Case Law Details
Urvashi Porwal
Brief of the Case
In the case of Sumit Wool Processors vs. Commissioner of Customs (Import) / (Export) it was held that it is a settled law that even a license obtained by fraud or mis-representation of facts is only voidable and not void ab-initio. It is good in law until it is avoided. Thus even a license obtained by fraud or mis-representation is valid in law until such time that it is cancelled by the licensing authority. Therefore no recovery can be made from a bonafide purchaser of the scrip.
Brief facts of the Case
The Directorate of Revenue Intelligence (DRI) investigated the cases of over valuation of export goods. Investigations revealed that some exporters namely M/s Nidhi Textiles, M/s Milan Exports, M/s Madhuri Impex Pvt. Ltd., Madhuri Synthetics, M/s Mahavir Synthetics, M/s Laxminath Exports who are all merchant exporters inflated the FOB value of their exports significantly and obtained the DEPB Scrips/DFIA Licenses against such exports. The DEPB scrips were sold to various transferees on the basis of endorsement of transferability by the DGFT. Appellants in the present appeals are such transferees of the DEPB scrips, DFIA licenses and Focus Market scrips. The transferees imported the goods against such scrips and availed the duty credit/exemption available under the scrips under Notifications such as 89/2005-Cus, 40/2006-Cus. The gross inflation in the FOB value of exports resulted in excess duty credit availability on the DEPB scrips. Importers/transferees who made imports under these scrips could therefore avail the credit obtained fraudulently resulting in loss of Revenue to the Government. The investigation by DRI culminated in issue of show cause notices to the exporters and the transferees/importers of the DEPB/DFIA documents. The impugned orders have been passed holding the goods exported and imported liable to confiscation. The demand of duty has been confirmed against the importers i.e. transferees of the scrips under Section 28 alongwith confirmation of penalties under Section 28AB. Penalties have also been imposed on the exporters and importers under Section 112/114A. When the matter was investigated and referred to the licencing authority, the Joint DGFT cancelled all the DEPB/DFIA scrips ab-initio. Only transferees are in appeal before us.
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