Cheque payment of customs duty takes effect on presentation if honoured, defeating later duty escalation, confiscation, and penalties.

Accepted tender of customs duty by cheque was treated as payment on the date of presentation, because the cheque was not dishonoured and later realisation did not alter its legal effect. On that basis, the relevant rate of duty for warehoused goods was the pre-budget rate applicable on removal from the warehouse, and the post-budget rate could not be invoked. The record did not establish wilful misdeclaration, suppression, or intent to evade duty. As clearance had been granted by the proper officer, confiscation under Section 111(j) was unsustainable, and the importer's penalty, as well as penalties on company and departmental officers, could not stand.

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Issues: (i) whether payment of customs duty by cheque was complete on the date the cheque was presented and accepted, or only on the date of realisation; (ii) whether the applicable rate of duty was to be determined on the date of cheque presentation and whether the warehousing licence was validly cancelled; (iii) whether the charge of evasion based on wilful misdeclaration and suppression of facts was established; (iv) whether the goods were liable to confiscation under Section 111(j) of the Customs Act, 1962; (v) whether penalty on the importer was sustainable under Section 114A or Section 112 of the Customs Act, 1962; and (vi) whether penalties on the company officers and departmental officers were sustainable.

Issue: (i) whether payment of customs duty by cheque was complete on the date the cheque was presented and accepted, or only on the date of realisation

Analysis: The duty-paying procedure permitted payment by cheque during the bank strike arrangement, and the cheque was accepted by the department. The governing treasury rules treated tender of a cheque as payment when the cheque was honoured, unless dishonoured. The cheque was not dishonoured; it was ultimately realised, though later. The mere existence of an internal bank memo did not amount to dishonour. The legal effect of the accepted cheque, therefore, attached to the date of presentation.

Conclusion: The duty was paid on the date of presentation and acceptance of the cheque.

Issue: (ii) whether the applicable rate of duty was to be determined on the date of cheque presentation and whether the warehousing licence was validly cancelled

Analysis: Once duty was treated as paid on the date the cheque was accepted, the requirements for clearance of warehoused goods stood satisfied. The goods were accordingly removed from the warehouse with the proper officer's permission, and the relevant date for duty was the date of removal from the warehouse under the warehousing provision applicable to such clearance. The post-budget rate could not be applied by invoking the provision dealing with goods that had escaped duty, because these goods had been openly warehoused, assessed, and cleared under departmental permission.

Conclusion: The relevant rate of duty was the pre-budget rate applicable on the date of removal from the warehouse, and the licence cancellation was valid.

Issue: (iii) whether the charge of evasion based on wilful misdeclaration and suppression of facts was established

Analysis: The assessments had been completed before the budget change, and there was no short-levy on the relevant date. The record showed a bona fide expectation of funds and prompt disclosure when the cheque realisation issue arose. In these circumstances, the ingredients of deliberate misstatement, suppression, or intent to evade duty were not made out.

Conclusion: The charge of evasion by wilful misdeclaration or suppression of facts was not established.

Issue: (iv) whether the goods were liable to confiscation under Section 111(j) of the Customs Act, 1962

Analysis: Confiscation under this provision requires removal, or attempted removal, without permission or contrary to the terms of permission. Here, ex-bond bills of entry were filed, assessed, and out-of-charge was granted. Clearance was given by the proper officer on the basis of accepted payment and no condition of non-compliance was shown to have been breached. The factual basis for confiscation was therefore absent.

Conclusion: The goods were not liable to confiscation under Section 111(j).

Issue: (v) whether penalty on the importer was sustainable under Section 114A or Section 112 of the Customs Act, 1962

Analysis: The adjudicating authority itself treated the matter as one not involving short-levy, which meant the statutory foundation for penalty based on evasion was missing. Once confiscation was unsustainable, penalty under Section 112 could not stand. The facts also did not show knowing dealing with goods liable to confiscation.

Conclusion: The penalty on the importer was not sustainable.

Issue: (vi) whether penalties on the company officers and departmental officers were sustainable

Analysis: Since the goods were not liable to confiscation and clearance had been granted by the proper officer, the alleged aiding and abetting could not be sustained. The evidence did not establish collusion or deliberate misconduct by the company officers or the departmental officers sufficient to attract penal liability.

Conclusion: The penalties on the company officers and the departmental officers were not sustainable.

Final Conclusion: The demand and penalties failed, the confiscation was set aside, and the appeals succeeded with consequential relief.

Ratio Decidendi: Where a cheque tendered and accepted in terms of the applicable payment procedure is not dishonoured, duty is treated as paid on presentation of the cheque, and a valid out-of-charge clearance of warehoused goods cannot later be converted into confiscation or penalty merely because the cheque was realised on a later date.

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