Summary
Two importers claimed duty exemption against DEPB scrips they had bought, or transfer release advices issued on them, which later proved to be forged and never issued. Invoking the extended period of limitation, the department demanded duty with interest, and the Tribunal and the Punjab and Haryana High Court confirmed the demand because fraud vitiates everything. The importers argued that, as innocent buyers, the extended period could not run against them. The Supreme Court dismissed their appeals. Forged scrips are void from the start, so the exemption was never available and the extended period was rightly invoked, even though duty had been paid under protest once the forgery came to light. A buyer's knowledge or diligence (Aafloat Textiles) bears on penalty, not duty, and the pending penalty proceedings were to be completed within six months.
Issues
- Whether customs duty could be demanded, invoking the extended period of limitation, from importers who claimed exemption against DEPB scrips later found to be forged, where the importers claimed to be innocent buyers.
- Whether the buyer's knowledge of the forgery, as considered in Aafloat Textiles, is relevant to duty liability or only to penalty.
Provisions considered
- Section 28 (extended period), Customs Act, 1962Exemption claimed against forged DEPB scrips, which are void ab initio because fraud vitiates everything, justified invoking the extended period to recover the duty foregone. (¶¶ 8, 9, 10)
- Section 25 (exemption notifications), Customs Act, 1962Exemption under the DEPB notification depended on genuine scrips. Since the scrips were never issued, the exemption was inadmissible and duty with interest was payable. (¶¶ 3, 8, 10)
- Section 130, Customs Act, 1962The importers' appeals to the High Court under this provision failed, and their further appeals to this Court were dismissed. (¶¶ 1, 2.3, 12)
Held
- The DEPB licences and scrips used to claim exemption were forged and had never been issued. On the principle that fraud vitiates everything, they were void ab initio, and the Department was justified in invoking the extended period. (¶¶ 8, 9)
- Paying duty under protest once the forgery was discovered did not remove the liability. Exemption claimed on forged scrips carries a duty liability, which was rightly confirmed. (¶ 10)
- Whether the buyer knew of the fraud or should have checked the scrips is relevant to penalty, not to duty (Aafloat Textiles distinguished). The penalty question, remitted by the Tribunal, was to be decided within six months. (¶¶ 11, 12)
Result
Both appeals dismissed. The duty demands with interest were upheld, and the adjudicating authority was directed to complete the remanded penalty proceedings, preferably within six months. No costs.