By TIOL News Service

KOLKATA, FEB 19, 2016: THE appellants are transferees of the DFIA Licenses which were purchased by them on bonafide belief that Licenses were genuine. That DGFT has not cancelled these Licenses and all the DFIA Licenses were valid on the date of import of goods. It is the case of the appellants that no duty/penalty can be thrust upon the transferee appellants as the duty demand is time barred and no intention to evade payment can be attributed to the transferees of the bonafidely issued licenses.

Revenue argued that this issue, involved in these proceedings against the appellants, has already been settled by Calcutta High Court in the case of ICI India Ltd. Vs. CC (Port) Calcutta which has been upheld by Supreme Court and has also been followed subsequently in several case laws by CESTAT & High Courts.

After hearing both sides, the Tribunal held:

+ The ratio laid by the Apex Court in 2015-TIOL-162-SC-CUS is squarely applicable to the facts involved in the present proceedings in as much as the conditions contained in exemption notification No. 40/2006-CUS dated 1/5/2006 have to be fulfilled to the satisfaction of the Customs authorities and if these conditions are not satisfied then action can be taken by the Customs authority for demanding duty even if Licensing authority has not taken any action with respect to DFIA Licenses. One of the conditions of the exemption notification No. 40/2006-CUS dated 1/5/2006, read with EXIM Policy, is that duty free yarn import is permissible only for those goods what were exported by the appellants. As the said exports were not 100% mulberry natural silk yarn, as prescribed under SION J-123, but Noil yarn and that too alongwith cotton, therefore, the import of goods other than the material exported cannot be held to be proper and action for demanding Customs duty against the appellants is justified even if no action is taken by DGFT for cancellation of impugned DFIA Licenses.

+ Appellants who imported the goods against transferable DFIA Licenses have also taken an argument that they have purchased the DFIA Licenses under a bonafide belief that the same were genuine. It is thus their case that they cannot be held as party to the fraud and extended period cannot be made applicable for demanding duty. Transferee appellants have relied upon an order dated 31/8/2015 passed by the co-ordination bench, Mumbai in the case of Incos ABS (India) Ltd. & others Vs.C.C ., Kandla . In this order it has been held by CESTAT, Mumbai that transferees cannot be held responsible for duty and that extended period is not applicable while demanding duty. With due respect we differ with the view expressed orders passed by CESTAT, Mumbai as several case laws, including some recently decided by the Apex Court, were not brought to the notice of CESTAT, Mumbai. On this issue Delhi CESTAT in the case of C.C. Amritsar Vs. Sona Castings 2011-TIOL-189-CESTAT-DEL held that fraud vitiates everything and transferee is also responsible to pay duty against such scripts obtained fraudutantly . This conclusion drawn is based on several quoted case laws of Apex Court and High Courts of Kolkata & Punjab & Haryana.

+ A scrip obtained from the Licensing authority fraudulently cannot give licence to any transferee to avail any Customs duty exemption. Fraud in common parlance means dishonest dealing, deceit or cheating etc. It makes no difference whether fraud is committed by outrightly forging of documents or by willful misdeclaration /misrepresentation. A fraud is a fraud and there are no categories of mild frauds and severe frauds in taxation matters. Further in a recent case of Tata Iron & Steel Co. Ltd. Vs. C.C. Mumbai on the issue of applicability of extended period in such cases it has been held by Apex Court that extended period is available to the Revenue for demanding duty from the transferees.

Accordingly, the Tribunal upheld the demand and partly allowed the appeals by setting aside the penalties imposed.

(See 2016-TIOL-457-CESTAT-KOL)