M/s. Munjal Showa Ltd Versus Commissioner of Customs and Central Excise (Delhi – IV)

M/s. Munjal Showa Ltd Versus Commissioner of Customs and Central Excise (Delhi – IV)  Case

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2576 OF 2010

M/s. Munjal Showa Ltd. …Appellant(s)

Versus

Commissioner of Customs

and Central Excise (Delhi – IV) …Respondent(s)

WITH

CIVIL APPEAL NO. 5608 OF 2011

M/s. Friends Trading Co. …Appellant(s)

Versus

Union of India and Ors. …Respondent(s)

J U D G M E N T

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment

and order dated 01.09.2008 passed by the High Court of Punjab and

Haryana at Chandigarh in C.U.S.A.P. No. 27 of 2008 by which the High

Court has dismissed the said appeal preferred by the appellant –

1

assessee – M/s. Munjal Showa Ltd. filed under Section 130 of the

Customs Act and has confirmed the order passed by the Customs,

Excise and Service Tax Appellate Tribunal (hereinafter referred to as the

“Tribunal”) confirming the demand of Customs Duty with interest, the

original assessee - M/s. Munjal Showa Ltd. has preferred the present

Civil Appeal No. 2576 of 2010.

1.1 Feeling aggrieved and dissatisfied with the impugned judgment

and order dated 02.02.2011 passed by the High Court of Punjab and

Haryana at Chandigarh in CUSAP No. 1 of 2011 by which the Division

Bench of the High Court has dismissed the said appeal and has

confirmed the judgment and order passed by the Tribunal in Custom

Appeal No. 576 of 2006 by which the Tribunal has confirmed the

demand of Customs Duty with interest, the original assessee – M/s.

Friends Trading Co. has filed the present Civil Appeal No. 5608 of 2011.

Civil Appeal No. 2576 of 2010

2. That the appellant herein – M/s. Munjal Showa Ltd. imported

consignments through ICD, Ballabgarh using Transfer Release Advices

(hereinafter referred to as “TRAs”) issued by the Bombay Custom

House. On verification, it was found that the DEPB Licensees on the

basis of which TRAs were issued, were not genuine. The goods were

cleared in May/June, 2003 and by letter dated 05.08.2003, the Assistant

2

Commissioner, ICD, Faridabad informed the appellant that TRAs issued

against the DEPB Scripps were forged and that the DEPB were also

forged and, therefore, the appellant was required to deposit the duty with

interest in lieu of DEPB benefit availed by it.

2.1 The appellant by letter dated 07.08.2003 informed the Department

that it was surprised to learn about the forgery and was taking steps to

lodge F.I.R. against the transferor and sought time to make payment.

The appellant deposited the amount of duty on 12.08.2003 under

protest. After completion of investigation, show cause notice dated

03.10.2006 was issued to the appellant alleging evasion of duty by

seeking exemption against debits in releasing the advices, which were

forged and which were not genuinely issued by the competent authority.

The appellant challenged the show-cause notice on the ground of

limitation as well as on the ground that though the DEPB Scripps were

forged but there was no intention to evade Customs Duty.

2.2 The Commissioner of Customs passed order dated 17.10.2007

holding that DEPB Scripps were forged and thus void ab initio and,

therefore, the exemption availed of was inadmissible; goods were liable

to confiscation and appellant was liable to interest and penalty. The

Commissioner observed and held that the importer (the appellant), who

claimed benefit on the basis of forged DEPB Scripps stood at par with

3

his predecessor and, therefore, cannot get the benefit of forged

documents. The order passed by the Commissioner of Customs was

the subject matter of appeal before the Tribunal. The Tribunal rejected

the plea of the appellant on the issue of liability of duty but remanded the

matter to the original authority on the issue of penalty. It is reported that

the issue with respect to penalty, on remand, is yet pending. However,

the Tribunal confirmed the duty liability.

2.3 Feeling aggrieved and dissatisfied with the order passed by the

Tribunal, the appellant preferred appeal before the High Court under

Section 130 of the Customs Act. Before the High Court, it was mainly

contended on behalf of the appellant that the show-cause notice issued

was beyond the period of limitation and in the facts and circumstances of

the case and when the ingredients of “fraud” and “with intent to evade

payment of duty” are absent, the extended period of limitation could not

have been invoked by the Department.

2.4 By the impugned judgment and order, the High Court has

dismissed the said appeal confirming the order passed by the Tribunal

confirming the demand of duty on the ground that “fraud” vitiates

everything and therefore, the Department was justified in invoking the

extended period of limitation. The impugned judgment and order passed

4

by the High Court is the subject matter of the present Civil Appeal No.

2576 of 2010.

Civil Appeal No. 5608 of 2011

3. That the appellant imported goods and filed Bill of Entry dated

24.11.2000. It availed exemption from payment of Customs Duty under

Notification dated 07.04.1997 under Section 25 of the Customs Act,

1962 against DEPB Scrip dated 14.11.2000. Finding that the said DEPB

Scrip was procured fraudulently by the predecessor, the Scrip obtained

by the appellant was held to be void ab initio. Accordingly, demand of

duty was raised against the appellant vide Order-in-Original dated

04.10.2005. The said order was affirmed in appeal and was further

affirmed by the Tribunal. The further appeal preferred before the High

Court has been dismissed by the impugned judgment and order.

3.1 At the outset, it is required to be noted that while dismissing the

appeal, the High Court has relied upon its earlier decision in CUSAP No.

27 of 2008 in the case of M/s. Munjal Showa Limited Vs.

Commissioner of Customs and Central excise (Delhi (IV)

Faridabad).

5

4. We have heard the learned counsel appearing on behalf of the

appellant(s) and Shri Vikramjit Banerji, learned ASG appearing on behalf

of the respondent.

5. It was/is the case on behalf of the assessee that in the facts and

circumstances of the case, the Department was not justified in invoking

the extended period of limitation.

5.1 Relying upon the decision of this Court in the case of

Commissioner of Customs (Preventive) Vs. Aafloat Textiles India

Private Limited and Ors., (2009) 11 SCC 18, it is submitted that as

observed and held by this Court even in the case of a fraud, an inquiry

was required to be made whether the appellant(s) – buyer(s) had

knowledge that DEPB Scripps were forged or fake.

6. While opposing the present appeal, Shri Vikramjit Banerji, learned

ASG has submitted that in the present case, admittedly the DEPB

licences/Scripps purchased by the appellant(s) of which the exemption

benefit was availed, are found to be forged and fake. It is submitted

that, therefore, the appellant(s) being beneficiaries of such forged and

fake DEPB licenses/Scripps were liable to pay the Customs Duty of

which the exemption benefit was availed against such DEPB

licenses/Scripps. It is submitted that as rightly observed by the High

Court as well as by the Tribunal that fraud vitiates everything and

6

therefore, such forged/fake DEPB licenses/Scripps are void ab initio. It

is submitted that therefore, no error has been committed in confirming

the Customs Duty.

7. We have heard the learned counsel appearing on behalf of the

respective parties at length.

8. From the judgment and order passed by the Tribunal and even

from the findings recorded by the Department, it has been found that the

DEPB licenses/Scripps, on which the exemption benefit was availed of

by the appellant(s) (as buyers of the forged/ fake DEPB

licenses/Scripps) were found to be forged one and it was found that the

DEPB licenses/Scripps were not issued at all. A fraud was played and

the exemption benefit was availed on such forged/fake DEPB

licenses/Scripps.

9. In that view of the matter and on the principle that fraud vitiates

everything and such forged/fake DEPB licenses/Scripps are void ab

initio, it cannot be said that the Department acted illegally in invoking the

extended period of limitation. In the facts and circumstances, the

Department was absolutely justified in invoking the extended period of

limitation.

7

10. It is also required to be noted that the moment, the appellant(s)

was/were informed about the fake DEPB licenses, immediately they paid

the Customs Duty, may be under protest. The Customs Duty was paid

under protest to avoid any further coercive action. Be that as it may, the

fact remains that the DEPB licenses/Scripps on which the exemption

was availed by the appellant(s) was/were found to be forged one and,

therefore, there shall be a duty liability and the same has been rightly

confirmed by the Department, which has been rightly confirmed by the

Tribunal as well as the High Court.

11. Now, so far as the submission on behalf of the buyer(s) –

appellant(s) relying upon the decision of this Court in the case of Aafloat

Textiles India Private Limited and Ors. (supra) is concerned, whether

the buyer(s) had a knowledge about the fraud or the forged / fake DEPB

licenses/Scripps and whether the appellant(s) – buyer(s) was/were to

take requisite precautions to find out about the genuineness of the

DEPB licenses/Scripps which they purchased, would have a bearing on

the imposition of the penalty, and has nothing to do with the duty liability.

It is to be noted that in the present case so far as the penalty

proceedings are concerned, the matter is remanded by the Tribunal to

the adjudicating authority, which is reported to be pending.

8

12. In view of the above and for the reasons stated above, both the

appeals fail and are accordingly dismissed. As the penalty proceedings

are reported to be pending pursuant to the remand order passed by the

Tribunal, we direct the adjudicating authority to complete the penalty

proceedings on remand, at the earliest preferably within a period of six

months from today.

With this, both the appeals are dismissed. No costs.

………………………………….J.

 [M.R. SHAH]

NEW DELHI; ………………………………….J.

SEPTEMBER 23, 2022. [KRISHNA MURARI]

9