Fraudulent documents render transactions void; importers must exercise due diligence to avoid liability for penalties under the Customs Act.

JUDGMENT :

(Delivered by Dr.ANITA SUMANTH., J)

Prayer in C.M.A.No.84 of 2013: Appeal filed under Section 130 of the Customs Act, 1962 against the Common Final Order No.701 to 767 of 2012 dated 22.06.2012 in Appeal No.C/408/07 Received by Appellant on 27.06.2012 passed by the Customs Excise & Service Tax Appellate Tribunal, South Zonal Bench, Chennai, confirming penalty amount against the Appellant imposed under Section 112(a) of the Customs Act, 1962.

This order disposes 78 Civil Miscellaneous Appeals filed at the instance of importers, licence brokers and traders, as well as the Commissioner of Customs challenging an order passed on 14.06.2012 by the Customs Excise and Service Tax Appellate Tribunal (CESTAT/Tribunal) at Chennai. Since C.M.A No.1766 of 2016 involving identical issues was not listed on that date, the matter was directed to be listed in a special list and forms part of the batch being disposed today by way of this common order.

2. The CESTAT, by way of the impugned order, disposed 67 appeals preferred by importers and traders of Duty Entitlement Pass Book (DEPB) scrips and Telegraphic Release Advice (TRA) challenging adjudication orders, alleging that the TRAs and DEPBs had been forged and constituted fabricated instruments.

3. Under the orders of adjudication, the authorities had confiscated the DEPB licences and TRAs and had raised demands of Customs Duty under Section 28(1) of the Customs Act, 1962 (Act) along with penalty under various provisions, including Sections 112(a) and 114(A) of the Act.

4. The CESTAT dismissed the appeals in full in the case of Satish Mohan Agarwal holding him to have played a pivotal role in the entire sequence of fraudulent events including the preparation of the fake DEPB scrips and TRAs. Penalty was also upheld.

5. In the case of the importers, the duty and interest was confirmed, and the penalties were set aside in full. In the case of the traders/brokers/sub-brokers too, the duty and interest was upheld, and the penalty was reduced to 50%. As against the aforesaid conclusions, cross appeals have been filed by (i) Satish Mohan Agarwal challenging the confirmation of the adjudicatory order in full (ii) by the importers/licence holders/traders aggrieved by that portion of the order confirming part of the duty/penalty and (iii) by the Revenue contesting the deletion of duty, interest and part/whole of the penalty.

6. The substantial questions of law admitted for consideration are as follows:

‘C.M.A.No.84 of 2013 (appeal filed by Nemichand Desarlla, who is a License Broker)

1. Is the 2nd respondent Tribunal right in confirming penalty of Rs.75,000/- on the appellant in terms of Section 112(a) of the Customs Act, 1962, especially when it has been shown and established that the appellant had no prior knowledge of the forged/fabricated nature of the DEPB Licence/TRAs, which was purchased in open market, being freely transferable, and more so when such licence/TRAs came in sealed cover?

2. Is the findings of the 2nd respondent Tribunal at paragraph 12 of the order impugned as against the appellant sustainable? In this connection, is the Tribunal correct in entering a finding that the appellant should have made enquiries with Customs Authorities and others as to the validity of the licence sustainable in light of the fact that the licence/TRAs were purchased and sold in the ordinary course of business and there was not even a reasonable belief entertained as to the nature of the said licence/TRAs at that point of time?

3. Is the Tribunal right in penalizing the appellant on the charge of abetment of use of forged/fabricated DEPB/TRA by the importer for obtaining duty free clearance or imports, when the Tribunal itself has vacated the imposition of penalty on the importer consciously?

4. Has the Tribunal committed an error of jurisdiction inasmuch as no act of commission or omission or abetment of such is attributable to the appellant qua the liability of the goods imported for confiscation. In this