Order date – 16 November 2022

 Facts –

• The Appellant, M/s Nidhi Enterprises 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 DGFT to various persons under various export promotion schemes. These licenses/scrips are transferable and after the exporter fulfils its export obligations under the license, it can sell them to anyone else who can then import goods against the license/scrip duty free.
• It was alleged that Shri Sharafat Hussain, along with Shri Vinod Pathror, used the User IDs of the Customs officers and entered wrong details of the licenses in the Customs EDI system enhancing the value of the duty free entitlement, by entering fake and forged licenses and by entering the same license multiple times. Using such licenses, several importers cleared their consignments without paying duty.
• A show-cause notice was issued to the appellant that the appellant is also one of the importers who cleared the consignment without paying duty. 
• Being aggrieve the appellant had filed an appeal

Issue –

• Whether in a case where forged or manipulated scrips or licenses have been used for clearance of goods and there is no evidence that the fraud was committed by the importer, demand can been raised for the duty on the importer and if so whether extended period of limitation can also be invoked?

Order –

• The Tribunal relied on the decision of this tribunal in Mercedes Benz India Ltd. & Others Vs. Directorate of Revenue Intelligence, wherein it was held that duty can be demanded from the importer invoking extended period of limitation where fraudulent or forged licenses/scrips are used to clear the goods even if the importer itself has not committed the fraud or forgery and even if there is no evidence that the importer knew about it because “fraud vitiates everything”.
• The Tribunal verified the invoices issued by the companies owned by Shri Sharafat Hussain to the appellant which do not indicate that any license/scrip was transferred to the appellant. Consequently, the appellant never had any license/scrip with it nor was even aware as to the benefit available under which license/scrip issued to whom and/or transferred who was used in the Bill of Entry was known to the appellant. It also states there no reason to hold that the appellant is entitled to the benefit of exemption notifications even to the extent that the manipulated license has covered part of the duty debited.
• It does not find any evidence of appellants‟ knowledge of fraud or forgery of the scrips/licenses in this case. However, as far as the question of responsibility to take precautions and if such precautions were taken are concerned, caveat emptor (Buyer Beware) is a well-established principle and it requires the buyer of any goods to take reasonable precautions with respect to what he is buying.
• Effectively, so far as the appellant is concerned instead of paying duty to Government exchequer it had paid a percentage of the amount equivalent to the duty to the firms of Shri Sharafat Hussain. Shri Sharafat Hussain, in turn, used manipulated/forged licences to clear the Bills of Entry.
• Hence, we find no reason to hold that the appellant was a genuine buyer of licences/scrips and had purchased them in good faith.
• Penalty under section 114AA is imposable only if knowingly or intentionally a false declaration, statement or document is made, signed or used. There is no evidence that the appellant or its partner had knowledge of the fraud/forged licenses/ scrips being used to clear the goods and therefore, the penalty under section 114AA cannot be sustained. Penalty under section 112(a) (ii) in this case arise out of the same cause of action and the same cannot be sustained as the penalty under section 114AA was upheld.
• Penalty of Rs.10,00,000 under section 112(a) (ii) and penalty of Rs. 1,00,000 under section 114AA were imposed on Jain, partner of Nidhi.
• The impugned order is upheld except to the extent of imposition of penalties