TMI Blog2004 (10) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is closed. The licences for the warehouses were valid upto 24.11.1999. General bond of ₹ 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. 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 no.3) stating that ICICI Ltd. had indicated their desire to disburse a sum of ₹ 100 crores so that the Countervailing Duty (in short 'CVD') amount to be paid before pronouncement of the Union Budget, 1999. The memo pointed out that the necessary documentation was in process and remittance of the funds by telegraphic transfer to the State Bank of India (SB) Jamnagar would be done immediately thereafter. Respondent no.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Investigations were carried out by various governmental agencies and respondents 2 to 4 were arrested on 6.5.1999. Their bail application was rejected by concerned magistrate. On 17.5.1999 the Gujarat High Court granted bail to them on the unconditional undertaking by their counsel appearing before the High Court that the amount of enhanced customs duty will be paid in three instalments by 31st July, 1999. On 22.8.1999 a show-cause notice was issued to the respondent no.1-assessee proposing to levy duty on the imported goods under Section 15(1)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility 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. 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 was no written consent of the customs authorities. The show cause notice referred to the correspondences between respondent no.1 and the bankers. It was alleged that the undertaking in the letter of respondent no.1 dated 25.2.1994 clearly shows fraudulent attempt to misuse the bonafide facilities given in terms of trade notice as the respondent no.1 was fully aware that they had not received the funds at Jamnagar. After referring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged 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. 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 confiscation of goods and imposition of penalty. It is to be noted that respondent no.1, inter alia, contended that there was no certainty that the rate of duty will be enhanced and that they acted under a bona fide belief that the funds would be available on 25.2.1996. They also claimed bona fide error of judgment and lack of collusion with officers. The stand was not accepted by the Commissioner. Appeals were filed before CEGAT by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said provision was not invokable. However, penalty of ₹ 10 crores was imposed under Section 112(b). 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). CEGAT set aside the penalties holding that respondent nos.2 to 7 had not committed any breach. 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 ₹ 599,26,00046 was to be confiscated under Section 111(j) of the Act as the imported goods except good worth ₹ 73.93 crores which were covered by corporate guarantee. Redemption fine of ₹ 20 crores in view of confiscation was imposed. Total demand of ₹ 96,26,91.711/- was confirmed under Section 28(1) proviso of the Act as also in terms of statement made on behalf of respondent no.1 before the Gujarat High Court on 17.5.1999. The duty was worked out on the basis of computation in the show cause notice. Penalty of rupees ten crores was imposed on respondent no.1 under Section 112(b) of the Act. Penalty of rupees one crore was levied on respondent no.2 under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities is the date of payment. 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 were cleared on 25.2.1999, when the statements of the concerned witnesses clearly show that it was done on 26.2.1999. The proved manipulation of records further strengthened the department's view. It was pointed out that relevant factual aspects placed by the department before the CEGAT had not been considered. On the other hand it recorded some findings which were based on conjectures and/or surmises. The effect of fraud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 design to evade duty. Several aspects were highlighted to show that the respondent no.1 and its officials were acting with fraudulent intention. The Tribunal did not even consider the effect of those acts. By fraud is meant an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill will towards the other is immaterial. The expression fraud involves two elements, deceit and injur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings 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 some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Concise Oxford Dictionary, it has been defined as criminal deception, use of false representation to gain unjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise 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). In that case it was observed as follows: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terminative 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). 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) 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 was given with reference to the trade notice. The effect of the manipulation of records to show as if action was taken on 25.2.1999 and not on 26.2.1999 was also not considered by the CEGAT in the proper perspective. Rules 79 and 80 of the Treasury Rules were relied upon overlooking the effect of the Central Government Account (Receipt and Payment Rules, 1983) (in short 'Receipt Rules') which clearly stipulates as to the relevant date of receipt. Rule 20 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable can be determined . 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. So far the respondents 2 to 4 are concerned, the Commissioner's findings were as follows: (1) Respondent No.2- Sri S.R. Agarwal gave instructions from time to time for clearance of all imported goods before pronouncement of Union Budget 1999. There was no requisition from Essar Projects Ltd. (in short EPL) or the contractors for such goods. Incharge of finance portfolio was fully aware of the financial status of the assessee. In spite of his personal knowledge he instructed respondent No.3 (Sri P.R. Ashok) to complete the formalities. The intention to defraud is apparent from his fax m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. CEGAT did not consider the aberrations highlighted by the Commissioner and in a very cryptic manner dealt with the issues. No plausible reason has been indicated as to why the allegations which are quite serious in nature and the conclusions in relation thereto recorded by the Commissioner were not to be maintained. Only an abrupt conclusion was reached that Sri Thakur and Sri Chaudhuri had absolutely no connection with the acceptance of cheques. There was not even any reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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