Delve into the complex legalities surrounding fraud in customs duty evasion cases as discussed in a recent court decision. The court’s meticulous analysis of the fraudulent activities and the implications for duty liability and penalties sheds light on the intricacies of such cases.
Facts
- Appellant, M/s. Munjal Showa Ltd., imported goods using TRAs issued by Bombay Custom House based on fake DEPB Licensees.
- Show cause notice dated 03.10.2006 alleged duty evasion by claiming exemption against forged TRAs.
- Appellant deposited duty amount on 12.08.2003 under protest upon receiving the notice.
- Appellant expressed surprise about the forgery and stated intent to lodge an FIR against the transferor.
- Appellant contended show-cause notice was beyond the period of limitation
- Appellant argued that the ingredients of ‘fraud’ and ‘intent to evade payment of duty’ were absent
- Department invoked extended period of limitation based on ‘fraud’
- Order-in-Original dated 04.10.2005 affirmed by the Tribunal
- High Court dismissed appeal confirming Tribunal’s order based on ‘fraud’ vitiating everything
- High Court’s decision subject of present Civil Appeal No. 2576 of 2010
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Arguments
- The assessee argued that the Department was not justified in invoking the extended period of limitation.
- Citing the decision in the case of Commissioner of Customs (Preventive) Vs. Aafloat Textiles India Private Limited and Ors., (2009) 11 SCC 18, it was emphasized that even in cases of fraud, an inquiry is necessary.
- The ASG countered by stating that the DEPB licenses/Scripps used by the appellants were found to be forged and fake, making them liable for Customs Duty.
- High Court and Tribunal observed that fraud vitiates everything
- Forged/fake DEPB licenses/Scripps are considered void ab initio
- No error in confirming Customs Duty as exemption benefit was availed against such licenses/Scripps
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Analysis
- DEPB licenses/Scripps on which exemption benefit was availed were found to be forged or fake.
- Fraud was committed and exemption benefit was wrongly availed.
- The forged/fake DEPB licenses were considered void ab initio due to fraud.
- Appellant(s) paid Customs Duty immediately upon being informed about the fake DEPB licenses.
- Customs Duty was paid under protest to prevent further coercive action.
- High Court’s decision in the case of M/s. Munjal Showa Limited was cited by the Tribunal.
- Department’s invocation of the extended period of limitation was deemed justified.
- Debate on whether appellant(s) had knowledge of the forgery of DEPB Scripps was raised.
- DEPB licenses/Scripps on which exemption was claimed found to be forged.
- Duty liability exists due to forged DEPB licenses/Scripps.
- Department’s decision to enforce duty liability upheld by Tribunal and High Court.
- The submission on behalf of the buyer(s) relies on the decision of the court in the case of Aafloat Textiles India Private Limited and Ors.
- Whether the buyer(s) had knowledge about the fraud or the forged/fake DEPB licenses/Scripps is crucial in determining the penalty, not the duty liability.
- The buyer(s) being required to take precautions to verify the authenticity of the DEPB licenses/Scripps they purchased is also considered in penalty imposition.
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Decision
- The penalty proceedings in the present case have been remanded by the Tribunal to the adjudicating authority.
- The penalty proceedings are reported to be pending following the remand order by the Tribunal.
- Both appeals have failed and are dismissed with no costs.
- The adjudicating authority is directed to complete the penalty proceedings on remand, preferably within six months from today.
Case Title: M/S. MUNJAL SHOWA LTD. Vs. COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE (DELHI IV) (2022 INSC 1008)
Case Number: C.A. No.-002576-002576 / 2010
