A bona fide subsequent purchaser of a duty-free license is not liable for customs duty even if the license was fraudulently re-registered, provided the license was issued by the competent authority, as such fraud renders the license voidable and not void ab initio.

JUSTICE DILIP GUPTA:

This appeal has been filed for setting aside the order dated 27.03.2025 passed by the Principal Commissioner (Appeals)¹1. the Principal Commissioner by which the appeal filed by the appellant to assail the order dated 15.04.2021 passed by the Joint Commissioner of Customs, ICD-Import, Tughlakabad, New Delhi,²2. the Joint Commissioner has been dismissed. The Joint Commissioner, by the aforesaid order, had confirmed the demand of customs duty in respect of Bill of Entry No. 7892759 dated 05.01.2015 under section 28(4) of the Customs Act, 1962³3. the Customs Act with applicable interest under section 28AA. Penalties under sections 114A and 114AA of the Customs Act were also imposed upon the appellant.

It transpires from the record that on 24.09.2014, Director General of Foreign Trade⁴4. DGFT issued a duty free license under Focus Market Scheme for Rs. 20,65,447/- to M/s Siddharth Corporation for registration at Chennai Port. On 30.09.2014, the license was utilized for payment of duty of Rs. 20,59,589/-. Subsequently, the said license was re-registered by the Customs Authorities at Nhava Sheva Port on 26.12.2014 under Registration No. 3000585705. The appellant had engaged a customs broker for clearance of its consignments through Bill of Entry No. 7892759 dated 05.01.2015. The appellant had purchased the said license which was registered at Nhava Sheva Port through a customs broker for valuable consideration. The Proper Officer granted the consignment an out of charge order.

It further transpires that in June, 2018 Special investigation and Intelligence Branch, ICD, Tughlakabad, initiated investigation and a show cause notice dated 01.01.2020 was issued to the appellant demanding customs duty of Rs. 19,79,381/-, paid by way of debit from the license by invoking the extended period of limitation contemplated under section 28(4) of the Customs Act.

The appellant filed a reply to the show cause notice and not only contended that the demand should be dropped but also contended that the extended period of limitation could not have been invoked in the facts and circumstances of the case.

The Joint Commissioner, however, by order dated 15.01.2021 confirmed the demand of duty by invoking the provisions of section 28(4) of the Customs Act and also imposed penalties upon the appellant under sections 114A and section 114AA of the Customs Act.

Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals), who by order dated 27.03.2023 dismissed the appeal.

Shri Piyush Kumar, learned counsel for the appellant submitted that the license was registered at Nhava Sheva Port and the appellant, as a subsequent purchaser, cannot be held liable for payment of duty even if the license was fraudulently re-registered at Nhava Sheva Port. Learned counsel also submitted that the extended period of limitation under section 28(4) of the Customs Act could not have been invoked in the facts and circumstances of the case.

Shri M.K. Shukla, learned authorized representative appearing for the department, however, supported the impugned order and submitted that it does not call for any interference. Learned authorized representative pointed out that as the license was fraudulently re-registered at Nhava Sheva Port, the demand of customs duty by invoking the extended period of limitation under section 28(4) of the Customs Act is justified. To support this contention, learned authorized representative placed reliance upon the decision of the Tribunal in M/s GFC Weld House vs. Principal Commissioner, Customs-New Delhi (ICD TKD)⁵5. Customs Appeal No. 50462 of 2023 decided on 17.12.2023. Learned authorized representative also placed reliance upon the decision of the Tribunal in M/s NACL Industries Limited vs. The Commissioner, Officer of the Commissioner of Customs, (Adjudication) Delhi Zone, New Delhi⁶6. Customs Appeal No. 54732 of 2023 decided on 27.04.2026.

The submissions advanced by the l