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TMI Blog2003 (3) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, informed Shri S.R. Agarwal, Director (Finance) of EOL, that Customs duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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-bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Central Excise Rs. 5 lakhs under Section 112(a) of the Act; (6) Shri S.P. Chaudhari, Supdt. of Central Excise Rs. 50,000/- under Section 112(a) of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld make advance arrangements to deposit moneys into the Banks and keep sufficient amounts in their P.LAs so that they do not face any difficulty in the clearance of the goods during the period of the strike. (2) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the strike is unduly prolonged (say over 3-4 days) (iii) Where Bank employees adopt "go-slow" (iv) in the case of closure of the assessee's Bank, unless that Bank is the only nominated Bank in the Collectorate. 10. The above Trade Notice provides for payment of duty by cheque in certain circumstances set out thereunder. 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 paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee before the Appellate Assistant Commissioner against the Income-tax Officer's refusal to grant interest under Section 214 of the Income-tax Act, 1961, was a competent one filed under Section 246(c) of the said Act? The Court held that the relevant date in the case of payment of advance tax was 13-9-74, the date of the cheque, which was handed over on the same date to the Income-tax Officer, and not the date of 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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy of balance in their bank accounts was a false declaration and was in contravention of para 3 of the Trade Notice, although, the show cause notice makes such an allegation. On the other hand, the Commissioner has proceeded to record his finding only on the issue as to the date of payment of duty viz. as to whether duty can be said to have been paid on 25-2-99 which is the date of presentation of cheques by M/s. EOL, or 17-3-99, which 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, cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of rate of duty, and whether the warehouse licence could be treated as cancelled as detailed in the impugned show cause notice : The Commissioner has held that, on the basis of the records, the provisions of Section 15(1)(c) of the Customs Act are attracted; that the goods have been removed from the warehouse contrary to the terms of the licence cancellation order, which in fact assumed that the duty amount payable on the warehoused goods had been paid, that, owing to the cancellation of the licence, which order was obtained by fraud and misrepresentation, 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case. However, from the chart given in para 3.3.3 of the appeal filed by EOL, the similarity between the two cases came out clearly. The comparative chart is reproduced below: - Allegations made in the Show Cause Notice Allegations dealt with in Montana Valves (supra) Goods were removed without payment of duty by presentation of a cheque with a false declaration regarding availability of funds. Goods warehoused were removed under Shipping Bills under a false declaration for export 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 discusse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rate of duty, would be the date on which duty ought to have been paid i.e. the date of removal of the goods because the duty in any case must be paid under Section 47. Applying this ratio, since in the present case, the goods were removed on 25-2-99, this is the relevant date on which duty ought to have been paid and since this is the relevant date, then the rate of duty prevailing on 25-2-99, should be levied on the goods. 22.1 In the case of Sedco Forex International 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient balance in their account; non-availability of funds was suppressed from the department till 3-3-99 with a clear intent to get the warehoused licence cancelled/debonded on 25-2-99; the appellants actively pursued the application for licence cancellation even though the non-availability of funds was known to Shri S.R. Agarwal on 25-2-99; that they deliberately withheld crucial information of non-disbursement of funds in spite of their knowledge that levy of basic customs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ICICI had promised to release funds by 25-2-99, and based on such a promise, and on the fact that large amounts exceeding Rs. 800 crores had already been sanctioned by ICICI, expecting the release of a further smaller sum of Rs. 100 crores for payment of duty can be held to be a bona fide belief which can be entertained by an ordinary person. The factual position as emerging from the various statements, has not been controverted during investigation and the DRI has not recorded statement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Apex Court decision in the case of Jain Shudh Vanaspati Ltd. [1996 (86) E.L.T. 460 (S.C)]. Findings : 28. The provisions of Section 111(j) are attracted when dutiable or prohibited goods removed or attempted to be removed from the warehouse without permission of the proper officer or contrary to the terms of such permission. Section 68 of the Customs Act permits clearance of warehoused goods for home consumption after presentation of a B/E for home consumption, payment of total duty 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods from the bonded warehouse without the consent of the concerned authorities. The ratio of this judgment cannot therefore, be applied against M/s. EOL who had cleared goods after assessment of the ex-bond Bs/E and after the passing of an out of charge order by the proper officer of the Customs. 29. In the light of the above discussion, we hold that the provisions of Section 111(j) are not applicable and, therefore, set aside the confiscation. 30. Issue No. 5. To determine the appropriate 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 ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishonestly or contemptuously or with a deliberate object of committing a breach of law. The Court noted that the importers had acted under a bona fide belief that the goods were importable under OGL. The Supreme Court set aside the penalty. In the present case, the Commissioner himself has observed that it is M/s. EOL who had brought the fact of non realisation of cheques to the notice of the department and that they have not derived any benefit. 34. In the light of the above discussion, we hold that the penalty 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 pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld Shri A.C. Sharma the Dy. Commissioner, Jamnagar as the officer primarily responsible for the lapse and that the Supdt. acted under his overall guidance and supervision, and for the above reasons, imposed different amounts of penalty on all 3 officers. Finding : 38. The finding in para E(ii) being that EOL had fraudulently got the bonded warehouse licence cancelled, it would mean that a fraud was perpetrated on the officers who had cancelled the licence and although in the show cause notice, it was alleged that officers 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs warehouse, Jamnagar and was concerned with the activity of all clearances under ex-bond Bs/E from the warehouse. On 25-2-99, an application for cancellation of bonded warehouse at Vadinar was addressed by EOL to the Asstt. Commissioner of Central Excise, Jamnagar who cancelled the licence after obtaining the report from Shri Choudhari for recommendation of the cancellation of the licence. In this connection, it is pertinent to note that EOL have filed around 84 ex-bond Bs/E around 18-2-99, which is well prior to 28-2-99 when 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material time, the provisions of the Rule 173G of the Central Excise Rules, 1944 prescribed the manner of payment of duty. Sub-rule (1) of the said Rule reads as under :- "RULE 173G. Procedure to be followed by the assessee. - (1) Every assessee shall keep an account-current with the Commissioner separately for each excisable goods falling under different Chapters of the Schedule to the Central Excise Tariff Act, 1985 (5 to 1986), in such form and manner as the Commissioner may require, of the duties payable on the excisable goods and in particular such account (and also the account in Form R.G. 23, if the assessee is availing of the procedure prescribed in Rule 173K) 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 interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date on which duty was paid. 49. As correctly observed by the Commissioner in his Order if the rate of duty had not changed the conclusion on the various steps taken by the assessee would not have been questioned. All the actions of the assessee are being evaluated in retrospect on the increase in the duty on the warehoused goods. 50. One of the points contested is the date of removal of goods from the warehouse. In this case there was no physical removal of goods from the warehouse. What happened was that the status of the area where the goods were stored underwent a change. It ceased to be bonded premises. Therefore although the goods remained physically in the warehouse, due to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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