TaxTMI 
TaxTMI 
2004 (10) TMI 606
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.... M/s Essar Oil Limited (hereinafter referred to as the 'assessee'), its officers (Respondents nos. 2 to 4) and officials of the Customs Department (Respondent nos. 5 to 7). 2. Backgrounds facts as projected by the appellant are as follows: Sometime during 1997 respondent no.1 imported plants and machineries worth Rs. 600 crores for its refinery project. These imported goods were stored in private bonded warehouses, one of which is closed. The licences for the warehouses were valid upto 24.11.1999. General bond of Rs. 120 crores was executed by respondent no.1 under Section 59(2) of the Act to secure payment of customs duty. Between 18 and 23.2.1999 respondent no.1 submitted 84 ex-bonds bills of entry which were assessed to customs duty at the prevalent rate and corresponding TR-6 Challans for payment of duty were handed over to the assessee. 3. On 24.2.1999 assessee-respondent no.1 wrote to ICICI Ltd. stating that there was possibility of imposition of duty on refinery goods and requested them to immediately release funds to avoid project cost over- run. On the same day inter office memo was issued by Shri S.R. Aggarwal (respondent no.2) to Shri P.R. Ashok (respondent n....
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....warehousing licence was cancelled on the strength of the cheque payment though the goods were not physically moved from the warehouse. 5. After the banks strike was over, the cheque was deposited for collection at the Rajkot, on 27.2.1999. On the same day at the close of office hour the rate of customs duty was enhanced from nil basic duty to 5% on the Union Budget. 6. On 1.3.1999 respondent no.1 wrote to his bank that they were arranging for transfer of funds from Mumbai by 2.3.1999. As the funds were not received in the revenue accounts, respondent no.1's banker at Saurathtra prepared an inter office memo advising appellant's bank at Rajkot that the cheque issued by respondent no.1 had been returned unpaid. However, the memo was not sent to the bank, as respondent no.1 wrote several letters to their banks at Jamnagar requesting that cheque be withheld till funds were arranged by them. On 16.3.1999 finally respondent no.1 arranged funds to cover the cheque amount which was honored and credited to the Government's account on 17.3.1999. 7. Investigations were carried out by various governmental agencies and respondents 2 to 4 were arrested on 6.5.1999. Their bail appl....
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....t of clean demand bill must be advised to the purchasing office and advice must be sent by telegram. The advice is to be sent not later than the close of the day following the close of the day following the presentation of the Bill. A departure was made in the present case. The concerned Bank was requested not to dishonour the cheque. As late as on 3rd March, 1999 oral information was given to Customs officials about non-availability of funds. Thereafter on several dates the assessee requested the Banks to delay action at their ends. The trade notice referring to which letter was written to accept cheque was not applicable to the Banks strike as the same was a pre-notified strike and was for two days. 8. Statement of Mr. Rak Hashiya, of State Bank of Saurashtra, Rajkot was to the effect that normal procedure was to return the cheque on the day it is presented if the funds were not there. His further statement was to the effect that he had advised N.C. Goplani that the cheque may be retained for two to three days only after both the customs authorities and the respondent no.1 give consent letter, failing which the cheque was to be returned. He was informed on 5.3.1999 that there wa....
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....99 (the date of presentation of the cheques by M/s. EOL) in the facts and circumstances of the case; (ii) The date for determination of rate of duty, and whether the Warehouse License could be treated as cancelled as detailed in the impugned show cause notice; (iii) Whether the charge of evasion of duty by malafide intent of wilful misdeclaration, suppression of facts with an intent to evade the payment of duty, etc. as alleged in the show cause notice is established; (iv) Whether the goods are liable to confiscation under Section 111(j) of the Customs Act, 1962; (v) To determine the appropriate penal clause invokable whether penalty against the noticee M/s. EOL is leviable under Section 114 A or Section 112(a)/(b) of the Customs Act, 1962; (vi) The extent of involvement of the individual persons vis-vis evidence on record to sustain the charge of collusion on the part of the employees of notice viz. M/s. EOL and the officers of the department as detailed in the show cause notice. 10. After considering show-cause reply filed by respondent no.1 the Commissioner Customs House, Kandla (in short 'Commissioner') confirmed the demand of duty and also directed confiscat....
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.... belief. 17. Answering Issue no.4, Commissioner held that goods were liable for confiscation under Section 111(j) as deemed removal was contrary to the permission and fraudulent intention was clearly established. However, redemption fine of Rs. 20 crores was imposed. 18. CEGAT held that there could not be any confiscation as goods had been cleared under a permission. 19. As regards applicability of Section 114A, under Issue no.5, it was held said provision was not invokable. However, penalty of Rs. 10 crores was imposed under Section 112(b). 20. Commissioner held that respondents 2 to 7 were involved in the fraud, in answering Issue no.6. They were held liable to penalty under Section 112(a). 21. CEGAT set aside the penalties holding that respondent nos.2 to 7 had not committed any breach. 22. So far as Issue no.3 is concerned, in view of the operative portion of the order of the Commissioner was to the effect that the goods valued at Rs. 599,26,00046 was to be confiscated under Section 111(j) of the Act as the imported goods except good worth Rs. 73.93 crores which were covered by corporate guarantee. Redemption fine of Rs. 20 crores in view of confiscation was imposed. Tota....
