Case Law Details
Fats And Proteins Pvt Limited Vs Commissioner of Customs (CESTAT Ahmedabad)
Introduction: In the case of “Fats And Proteins Pvt Limited vs Commissioner of Customs (CESTAT Ahmedabad),” the Customs Act’s penalty imposition for fabricated DEPB scrips was the central issue.
Detailed Analysis:
1. Background of the Case: The appellant, Fats And Proteins Pvt Limited, purchased DEPB (Duty Entitlement Passbook) scrips from the open market in good faith. However, later investigations revealed that these DEPB scrips were fabricated. The Customs department sought to recover the duty availed by invoking an extended period, leading to a dispute that pertains to the period from January 2004. The show-cause notice was issued on May 21, 2008.
2. Legal Arguments:
- Department’s Argument: The Department relied on the decision in the case of Munjal Showa Limited vs. CC&CE (Delhi-V) to justify invoking the extended period. They argued that the forged DEPB licenses used by the appellant warranted the extended period and duty recovery.
- Appellant’s Argument: The appellant relied on a decision by the Division Bench of CESTAT Ahmedabad in the case of M/s. Vijay Solvent Extraction Ind. Pvt. Limited vs. CC, Kandla. In this case, it was held that the extended period cannot be invoked when the assessee has not suppressed any material fact and is a victim of fraud/forgery.
3. CESTAT Ahmedabad’s Decision: CESTAT Ahmedabad considered both arguments and noted that the Division Bench’s decision cited by the appellant had been effectively overruled by the Apex Court’s decision in Munjal Showa Limited’s case. The Apex Court held that the use of forged DEPB licenses vitiates everything, justifying the extended period of limitation.
The Court also highlighted that the appellant, upon learning about the fake DEPB licenses, immediately paid the Customs Duty, albeit under protest. This further justified the duty liability.
As for the penalty proceedings, the matter was remanded to the adjudicating authority, and no decision had been made regarding the penalty at the time of this judgment.
4. Conclusion: In conclusion, the CESTAT Ahmedabad upheld the duty demand based on fake DEPB scrips, stating that no right accrued to the appellant. However, since there was no intention to commit fraud or forgery, the penalty imposed was set aside. This ruling highlights the significance of verifying the authenticity of documents in customs matters.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
When the matter was called, none appeared for the appellant. The matter has been coming up on the board on earlier occasion also and this is 11th time. The matter pertains to year 2012 therefore the same is taken up for disposal on merits.
2. The appellant in this case have a grievance as purchaser of DEPB scrips from the open market on the bonafide belief. However, later on DEPB scrips was found to be fabricated and the department sought to recover the duty availed by invoking extended period. The dispute pertains to the period Jan 2004 for which the show cause notice was issued on 21.05.2008.
3. Learned AR seeks to place reliance on the decision in the case of Munjal Showa Limited vs. CC&CE (Delhi-V) in Civil Appeal No. 2576 of 2010, whereas the party has relied upon the decision of this Bench in the case of M/s. Vijay Solvent Extraction Ind. Pvt. Limited vs. CC, Kandla vide order No. A/10849-10857/2019 dated 08.05.2019 wherein the Division Bench of CESTAT Ahmedabad held that extended period cannot be invoked when the assessee has not suppressed any material fact and as the appellant himself is a victim of fraud/ forgery committed. This Court finds that the Division Bench of CESTAT Ahmedabad cited supra, in effect stands overruled by the Apex Court decision in the matter of M/s. Munjal Showa Limited in Civil Appeal No. 2576 of 2010 has held as follows:-
“8. From the judgment and order passed by the Tribunal and even from the findings recorded by the Department, it has been found that the DEPB licenses/Scripps, on which the exemption benefit was availed of by the appellant(s) (as buyers of the forged fake D licenses/Scripps) were found to be forged one and it DEPB licenses/Scripps were not issued at all the exemption benefit was availed on licenses/Scrips.
9. In that view of the matter and on the principle that fraud vitiates everything and such forged/fake DEPB licenses/ initio, it cannot be said that the Department acted illegally in invoking the extended period of limitation. In the facts and circumstances, the Department was absolutely justified in invoking the extended period of limitation.
10. It is also required to be noted that the moment, the appellant(s) was/were informed about the fake DEPB licenses, immediately they paid the Customs Duty, may be under protest. The Customs Duty was paid under protest to avoid any further coercive action. Be that as it may, the fact remains that the DEPB licenses/Scripps on which the exemption was availed by the appellant(s) was/were found to be forged one and, therefore, there shall be a duty liability and the same has been rightly confirmed by the Department, which has been rightly confirmed by the Tribunal as well as the High Court.
11. Now, so far as the submission on behalf of the buyer(s) appellant(s) relying upon the decision of this Court in the case of Aafloat Textiles India Private Limited and Ors. (supra) is concerned, whether the buyer(s) had a knowledge about the fraud or the forged / fake DEPB licenses/Scripps and whether the appellant(s) – buyer(s) was/were to take requisite precautions to find out about the genuineness of the DEPB licenses/Scripps which they purchased, would have a bearing on the imposition of the penalty, and has nothing to do with the duty liability. It is to be noted that in the present case so far as the penalty proceedings are concerned, the matter is remanded by the Tribunal to the adjudicating authority, which is reported to be pending.
12. In view of the above and for the reasons stated above, both the appeals fail and are accordingly dismissed. As the penalty proceedings are reported to be pending pursuant to the remand order passed by the Tribunal, we direct the adjudicating authority to complete the penalty proceedings on remand, at the earliest preferably within a period of six months from today.
With this, both the appeals are dismissed. No costs.”
4. In view of the definite findings of the Apex Court that fraud vitiates everything and it having been considered and decided that for the fake scrips, no right accrues, same holds good for the appellant in the present matter too. However, since in the decision of Division Bench from the same facts cited by the appellant, it has already been decided that there is no allegation of fraud against the importer, penalty cannot be invoked in the absence of mens-rea, therefore regarding penalty party is entitled to relief.
5. In view of the above cited judgments, the duty demand is sustained on the basis of fake scrips and not vested any right in the appellant. However, since there is no intention to the fraud/ forgery, the penalty imposed is set-aside. The appeal is partly allowed in the above terms.
(Dictated and pronounced in the open court)
