TMI Blog2003 (3) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a severe cyclone at Vadinar which caused substantial damage to the project as a result of which project cost increased. The project was thus facing a financial set back and funds required for debonding of the warehouse were not available, though the project management consultants were pressing for supply of imported materials to continue with the erection of the refinery. Due to this, pent up requisitions were taken up for clearance, when ICICI indicated its willingness to sanction a bridge loan of Rs. 100 crores in February, 1999. As per ICICI letter dated 18-1-1999 and 8-2-99 on the above basis, EOL decided to process papers to ensure timely clearance of warehoused goods before the commencement of the budget to avoid any project cost increase due to any possible changes in the rate of duty. On 20-2-99, the Board of Directors of EOL resolved the availment of loan facilities of Rs. 100 crores and non-convertible debentures of Rs. 70 crores being offered by ICICI and thereafter EOL filed total 84 ex-bond bills of entry which were assessed. However, duty could not be paid immediately as funds were yet to be disbursed by ICICI. The Manager (Imports) of EOL, Shri Nitin Bhatt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The investigations howed that M/s. EOL desired to freeze their duty liability on the goods lying in the warehouse and at the jetty and to achieve this goal they took the following steps : (i) filed Ex-Bond bills of Entry for all the goods lying in the Private Customs Bonded Warehouse even though no requisition for all these goods had been sent by CIL/Contractors/Sub-contractors; (ii) filed Home Consumption Bills of Entry for the goods lying at the Vadinar Port for which the Bills of Entry had otherwise not been filed even after expiry of the 30 days period and also for which no requisition was made by the users as per records; (iii) sought substitution of the Warehousing Bills of Entry for the goods which had been bonded as early as August/September, 1998 and in respect of which all warehousing formalities were completed and physical warehousing waiver was sought by EOL only; (iv) despite the fact that they were facing resource constraints and as such blocking Rs. 100 crores for goods which might be put to use after 6 months would not be prudent and reflect adversely on the Financial Management in crisis situation, yet they filed the ex-bond bills of entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act; and (7) Shri K.N. Thaker, Supdt. of Central Excise Rs. 25,000/- under Section 112(a) of the Act. In these appeals, the importer challenges the differential duty demand of Rs. 36,23,78,287/- and the penalty, and the officers of the company and the officers of Customs challenge the penal action against them. 7. We have heard Shri V.M. Doiphode, ld. Advocate for the company and its officers, Shri M. Chandrasekharan, ld. Sr. Counsel for Shri A.C. Sharma, Shri Devan Parekh, ld. Advocate for Shri S.P. Choudhary and Shri K.N. Thaker and Shri K.M. Mondal, ld. Consultant for Revenue and record our findings on the various issues as under :- 8. Issue No. 1. Whether the duty could be treated to have been paid on the 25th February, 1999 (Date of presentation of the cheques by M/s. EOL) in the facts and circumstances of the case : The Commissioner holds that the ex-bond clearances from the warehouse are permitted only after the receipted TR-6 Challans are presented as evidence for the payment of Customs Duty; that the warehoused goods being in physical control, no clearance can be permitted, unless the duty is actually paid; that the plea of EOL, that unless the cheque is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In cases, where the strike of Bank employees is without notice or where the strike is called for after due notice is prolonged beyond a reasonable time (say over 3-4 days) or where difficulty is faced by the assessees in depositing Central Excise duties in the nominated Banks during riots, imposition of curfew or natural calamities such as floods/cyclones etc. the following procedure should be observed only for the duration of the strike or during the above kind of situations provided all the nominated banks i.e. all the branches of Bank of Baroda and State Bank of India are closed in a particular city or town affected by such situation. (3) During the days of the closure of Bank business due to such strikes, the assessees can send their cheques by registered post, acknowledgement due (R.P.A.D.) or special messenger with the TR.6 challans, (in quadruplicate) duly filled in, to the Chief Accounts Officer (Revenue), Central Excise Building, 3rd floor, Race Course, Baroda, with a clear declaration that they have sufficient balance their Bank Account. They should send a copy of the letter forwarding the cheque, to the concerned Range Officer also. On the strength of a cheque so sent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereunder. The Central Treasury Rules also provide for payment of Government dues by cheque. According to Rule 79(1)(a), at places where the cash business of the treasury is conducted by the Bank, cheques drawn on local branch of a scheduled bank may be accepted by departmental officers of the treasury or the Bank in payment of Government dues or in settlement of other transactions with the Government. The cheques should be crossed by the drawer before tendering. However, until the cheque is cleared, the Government cannot admit that payment has been received; consequently the receipt of the cheque alone may be acknowledged when it is tendered. Rule 79(1)(b) stipulates that in the event of the cheque being dishonored by the Bank on presentation, the fact shall be reported at once to the tenderer with a demand for payment in cash. Rule 80 provides that if a cheque tendered in payment of Government dues is accepted under the provisions of Rule 79, and is honoured on presentation, payment shall be deemed to have been made (i) if the cheque is handed over to the Government s bankers or to a Government officer authorised to receive money on behalf of the Government, on the date on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encashment i.e. 25-9-1974, and answered the first question in the affirmative and against the Revenue. The second question was also answered in the affirmative and against the Revenue. 