Pranav B Prem

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi Bench, has upheld the customs duty demand, interest and penalties imposed on an importer for using a fraudulently registered Focus Product Scheme (FPS) licence to clear goods. The Tribunal reiterated that when imports are made on the basis of forged licences or forged Telegraphic Release Advice (TRA), such imports are void ab initio, and liability to duty along with statutory consequences automatically follows.

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The Division Bench comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) was hearing an appeal filed by Metline Houseware challenging the order of the Commissioner of Customs (Appeals), which had confirmed the earlier order of the Joint Commissioner. The adjudicating authority had determined that the importer had cleared goods on the basis of an FPS licence that was manipulated and fraudulently registered at ICD Patparganj. The appellant did not dispute that the licence was manipulated but pleaded lack of knowledge and good faith in purchasing the licence through brokers.

The Tribunal noted that after purchasing the licence, the appellant did not apply for issuance of the TRA from the port of registration, as was required. Instead, the importer relied on TRAs supplied by brokers without verifying their authenticity from the issuing customs location. The Bench observed that due diligence expected of an importer was not exercised and that failure to ascertain the veracity of TRAs from the port of registration was a serious lapse that facilitated improper clearance of goods.

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While rejecting the plea of bona fide conduct, the Tribunal relied heavily on its earlier ruling in Mercedes-Benz India Private Limited v. Commissioner of Customs, Delhi (Customs Appeal No. 52009 of 2018), wherein it was held that the purchaser of transferable licences cannot escape liability merely on the ground that they were unaware that TRAs were fabricated. In that precedent, CESTAT held that if the importer has not obtained TRAs on their own and has failed to verify the TRAs from the port of registration, the importer cannot claim to have exercised reasonable diligence. The New Delhi Bench reiterated that the same principle governs the present case.

Turning to the levy of penalty under Section 114A of the Customs Act, the Tribunal observed that the said provision provides for mandatory penalty equal to the duty amount in cases where duties are not levied or paid by reason of suppression of facts, wilful misstatement or collusion. Since the duty demand in the appellant’s case was confirmed solely because duty was not paid due to use of a fraudulently registered licence, the Tribunal held that the ingredients of Section 114A were satisfied. It concluded that the penalty was rightly imposed and no relief could be granted on this aspect.

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Finding no infirmity in the findings of the lower authority and holding that forged TRAs render imports void ab initio, the CESTAT dismissed the appeal, thereby affirming the demand of duty, recovery of interest under Section 28AA, and the penalty imposed under Section 114A of the Customs Act.

Appearance

Shri Vishal Nath and Shri S.C. Jain, Advocates for the Appellant

Shri M.K. Shukla, Authorised Representative of the Department

Cause Title: M/S. Metline Houseware V. Commissioner Of Custom(Import)

Case No: Customs Appeal No. 50178 of 2025

Coram: Dr. Rachna Gupta (Judicial Member), P.V. Subba Rao (Technical Member)