Legal principle

An importer who discharges customs duty through purchased scrips without verifying their validity or availability cannot claim bona fide purchaser protection under caveat emptor, and where penalty is imposed under Section 114A of the Customs Act, 1962, no separate penalty under Section 112 is leviable.

Court decision

The Delhi High Court decided for the Revenue: it held the appellant is not a bona fide purchaser under Section 41 of the Act of 1882 and cannot claim caveat emptor protection; that the proceedings rest on overwhelming independent evidence with no demonstrated prejudice; upheld the penalty under Section 114A of the Customs Act, 1962 while setting aside the penalty under Section 112; and disposed of the writ petitions in terms of the Appeals judgment, applying the findings mutatis mutandis.

Facts

A batch of Customs Appeals and Writ Petitions was filed by importers (apparently paper-trade firms and their representatives) who discharged customs duty on Bills of Entry by utilising purchased duty-credit scrips/licences already registered in the EDI system. Investigation revealed that Licence No. 0510389153, purchased for Rs.7,18,837/- against a credit value of Rs.7,29,688/-, was utilised for duty of Rs.20,85,111/- in four Bills of Entry, and the intermediary (Mr. Sharafat Hussain) gave evasive explanations, falsely claimed purchase documents were seized, and admitted he never verified licence authenticity with the DGFT. The Customs authorities' investigation collected independent documentary, electronic and oral evidence, and adjudication resulted in penalties; on appeal the Delhi High Court examined, inter alia, penalties under Sections 112(b) and 114A of the Customs Act, 1962.

Key provisions

• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 46(4), Customs Act, 1962 — Entry of goods on importation
• Section 12, Customs Act, 1962 — Dutiable goods