Paper Importer Claims Customs Duty Exemption Using Forged Scrips: CESTAT Upholds ₹65.42 Lakh Duty Demand [Read Order]

The Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld a demand of Rs. 65.42 lakh in customs duty against Raja Ram and Company, holding that the importer had used forged Duty Free Scrips to claim exemption from customs duty and that such fraud nullifies any benefit, irrespective of the importer’s alleged intent or knowledge.

Raja Ram and Company, a Delhi-based firm engaged in importing paper and paper products, was found to have used 16 fraudulently altered or fictitious Duty Free Scrips across 18 Bills of Entry filed between January 2014 and June 2015.

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The investigation revealed that the firm had engaged a customs broker, Kirti Cargo, whose employee, Sharafat Hussain, manipulated entries in the EDI system by registering forged or tampered scrips. The customs duty was then allegedly paid using these manipulated scrips that were either non-existent, fraudulently re-registered, or whose values were artificially inflated.

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A show cause notice was issued, and the Principal Commissioner passed an order confirming the demand of customs duty under Section 28(4) of the Customs Act, along with interest and penalties under Sections 114A, 114AA, and 112(b)(ii) against the firm and its partner, Jinender Kumar Jain. The appellant challenged the order before the CESTAT, arguing that they were unaware of the fraud, had relied on their customs broker, and that they were bona fide users of the scrips.

The department’s counsel argued that the importer failed to exercise due diligence and had in fact paid clearance charges to entities controlled by the customs broker rather than to the licensed CHA itself. It was also argued that the importer had never physically verified the scrips nor ensured that the duty payment was made through valid instruments, and therefore was complicit either directly or through gross negligence.

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The two-member bench comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) held that the importer’s ignorance was no defense in the face of clear evidence of forged instruments being used for duty payment. The tribunal cited Supreme Court rulings in Munjal Showa Ltd. and CESTAT decisions in Nidhi Enterprises and Bimal Paper Pvt. Ltd., explaining the legal principle that fraud vitiates everything.

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The tribunal found that the importer failed to meet the standard of reasonable care expected under the principle of caveat emptor, particularly in a high-stakes transaction involving exemption from customs duty.

Finding no merit in the importer’s plea that similar writ petitions were pending before the Delhi High Court, the tribunal refused adjournment and proceeded with the case. The tribunal dismissed both appeals and confirmed the duty demand of Rs. 65.42 lakh, along with applicable interest and penalties.

To Read the full text of the Order CLICK HERE

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