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....ty of funds was made under bona fide belief. The direction regarding confiscation was set aside. The penalties on respondent no.1 and its officials and the customs officials were set aside. It is to be noted that the Tribunal referred to Rules 79 and 80 of the Central Treasury Rules (in short 'Treasury Rules') to conclude that when the cheque is honored is the date on which cheque was received by the concerned authorities is the date of payment. 24. In support of the appeals learned Additional Solicitor General submitted that the Tribunal has lightly brushed aside the various points which had been taken note of by the Commissioner. Whether the date to be reckoned is the date of receipt of cheque by the department though it is cleared subsequently is really of no consequence in view of the fact that fraudulent mis-declaration was made about availability of funds, with the clear knowledge that funds were not available. Any act based on fraud vitiates the entire action taken. The CEGAT also failed to notice that the intention of respondent no.1 and its officials is clearly borne out from the fact that they managed to obtain declaration from respondent no.6 as if the documents....
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....issue is not relevant in the present case and only issue is whether Section 15(1)(b) or Section 15(1)(c) is applicable. A factual finding has been arrived at by CEGAT to hold that there was no wilful mis-declaration. 27. Residually it was submitted that for any unintentional breach penalty is not to be levied. The view of the Tribunal is a possible view and, therefore, no interference is called for. Similar arguments were advanced by respondent nos. 2 to 4 and the custom authorities (respondents 5 to 7). It was submitted that there was no question of any abetment and/or collusion. 28. The submissions need careful consideration. It is to be noted that the plea that in view of special statutory prescriptions reference to the trade notice was unnecessary does not appear to have been pleaded or considered by the CEGAT which proceeded only to determine the issue as to on which date the payment shall be reckoned to have been made. The entire case of the revenue was built around the alleged fraudulent acts of respondent no.1 and its officials and the customs officials. According to the revenue it was clearly a case where the declaration was done with fraudulent intention, with planned d....
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.... render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. (See Ram Chandra Singh v. Savitri Devi and Ors. (2003 (8) SCC 319). 32. "Fraud" and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, 'wing me into the easy hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary "fraud" in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, "fraud" is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with so....
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....power or defeating the provision of statute by adopting subterfuge or the power may be exercised for extraneous or irrelevant considerations. The colour of fraud in public law or administration law, as it is developing, is assuming different shades. It arises from a deception committed by disclosure of incorrect facts knowingly and deliberately to invoke exercise of power and procure an order from an authority or tribunal. It must result in exercise of jurisdiction which otherwise would not have been exercised. The misrepresentation must be in relation to the conditions provided in a section on existence or non-existence of which the power can be exercised. But non-disclosure of a fact not required by a statute to be disclosed may not amount to fraud. Even in commercial transactions non-disclosure of every fact does not vitiate the agreement. "In a contract every person must look for himself and ensures that he acquires the information necessary to avoid bad bargain. In public law the duty is not to deceive. (See Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, (1992 (1) SCC 534). 33. In that case it was observed as follows: "Fraud and collusion vitiate even the most solemn proceedi....
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....Education (2003 (8) SCC 311), Ram Chandra Singh's case (supra) and Ashok Leyland Ltd. v. State of T.N. and Another (2004 (3) SCC 1). 35. Suppression of a material document would also amount to a fraud on the court. (see Gowrishankar v. Joshi Amba Shankar Family Trust (1996 (3) SCC 310) and S.P. Chengalvaraya Naidu's case (supra). 36. "Fraud" is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. Although negligence is not fraud but it can be evidence on fraud; as observed in Ram Preeti Yadav's case (supra). 37. In Lazarus Estate Ltd. v. Beasley (1956) 1 QB 702, Lord Denning observed at pages 712 & 713, "No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." In the same judgment Lord Parker LJ observed that fraud vitiates all transactions known to the law of however high a degree of solemnity. (page 722) 38. It is not open to respondent no.1 to contend that trade notice is of no consequences when the permission to pay by cheque on out-station bank wa....
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....n. It is often said that "an attempt to give a specific meaning to the word "reasonable" is trying to count what is not number and measure what is not space". The author of "Words and Phrases" (Permanent Edition) has quoted from In re Nice & Schreiber 123 F.987, 988 to give a plausible meaning for the said word. He says, "the expression "reasonable" is a relative term, and the facts of the particular controversy must be considered before the question as to what constitutes reasonable can be determined". 42. From the factual scenario described it is clear that respondent no.1 was aware that there was no fund available. In fact, from 3.3.1999 it accepted the position that there was no fund available and was asking for time to arrange funds. This according to us clearly indicated a fraudulent motive and the declaration given was certainly mis-declaration. Therefore, the CEGAT was not right in its conclusions about inapplicability of Section 51(1)(c) to the facts of the case. The demand of duty and order of confiscation by the Commissioner is clearly sustainable. 43. So far the respondents 2 to 4 are concerned, the Commissioner's findings were as follows: (1) Respondent No.2- S....
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....ct that date of cancellation should be taken to be the date of "actual removal of goods from warehouse". It was concluded that Sri Chaudhuri failed to ensure "actual removal" for the purpose of cancellation of warehouse licence. All the three officers failed to take note that physical removal of approximately 20,000 Mts. Cargo covered under 84 Bills of Entry from the bonded warehouse could not have been possible in a short span of one day. The officers acted in undue haste and resorted to backdating as accepted by them in their statements. It was noted that the three officers were located far apart from each other. Therefore, processing the files at various stages and/or places on the same day is not practicable. The sequence of processing files confirmed the backdating of documents which was admitted by the officers. The prime responsibility for scrutinizing the relevant documents was on Sri A.C. Sharma who failed to do that. The other officers committed acts of omission under the overall guidance and supervision of Sri Sharma. The plea for protection under Section 155 of the Act was rejected. Penalty under Section 112(a) in respect of each of the officers was levied. 46. CEGAT d....