive) vs M/S. Aafloat Textiles (I) P.Ltd.&Ors.;

1. Challenge in this appeal is to the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (in short the `CESTAT'). Challenge before the CESTAT was to the order of Commissioner of Customs who confirmed the duty demand of Rs.6,69,40,149/- on 9 consignments of gold and silver imported by M/s Aafloat Textiles (India) Ltd. (Formerly known as M/s Akai Impex Ltd.) under Section 28 alongwith appropriate interest under Section 28AB of the Customs Act, 1962 (in short the `Act'). The benefit of exemption in terms of Notification No.117/94-Cus. Dated 27.4.1997 was denied and liability of the goods to confiscation under Section 111(d) and (o) of the Act was upheld. But since the goods were not available, confiscation was not ordered. Penalty equal to duty amount on the importer under Section 114A of the Act was imposed and Rs.50 lakhs was imposed on Shri Mahendra Shah and Rs.25 lakhs each on four other appellants before the CESTAT.

3. Background facts as emerging from the Commissioner's order are that the office premises of one M/s. Gazebo and M/s. Mahavir Corporation, were searched by officers of DRI and copy of SIL No.3536539 dated 6.8.1997 issued to M/s. Track Industries, Kanpur, was recovered. The Joint Director 2 General of Foreign Trade, Kanpur informed that no such licence had been issued and that the signature and security seal of their Foreign Trade Development Officer had been forged. The proprietor of M/s Gazebo, Shri R.T. Shah stated on 19.1.1998 that he had purchased the above bogus SIL from one Shri Sushil Kumar Lohia who, in turn admitted that the SIL was given to him by one Shri Manoj Kumar Jain and that he had obtained several bogus SILs from one Naresh Sheth and Shri Dinesh Buchasia, whose residential premises were searched and certain documents were recovered and his statement was recorded, wherein he stated that he had only dealt in 7 SILs which he bought at low premium from one Rajesh Chopra and that the SILs were forged. Shri Shinivas Pannalal Kalantri, General Manager of the importer company stated that gold/silver had been imported under SIL during the year 1996-97 and 1997-98, that one M/s. Lalbhai Trading Co. and two others were the clearing agents; that Shri Prakash Mohta of Finance Department looked after the purchase of SILs. The Chairman of the importer company stated that he looked after negotiation and purchase of bullion and sale of bullion; that Shri Prakash Mohta looked after purchase of licences, clearance of goods, delivery, payment to supplier etc. and that licence brokers through whom SILs were purchased and whom he knew, were Mr. Pachisia and Mr. Ketan Shah. The 3 statement of Shri Prakash Mohta, was also recorded in which he confirmed that he was looking after purchase of SILs for import of bullion and subsequently selling them in the local market. Shri Mahendra Shah stated that he had sold bogus SILs to the importer company. Shri Rasiklal Mehta stated that he and one AtuI Garodia met one Shri D.R. Gulati in Bombay who told that he could provide bogus SIL for which he would charge 3% to 4% premium, that Shri Gulati used to provide bogus SILs and Shri Garodia used to sell them in market and give them a premium of 3%.

4. The demand was confirmed under the proviso to Section 28(1) of the Act. The stand of the revenue that since the licenses were forged and were void, the buyer cannot have better title than the seller. CESTAT in appeal was of the view that the appeal could be disposed only on the ground of limitation without going into the merits of the matter. It was observed that there was no evidence to show that the importer had knowledge about the SIL being non- genuine.

24. As the maxim applies, with certain specific restrictions, not only to the quality of, but also to the title to, land which is sold, the purchaser is generally bound to view the land and to enquire after and inspect the title- deeds; at his peril if he does not.

29. In view of this finding the other issues raised by the respondent are of academic interest.

30. The appeal is allowed. There shall be no order as to costs.