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M/s. Munjal Showa Ltd. vs. Commissioner of Customs and Central Excise (Delhi-IV)

Civil Appeal · 2022 INSC 1008Decided 23 Sept 2022
Civil Appeal No. 2576 of 2010
M.R. Shah · Krishna Murari

Background

Both appellant-companies had imported goods claiming duty exemption using DEPB (Duty Entitlement Pass Book) licences bought from third parties. It later emerged that these DEPB licences were forged and had never genuinely been issued. Customs authorities demanded the duty with interest from both importers, treating the forged licences as void from the start. The Punjab and Haryana High Court upheld the demands in both cases, agreeing that "fraud vitiates everything" justified the department's use of an extended limitation period to raise the demand. The importers appealed to the Supreme Court.

Decision Breakdown

The Supreme Court dismissed both appeals. It held that once a DEPB licence is found to be forged, it is void from the very beginning ("void ab initio"), and the exemption benefit availed on its strength is not sustainable, regardless of whether the department discovered the fraud only later, justifying use of the extended limitation period. The Court clarified that whether the importer personally knew the licence was forged is relevant only to the separate question of penalty (which remains pending before the adjudicating authority in both cases), not to whether the customs duty itself is owed. It directed that the pending penalty proceedings be completed within six months.

Lesson Learnt

An importer who benefits from an exemption based on forged documents remains liable to pay the customs duty even if unaware of the forgery: genuine ignorance of the fraud can reduce or affect a penalty, but does not erase the underlying duty liability.

Official source (sci.gov.in)View Judgment (PDF)

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