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2009(235)ELT587, JT2009(5)SC276, 2009(4)SCALE94, (2009)11SCC18, [2009]2SCR490
IN THE SUPREME COURT OF INDIA
Arijit Pasayat and Mukundakam Sharma , JJ.
Commr. of Customs (Preventive) – Appellants
Vs.
Aafloat Textiles (I) Pvt. Ltd. and Ors. – Respondent
Civil Appeal No. 2447 of 2007
Decided On: 16.02.2009
Customs Act, 1962 - Section 28AB/111(d) and (o) - Indian Contract Act, 1872 - Section 17 - Consignments of gold and silver imported - Special Import License purchased by the importer from brokers for clearance of gold and silver was forged - It was also stated that the period of limitation is not to be reckoned from the date of discovery of the forgery - Accordingly, the demands including the penalty imposed were cancelled - Held, Sale of goods the general rule with regard to their nature or quality is caveat emptor, so that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, expressed or implied - It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all risk of defect in the goods, unless there are circumstances beyond the mere fact of sale from which a warranty may be implied - No one ought in ignorance to buy that which is the right of another - Buyer according to the maxim has to be cautious, as the risk is his and not that of the seller - Abrupt conclusion that even if one or all the respondents had knowledge that the SIL was forged or fake that was not sufficient to hold that there was no omission or commission on his part so as to render silver or gold liable for confiscation - Were not genuine documents and were forged - Since fraud was involved, in the eye of law such documents had no existence - Since the documents have been established to be forged or fake, obviously fraud was involved and that was sufficient to extend the period of limitation - Appeal allowed.
In the context of this Agreement, the concepts of fraud and locus are integral to understanding the legal implications and the enforceability of the provisions.
Fraud, as discussed, involves deliberate deception with the intent to deceive or cause injury to the other party, often through false representations, concealment, or misrepresentation of material facts. It encompasses acts of trickery or deceit that induce another party to act to their detriment, and it can vitiate legal transactions, agreements, or proceedings. The presence of fraud invalidates the transaction or document, rendering it null and void in the eyes of law, especially when it involves forgery or misrepresentation intended to deceive.
Locus, or locus standi, refers to the legal standing or capacity of a party to bring an action or be heard in a court of law. It determines whether a party has sufficient interest or connection to the subject matter of the dispute to participate in legal proceedings. In the context of this Agreement, establishing locus is crucial for a party to assert rights, challenge validity, or seek remedies related to the subject matter affected by fraudulent activities.
Therefore, within this Agreement, the discussion of fraud underscores the importance of truthful and genuine conduct, and the consequences of engaging in deceptive practices. The discussion of locus emphasizes the necessity for parties to have a legitimate interest or authority to invoke legal rights or obligations under the Agreement, especially when fraudulent conduct may impact the validity or enforceability of the contractual terms.
JUDGMENT
Arijit Pasayat, J.
1. Challenge in this appeal is to the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (in short the 'CESTAT'). Challenge before the CESTAT was to the order of Commissioner of Customs who confirmed the duty demand of Rs. 6,69,40,149/- on 9 consignments of gold and silver imported by M/s Aafloat Textiles (India) Ltd. (Formerly known as M/s Akai Impex Ltd.) under Section 28 alongwith appropriate interest under Section 28AB of the Customs Act, 1962 (in short the 'Act'). The benefit of exemption in terms of Notification No. 117/94-Cus. Dated 27.4.1997 was denied and liability of the goods to confiscation under Section 111(d) and (o) of the Act was upheld. But since the goods were not available, confiscation was not ordered. Penalty equal to duty amount on the importer under Section 114A of the Act was imposed and Rs. 50 lakhs was imposed on Shri Mahendra Shah and Rs. 25 lakhs each on four other appellants before the CESTAT.
2. Case of the department that the Special Import License (in short 'SIL') purchased by the importer from brokers for clearance of gold and silver was forged and, therefore, was not valid for the consignments in question.
3. Background facts as emerging from the Commissioner's order are that the office premises of one M/s. Gazebo and M/s. Mahavir Corporation, were searched by officers of DRJ and copy of SIL No. 3536539 dated 6.8.1997 issued to M/s. Track Industries, Kanpur, was recovered. The Joint Director General of Foreign Trade, Kanpur informed that no such licence had been issued and that the signature and security seal of their Foreign Trade Development Officer had been forged. The proprietor of M/s Gazebo, Shri R.T. Shah stated on 19.1.1998 that he had purchased the above bogus SIL from one Shri Sushil Kumar Lohia who, in turn admitted that the SIL was given to him by one Shri Manoj Kumar Jain and that he had obtained several bogus SILs from one Naresh Sheth and Shri Dinesh Buchasia, whose residential premises were searched and certain documents were recovered and his statement was recorded, wherein he stated that he had only dealt in 7 SILs which he bought at low premium from one Rajesh Chopra and that the SILs were forged. Shri Shinivas Pannalal Kalantri, General Manager of the importer company stated that gold/silver had been imported under SIL during the year 1996-97 and 1997-98, that one M/s. Lalbhai Trading Co. and two others were the clearing agents; that Shri Prakash Mohta of Finance Department looked after the purchase of SILs. The Chairman of the importer company stated that he looked after negotiation and purchase of bullion and sale of bullion; that Shri Prakash Mohta looked after purchase of licences, clearance of goods, delivery, payment to supplier etc. and that licence brokers through whom SILs were purchased and whom he knew, were Mr. Pachisia and Mr. Ketan Shah. The statement of Shri Prakash Mohta, was also recorded in which he confirmed that he was looking after purchase of SILs for import of bullion and subsequently selling them in the local market. Shri Mahendra Shah stated that he had sold bogus SILs to the importer company. Shri Rasiklal Mehta stated that he and one Atul Garodia met one Shri D.R. Gulati in Bombay who told that he could provide bogus SIL for which he would charge 3% to 4% premium, that Shri Gulati used to provide bogus SILs and Shri Garodia used to sell them in market and give them a premium of 3%.
4. The demand was confirmed under the proviso to Section 28(1) of the Act. The stand of the revenue that since the licenses were forged and were void, the buyer cannot have better title than the seller. CESTAT in appeal was of the view that the appeal could be disposed only on the ground of limitation without going into the merits of the matter. It was observed that there was no evidence to show that the importer had knowledge about the SIL being non- genuine.
5. It was also stated that the period of
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