Importers Cannot Escape Liability For Forged Customs Scrips Used By Agents: Delhi HC

Fraudulent utilization of manipulated duty scrips by customs agents binds the principal importers, stripping them of bona fide purchaser protections and triggering statutory recovery provisions. A Division Bench comprising Justice Anil Kshetarpal and Justice Shail Jain ruled that commercial entities cannot shirk duty liabilities or escape penalties when their authorized intermediaries process forged export incentive scrips to evade revenue obligations.

The High Court addressed a massive batch of appeals and writ petitions challenging customs duty demands, interest, and penalties stemming from a systemic fraud at the Inland Container Depot (ICD), Tuglakabad. The scheme involved the manipulation of Duty Free Import Authorisation (DFIA), Focus Product Scheme (FPS), Focus Market Scheme (FMS), and other transferable duty scrips in the Electronic Data Interchange (EDI) system between 2011 and 2015.

While analyzing the degree of care exercised by importers, the Court in its reasoning, observed: "having authorised Mr. Sharafat Hussain to undertake customs-related activities and having derived the benefit arising therefrom, the Appellant cannot selectively disown responsibility for the manner in which such benefit was obtained. The Appellant cannot be permitted to accept the advantages flowing from an agency relationship while avoiding the corresponding legal consequences arising from acts performed within the scope of such authority."

Addressing the principle of caveat emptor and the duty of verification cast upon importers, the Court highlighted that the burden of establishing reasonable precaution lies squarely on the purchaser. Relying on Commissioner of Customs (Preventive) v. M/s. Aafloat Textiles India Pvt Ltd & Ors., Hardev Singh v Gurmail Singh (D) by LRs ( "(2007) 2 SCC 404": 2007 CaseBase(SC) 354), and Pandurang Jivaji Apte v. Ramchandra Gangadhar Ashtekar (D) by LRs & Ors., the Court evaluated the scope of bona fide transfers and the presumption of adverse inference.

The Court issued following directions:
"a. the Appellant is not a bona fide purchaser in light of Section 41 of the Act of 1882 and cannot claim protection under the principle of caveat emptor;
b. the proceedings rest upon overwhelming independent documentary, electronic and oral evidence, and the Appellant has failed to demonstrate any prejudice warranting interference;
c. the Impugned Orders, to the extent they impose penalties under 114A of the Act of 1962, is upheld, while the imposition of penalty under Section 112 of the Act of 1962 is set-aside; and
d. Since the writ petitions arise from the same investigation and adjudication proceedings as the connected Customs Appeals, the findings and directions issued therein shall apply mutatis mutandis to these proceedings."

Background

The dispute originated when Customs Authorities uncovered large-scale duty evasion carried out through manipulated digital records in the Indian Customs EDI System at ICD, Tuglakabad. Front-end entities linked to an authorized G-card holder, Mr. Sharafat Hussain, procured genuine scrips issued by the Directorate General of Foreign Trade (DGFT) and illegally altered their values in the EDI system either inflating their amounts or reusing exhausted scrips. Importers of paper products engaged these services for customs clearances and debited the altered scrips to pay import duties.

Show Cause Notices were issued proposing duty recovery under Section 28(4) of the Customs Act, 1962, interest under Section 28AA, and penalties under Sections 112(b)(ii), 114A, and 114AA. The importers argued that they were bona fide purchasers unaware of any EDI tampering, that primary physical scrips were unavailable, and that cross-examination of customs officers was denied. Rejecting these contentions, the High Court held that the importers failed to exercise due diligence, breached their statutory declarations under Section 46(4) of the Customs Act, 1962, and remained liable for the fraudulent acts of their agent.

Case Details:
Case No.: CUSAA 82/2023 & connected matters
Case Title: PARVEEN KUMAR JAIN v. PRINCIPAL COMMISSIONER OF CUSTOMS (IMPORT) ICD, TKD, NEW DELHI
Appearances:
For the Petitioner(s): Mr Kamal Mehta Senior Advocate with Dr Sushil Kumar Gupta and Ms. Anshika Kumari Advs.
For the Respondent(s): Mr. Vikrant Nilesh Goyal, Mr. Inderpreet Singh, Mr. Kunal Dixit, Advs., Mr. Gibran Naushad, SSC, Mr. Harpreet Singh, Senior Standing Counsel with Mr. Jatin Kumar Gaur, Advs.

Source: 2026 CaseBase(DEL) 4776