14. In the case of J J Dechane v. CIT - [1990 (182) ITR 345] the Hon ble Andhra Pradesh High Court noted the Treasury Rules and held that when cheques are handed over to the Government officials authorised to receive payment on behalf of the Government, payment would be deemed to have been made on the date the cheque was handed over. The High Court relied upon the decision of Oswal Woollen Mills Ltd. v. CIT and Kumudam Publications (P) Ltd. cited supra. 15. In the case of SAIL v. Commissioner of Central Excise, Bolpur - [2001 (132) E.L.T. 334] the Tribunal held that the date of cheque is to be taken as the relevant date for the purpose of taking credit, and set aside the impugned order of imposition of penalty upon the applicants for taking credit in PLA on the date when the cheque was handed over to their banker. In para 3 of its order, the Tribunal s attention has been drawn to the Government of India order in the case of Sahara Indian Airlines reported in 2000 (117) E.L.T. 802 (GOI) in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is the date on which cheques were realized by the bank. This itself would go to show that the Commissioner has accepted that payment of duty by cheque by M/s. EOL was permissible. This being so, the law laid down by various High Courts and the Tribunal as set out in the preceding paras would clearly apply to the present case and thus it is clearly established that 25-2-99, the date of presentation of the cheques, was to be treated as the date of payment of duty by M/s. EOL as the cheques were not specifically dishonoured. Dishonour takes place when the maker of the note, acceptor of the bill, or drawee of the cheque, makes default in payment, upon being duly required to pay the same. (Section 92 of the Negotiable Instruments Act) In other words, cheque is said to be dishonoured by non-payment when the banker (drawee of the cheque) makes default in payment. In the present case, the bank on which M/s. EOL, drew the cheques for duty payment, did not default any payment and in fact made the payment although belatedly, for which M/s. EOL paid bank charges of Rs. 12,00,786/- and interest of Rs. 65,70,586/- on duty unpaid for 20 days (25/2 to 16-3-99) at the rate of 20%. The Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, which order was obtained by fraud and mis representation, the removal of the goods in dispute from the warehouse resulted in clearance of Customs bonded goods without payment of duty; that these goods therefore escaped duty and duty was evaded thereon, and in this event, the goods cannot be held to be cleared in terms of Section 68 of the Act. The Commissioner has held that, for the purpose of determination of rate of duty, the goods are covered by the provisions of Section 15(1)(c) and the date of payment of duty would be taken as 17-3-99, when the duty was credited into the Government account. The Commissioner has also distinguished the facts of the present case from that of Montana Values Compressors Ltd. v. CC, Mumbai [2000 (116) E.L.T. 220] relied upon by EOL, on the ground that in the instant case, Customs duty on warehoused goods had not been paid at the time of cancellation of licence and therefore the goods in the present case had escaped duty, thus attracting the ratio of the Apex Court decision in the case of Chowgule Co. v. UOI [1987 (28) E.L.T. 39 (S.C.)] wherein it was held that the expression other goods mentioned in Section 15(1)(c) is obviously meant to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port without payment of duty. They were diverted clandestinely for domestic market. (vide para 2 of the judgment) Collusion is alleged against the appellant officers with some officers of the Department in ordering clearance without ensuring payment of duty. Goods were to be escorted by an officer of Customs for placing them on board the ship, who has not discharged his duty. (para 2 of the judgment) Bs/E filed and duty assessed was paid by way of cheque, realized on 17-3-99. The goods were cleared under out of charge order issued by the proper officer. Shipping Bills were filed and goods allowed clearance for export under orders of the proper officer. The above similarities have not been discussed by the Commissioner even though they were set out in the written submissions filed before him. 21. The Commissioner s reliance on the Apex Court decision in the case of Chowgule Co. Pvt. Ltd. is misplaced. The Supreme Court has clearly held that goods which are entered for home consumption under Section 46 are openly imported into India without concealment and the expression other goods under Section 15(1)(c) of the Customs Act covers other imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Drilling v. CC, Mumbai [2001 (135) E.L.T. 625] rigs were imported but were not declared to the Dept. in I.G.M. and no Bs/E were filed. Therefore, the facts are entirely different from those of the present case where goods have been cleared from those of the present case where goods have been cleared from the warehouse after proper assessment. The reliance of the Revenue on the Tribunal s order in the appellants own case (Order No. CI/92-96-WZB/2001) reported in 2001 (129) E.L.T. 761 is also misplaced. The factual position regarding the applicability of Section 15(1)(c) is set out in para 11 of the order from which it is clear that, in that case, goods were removed without filing B/E for home consumption under Section 46 and they were landed and cleared from a place which was not notified as a Customs area. Hence, as per the Apex Court judgment in Chowgule Co. cited supra, the goods do not fall under any of the two categories viz. goods entered for home consumption or goods warehoused, while in the present case, the goods were warehoused and cleared from the warehouse and hence it is Section 15(1)(b) of the Act, which will govern. 