Penalty u/s 114A of Customs Act not permissible in the Absence of Evidence which proves the Use of Forged Scrips to clear Goods: CESTAT

The Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that penalty u/s 114A of the Customs Act,1962 is not permissible in the absence of evidence which proves the use of forged scrips to clear goods.

Shri S.C. JainAdvocate appeared for the Appellant and Shri Rakesh KumarAuthorized Representative appeared for the Respondent.

M/s Nidhi Enterprises and Shri Sudarshan Kumar Jain challenged the order-inoriginal dated17.3.22017 passed by the Commissioner of Customs (Exports). Nidhi is in the business of importing and trading paper-based articles. It imported goods under 29 Bills of Entry using various duty-free licenses issued by the Directorate General of Foreign Tradeto various persons under various export promotion schemes such as Duty-Free Import Authorisation, Focus Product Scheme  Focus Market Scheme, Village and Khadi GramodyogYojnaand Duty Entitlement Passbook.

These licences/scrips are transferable and after the exporter fulfils its export obligations under the licence, it can sell them to else who can then import goods against the licence/scrip duty-free. Usually, the licences/scrips are sold at a discount at 95% of the value of the duty exemption available under the licence.

For imports under each of the schemes under which the licences/scrips are issued by DGFT, there is a corresponding exemption notification under the Customs Act. Thus, when the licence issued by the DGFT is produced before the customs for clearance, an appropriate value is debited from the licence/scrip and goods are cleared without the importer paying the duty in cash in terms of the corresponding exemption notification.

Based on intelligence, investigations were conducted by the Customs officers and it was found Shri Sharafat Hussain alias Sharafat Ali has been in the business of trading in these licences. Nidhi is a bonafide purchaser of the duty credit scrips and it was not aware of the modus operandi adopted by Shri Sharafat Hussain and Shri Patrol. It purchased the scrips at a discount of 2% to 5% of the face value of the scrips and it paid the purchase price through banking channels to Shri Sharafat Hussain.

The CESTAT observed that SCN and the impugned order have not put forth any substantive evidence that the appellant was aware of the modus operandi and It was not possible for the appellant to find out about the illegality committed concerning the scrips.

In the case of Commissioner of Customs And Central Excise (Delhi-IV) And M/s Friends Trading Co. Vs. Union of India And Ors, the Supreme Court held that whether the buyers had knowledge of fraud or forged/fake DEPB licences/scrips and whether the buyers were to take precautions to find out the genuineness of the scrips which they had purchased would have a bearing the imposition of penalty, though it has nothing to do with the duty liability. 

The CESTAT bench consist of  Mr Justice Dilip Gupta, president and Mr P V Subba Rao, member (technical)   while allowing the appeal of Jain, set aside the penalties imposed on him andthe impugned order was upheld except to the extent of imposition of penalties.

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates