GFC Weld House Vs Principal Commissioner (CESTAT Delhi)
The appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi arose from an order of the Commissioner of Customs (Appeals), which had upheld an adjudication order confirming customs duty, interest, and penalties against the appellant. The Joint Commissioner had confirmed a demand of ₹1,93,573 under section 28(4) of the Customs Act, 1962, along with interest under section 28AA, imposed an equivalent penalty under section 114A, and additionally imposed a penalty of ₹10,00,000 under section 114AA.
The dispute related to the import of goods cleared using a Focus Market Scheme scrip issued by DGFT in the name of another entity. The scrip, originally issued for ₹56,091, was fraudulently manipulated to reflect a value of ₹25,67,974 and registered in the Customs EDI system at ICD Tughlakabad. This manipulated scrip was used by three importers, including the appellant, to discharge customs duty. The appellant alone utilized the scrip to pay duty of ₹1,93,573, which exceeded the original value of the scrip by more than three times. Following investigation, a show cause notice was issued seeking recovery of duty with interest and imposition of penalties.
The appellant contended that it had purchased the scrip for consideration under a bona fide belief and had no role in the manipulation or fraudulent registration of the scrip. The Tribunal noted that the issue of duty demand and penalty under section 114A in cases involving forged or manipulated duty credit scrips stood conclusively settled by the Supreme Court of India in Munjal Showa Ltd., holding that fraud vitiates everything and that duty and consequential penalties are recoverable even from importers who were purchasers of forged scrips. In view of this settled position, the appellant did not press the challenge to the duty demand, interest, or penalty under section 114A.