23. Regarding the Commissioner s finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty was going to be introduced in the Union Budget of 1999-2000. Findings : 25. We have already held that even otherwise this is, not a case of evasion of duty. The ingredients of the proviso to Section 28(1) which has been invoked and under which duty has been confirmed are that there should be non-levy/short-levy by reason of collusion or any wilful misstatement or suppression of facts by the importer. In this case, 84 ex-bond Bs/E were assessed and duty was correctly assessed, based upon the rate of duty prevailing as on the dates of assessment. As on 25-2-99 when the goods were deemed to have been cleared due to cancellation of licence, there could not have been any non-levy or short-levy as the levy of basic customs duty itself came into effect only from 1-3-99. Further, the adjudicating authority has himself held in para E.II at page 107 of the impugned order that the question of invocation of Section 114A of the Customs Act under which also penalty was proposed in the show cause notice, would not arise as there is no short-levy. Thus, if this is not a case of short-levy as held by the Commissioner, the question of applying the ingredients of proviso to Section 28(1) do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of ICICI officials to counter the statement of Shri Agarwal. Therefore, in the absence of any other material, the Commissioner s conclusion that the declaration on 25-2-99 was false and intentional, is incorrect. It is also pertinent to note that cheque itself came for realisation on Monday 1-3-99 and 2nd March, 99 was a holiday for Holi and 3rd March was the earliest working day when EOL could, and did, bring the fact of non-realisation of cheques to the notice of the department. In the absence of any practice to issue letters to the bank enquiring about realisation of the cheques, as brought out from the statement of the ACAO, the department would not have come to know about the non-realisation of the cheque until the cheque was returned as dishonoured and in the present case, the cheques were not returned as dishonoured as we have already held in our findings on Issue No. (1). M/s. EOL brought the fact of non-realisation of cheques in writing to the notice of the department on 5-3-99 and undertook to pay interest if any payable; further interaction with the department was going on at various levels before the D.R.I., seized the goods on 12-4-99, and prior to this date EOL h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y leviable and all penalties, rent, interest and other charges, and after an order of clearance for home consumption has been made by the proper officer. Thus, the relevant condition is whether an order for clearance of warehoused goods for home consumption has been made. In the case of M/s. EOL, ex-bond Bs/E, were filed and duly assessed, and out of charge order was given. Thus, the goods have been cleared with the proper officer s permission. Therefore, the ingredients of Section 111(j) have not been established against M/s. EOL, particularly when the Revenue does not allege or find that the permission of the proper officer for allowing clearance under Section 68 was obtained by fraud. Permission for clearance was given after the department accepted the cheque and acknowledged the same in the light of Trade Notice No. 73/85 of the Baroda Commissionerate which accepts that presentation of cheque tantamounts to payment. In any case, on the date of permitting clearance against acceptance of cheques, there is physically no payment made to the Government as in the normal course also, outstation cheques are realised only after a couple of days, irrespective of where there is any balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate penal clause invokable whether penalty against EOL is leviable under Section 114A or Section 112(a)(b) of the Customs Act, 1962. The Commissioner has held that since import duty leviable on the goods was not paid on 25-2-99, therefore, the rate of duty has to be taken as applicable on the date of actual payment i.e. 17-3-99, it would not be apt to conclude that there was a short-levy of duty. M/s. EOL had neither discharged the duty liability prior to 25-2-99 nor on the date of physical removal of the goods. In other words, no tangible benefit accrued to them in the matter of putting the goods to use for economic benefit, that if the post-budget rate of duty had not undergone a change, the question of invocation of Section 114A would not arise. The Commissioner holds that the provisions of Section 114A are not applicable as it is not a case of short levy. However, he has imposed penalty under Section 112(b) of the Act on the ground of wilful misstatement and suppression of facts in order to evade duty. Findings : 31. In view of our earlier finding that the goods are not liable to confiscation under Section 111(j), penal action under Section 112 cannot be sustained. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty imposed upon M/s. EOL cannot sustain and accordingly set aside the same. 35. Issue No. 6. The extent of involvement of the individual persons vis-a-vis evidence on record to sustain the charge of collusion on the part of the employees of the EOL and officers of the department as detailed in show cause notice. It is the finding of the Commissioner that Shri P.R. Ashok signed the declaration regarding availability of sufficient balance in their account with the bank at the instruction of Shri S.R. Agarwal, that Shri S.R. Agarwal was in the knowledge of non-availability of funds prior to 25-2-99, and even by the evening of 25-2-99, and despite this knowledge he pursued the cancellation of warehousing licence and for grant of out of charge, with the assistance of Shri P.R. Ashok and Shri Nitin Bhatt. Findings : 36. We have already held that the goods in dispute were not liable to confiscation under Section 111(j) as goods were cleared as per permission of proper officer and clearance was not contrary to the terms of the permission. Hence, no penal action lies against the officers of M/s. EOL. It is also pertinent to note that Shri S.R. Agarwal consistently stated that IC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cers of EOL had colluded with the Customs officers, in the light of the finding that the charge of collusion is not established, the charge against Shri A.C. Sharma cannot sustain. As for the issue of pre-dating of the receipt of application for licence cancellation, from 26-2-99 to 25-2-99, and whether orders for cancellation were passed on 25/2 or 26/2, it does not alter the legal position relating to liability to duty as the pre-Budget restriction in respect of clearance of goods was to take effect only after office hours on 26-2-99. Further, EOL officials (Shri Ashok and Shri Bhatt) had categorically stated that they handed over the application on 25/2 and had also placed before the Commissioner, details relating to their commuting between Rajkot and Jamnagar on 25/2, including taxi receipts for the journey, as evidence in support of their contention. As for the statement of Shri Thacker that the application was given by EOL on 26-2-99, it is to be noted that Shri Sharma had in his reply dated 27-4-2002, (prior to the issue of the impugned order) which ld. Sr. Counsel urges may be taken as his defence in the appeal, that, on the part of the Supdt., there was some resentment aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changes in duty structure took place and such Bs/E were accordingly assessed and TR 6 challans were also issued. He received acknowledgement from the ACAO, Central Excise, Rajkot accepting payment by cheque dated 25-2-99 and he, therefore, endorsed the Bs/E as duty paid. From the statements of ACAO, Rajkot and Shri S.K. Sharma, Asstt. Collector, Rajkot, it is brought out that when the officers of EOL went to the ACAO on 25-2-99 for acceptance of payment by cheque due to bank strike, ACAO directed obtaining necessary permission from the higher authorities at Central Excise Headquarters, Rajkot as the amount involved was very large, that EOL officers met the Asstt. Collector (Technical), Rajkot, Shri S.K. Sharma that Shri Sharma was given a fax from the Commissioner s office, containing the Trade Notice to the Vadodara Commissionerate that Shri S.K. Sharma then discussed the matter with the Commissioner who has given his approval and then Shri Sharma endorsed the letter for acceptance of payment. On this basis, the ACAO accepted the payment by cheque. From the above narration, it is cystal clear that the two Supdts. viz. Shri Thaker and Shri Choudhary had absolutely no connection wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be maintained in triplicate by using indelible pencil and double-sided carbon, and the assessee shall periodically make credit in such account-current, by cash payment into the treasury so as to keep the balance, in such account-current, sufficient to cover the duty due on the goods intended to be removed at any time; and every such assessee shall pay the duty determined by him for each consignment by debit to such account-current before removal of the goods . 46. The highlighted portion could be interpreted to mean that the date of realization of the cheque was the date of deposit of duty in the PLA. There was at all times an element of uncertainty as to the dale on which the cheque was credited to the Government account. The cheque deposited by an assessee in an outstation branch would travel to the nodal branch and from there it would go for clearance through the head quarters of the bank. From the date of deposit of the cheque by the assessee it might take weeks before it was credited to the Government account. The actual date of realisation and the credit was known only to the Pay and Account Officer and the Chief Accounts Officer in the Collectorate Head Quarters and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this change the goods ceased to be bonded goods and duty paid goods. There is nothing unusual in this situation. The period of bonding of the warehoused goods is specified in Section 61 of the Customs Act. On a particular date where the warehousing period of any goods expires those goods cease to be warehoused goods although such goods continue to be physically in the bonded warehouse. [Kesoram Rayon - 1996 (86) E.L.T. 464 (S.C.)]. 51. The sequence of events was that the duty was paid on 25-2-99. The warehousing licence of the premise was cancelled on 26-2-99. The sum total of the two actions was as if the goods had been physically cleared from the warehouse on payment of duty. 52. The show cause notice makes out these activities as fraud committed by the assessee and also cites the officers of the department having assisted the assessee in committing this fraud. The events disclosed in the show cause notice go much further back in time. They show that in terms of a notice which appeared to apply to clearance of goods attracting duty of Excise they made a request to the Commissioner for extension of provisions to clearance of goods from the Customs Warehouse. The proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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