Legal principle

A DFIA/duty credit scrip actually issued by DGFT, even if the exporter obtained it by misrepresentation, is merely voidable and remains valid until cancelled; a bona fide transferee without knowledge of the fraud has good title to use it, and the extended period under Section 28(4) cannot be invoked against such a transferee absent an allegation of misrepresentation, collusion or suppression by him.

Court decision

The Tribunal allowed the appellant's appeal and set aside the impugned Order-in-Appeal, holding that the demand of duty with interest, invoking the extended period on the basis of the exporter's fraud, was unsustainable, with consequential relief to the appellant.

Facts

Indras Agencies Pvt. Ltd. availed duty-free imports of three consignments of patchouli oil SPX during 2012–2013 using two DFIA licences originally issued to exporter M/s. Pan Parag India Ltd., Kanpur for pan masala/gutkha exports and validly transferred to the appellant. Following a DRI investigation which found exporters had obtained DFIA licences by misrepresenting/suppressing the essential-oil specifications in their shipping bills and DGFT applications, and a DGFT SCN proposing cancellation of the exporter's licence, the department issued SCN dated 03/05-12-2014 to the appellant invoking the extended period under Section 28(4), Customs Act, demanding duty foregone of Rs. 25,12,280/- with interest. The Adjudicating Authority confirmed the demand (OIO No. 43014/2015 dated 17.11.2015) and the Commissioner (Appeals-II), Chennai rejected the appellant's appeal relying on Eastern Silk Industries Ltd. (CESTAT Kolkata). The appellant then appealed to the Tribunal.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded