Comet Overseas Pvt. Ltd. Vs Union of India (Calcutta High Court)
Summary: The Calcutta High Court allowed the appeal of Comet Overseas Pvt. Ltd., a subsequent purchaser and transferee of DFIA Licence No. 0210100847, and quashed customs duty of Rs.22,87,654.95/-, interest and redemption fine of Rs.15,00,000/- imposed in relation to an import made under the licence. The appellant was engaged in export-import bulk commodity trading and had purchased the transferable DFIA licence, originally obtained by Gemini Overseas Ltd., for Rs.14,51,795/- through proper banking channels. Acting on the licence, it imported Mulberry Raw Silk Yarn duty-free under Bill of Entry No. 437910 dated 22.10.2008. Subsequent DRI investigation revealed that Gemini Overseas had discharged its export obligation by exporting fabric made of Noil Yarn while declaring it as Natural Silk Fabric predominantly of Mulberry Raw Silk. A Show Cause Notice dated 11.05.2012 consequently proposed recovery of duty under the erstwhile proviso to Section 28(1) read with Section 28(4) of the Customs Act, 1962, confiscation under Section 111(o) and penalty under Section 112.
The Order-in-Original confirmed duty, redemption fine and penalty. CESTAT subsequently set aside the Rs.10 lakh penalty after finding that the appellant had no knowledge of the nature of the goods used and exported by Gemini Overseas/Eastern Silk Industries, but sustained duty, interest and redemption fine. Significantly, the DFIA licence had never been cancelled by the DGFT or Regional Authority. The substantial question before the High Court was whether a bona fide purchaser of a duty-free import licence for value could be required to pay duty, interest and redemption fine where it had no notice of irregularity committed by the exporter and the licence remained uncancelled. The appellant relied principally on East India Commercial Co. Ltd., Sneha Sales Corporation and Taparia Overseas to contend that a licence obtained through fraud or misrepresentation is voidable rather than void and continues to operate until lawfully cancelled.
