TMI Blog2004 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... stion regarding effect of deemed removal. The manipulative roles of respondents 2 to 7 have been clearly established. They were clearly active participants in the well-planned deception and fraudulent acts leading to evasion of duty. They had played major roles in the whole game of fraud and deception. There was clearly wilful disregard and deliberate defiance of statutory provisions. Levy of penalty is clearly warranted. Impugned order of CEGAT is set aside and order of Commissioner is restored.The appeals are allowed - 4299-4305 of 2003 - - - Dated:- 7-10-2004 - Arijit Pasayat and C.K. Thakker, JJ. [Judgment per : Arijit Pasayat, J.]. - These appeals by the Revenue are directed against the common judgment passed by the Customs Excise and Gold (Control) Appellate Tribunal, West Regional Bench, Mumbai (in short the 'CEGAT'). By the impugned judgment the CEGAT set aside the imposition of duty, redemption fine, interest and penalty levied under the Customs Act, 1967 (in short the 'Act') levied/imposed on respondent no. 1 M/s. Essar Oil Limited (hereinafter referred to as the 'assessee'), its officers (Respondents nos. 2 to 4) and officials of the Customs Department (Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 25-2-1999 for Rs. 60,03,85,603 in favour of Assistant Chief Accounts Officer SBECNC in line with the Trade Notice No. 73/85, copy of which was enclosed. It was indicated that action was being taken as per direction of Assistant Commissioner (Technical) at Rajkot. It was further indicated that the payment had to be made at Rajkot office due to banks strike. In the letter dated 25-2-1999 addressed to the Chief Accounts Officer, Excise and Customs, Rajkot, it was indicated that due to banks strike on that day they were depositing the customs duty on the goods at the regular bank. Therefore, they had enclosed Cheque No. 1175298 dated 25-2-1999. A declaration was made that respondent no. 1 had "sufficient bank balance" in its account in State Bank of Saurashtra, Jamnagar on whom the cheque was drawn and same shall be honored and cleared by the bankers "as and when presented by the concerned office". On 25-2-1999 the application was endorsed for acceptance by this Assistant Commissioner and were accepted and processed. Consequently, the warehousing licence was cancelled on the strength of the cheque payment though the goods were not physically moved from the warehouse. 5. After t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y adverse impact of the budget. Investigation further revealed that sufficient fund was not there in respondent no. 1's account till evening of 24-2-1999. False declaration was made regarding sufficiency of funds on 25-2-1999. Investigation also revealed that one of the departmental officials i.e. respondent no. 6 A.K. Thaker had manipulated dates and instead of the actual date of 26-2-1999, he had indicated that the action was taken on 25-2-1999. Statement of Shri L. Ghosh, Chief Manager of State Bank of Saurashtra at Jamnagar indicated that the cheque as issued by respondent no. 1 was intended to be returned to the clearing bank at Rajkot and telephonic information to this effect was given to the Chief Manager of the bank at Rajkot. A written notice was prepared. The same was not sent at the request of respondent no. 1 and contrary to the established practice and procedure of the bank and governing regulations cheque was not dishonored. The instructions of State Bank of Saurashtra Manual, inter alia, provides and requires that non-payment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of warehousing licence was obtained by fraud as duty had not been deposited. Hence duty payable is covered under Section 16(1)(c) of the Act. Action was taken against the customs officials i.e. respondent nos. 5 to 7 for their alleged abatement in the action and the act of collusion as established by manipulation of records. They had done or omitted to do acts which acts or omissions rendered the goods liable for confiscation. Accordingly, respondent no. 1 was required to show cause as to why goods removed contrary to terms of the permission for such removal should not be confiscated under Section 111(j), and since goods were removed on cancellation of licence based on false declaration without payment of duty at the rate prevalent on 17-3-1999, duty shall not be demanded and it was proposed in addition, to levy penalty on respondents 2 to 7 and interest on respondent no. 1. 9. The Commissioner framed six issues. They are as follows : (i) Whether duty could be treated to have been paid on the 25th February, 1999 (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, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment was not available because of false declaration. It was concluded that duty was paid on 25-2-1999 since payment of cheque relates back to the presentation and the cheque was not dishonored. 13. With regard to Issue no. 2, it was observed by the Commissioner that cancellation of warehousing license was obtained by fraud. Reference was made to the undertaking given before the High Court accepting liability to pay duty. Consequently it was held that there was no cancellation under Section 68. Therefore, provisions of Section 15(1)(c) were applicable. 14. CEGAT held that as duty shall be treated to have been paid on 25-2-1999, requirements of Section 68 were complied with and, therefore, Section 15(1)(b) and not Section 15(1)(c) was applicable. 15. As regards Issue no. 3, Commissioner held that charge of evasion of duty by mala fide intent, wilful mis-declaration, suppression of facts was clearly established. 16. CEGAT held that there was no wilful mis-declaration, no evasion or short levy. The declaration was held to have been made under bona fide belief. 17. Answering Issue no. 4, Commissioner held that goods were liable for confiscation under Section 111(j) as deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed payment had to be treated to have been made on the date on which the cheque was handed over to the authority. There was no fraudulent intention involved. Respondent no. 1 and its officials acted bona fide on the assurance given by ICICI Ltd. Negotiations for funds were going on since long. Therefore, the order of the Commissioner is not tenable. 23. The revenue supported the order of the Commissioner. As noted above CEGAT held that the Commissioner had not recorded any finding regarding non-applicability of the trade notice. There was no findings recorded by the Commissioner that the cheque payment facility was not 'available because of false declaration. The Commissioner only decided the issue as to what constitutes the date of payment. Since the cheque was honored it was to be held that date of payment was on 25-2-1999 though, in fact, it was cleared on 17-3-1999. Requirements of Section 58 were complied with and, therefore, Section 15(1)(b) was applicable and not Section 15(1)(c) as held by the Commissioner. There was no wilful declaration and the declaration about availability of funds was made under bona fide belief. The direction regarding confiscation was set aside. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse, Mr. Dushyant Dave, learned Senior Counsel appearing for respondent no. 1 submitted that the declaration, if any, made about availability of funds was really not relevant in view of the Act, more particularly, Sections 17, 46, 58 and 55. With reference to sub-section (2) of Section 47 it was submitted that consequences for non-payment under Section 46 were laid down. Section 72 deals with the situation when the importer is unable to pay and consequentially interest becomes chargeable. This made the position clear that only consequence of non-payment of duty in time is levy of interest. 26. The show cause notice itself indicated that the goods were removed on 25-2-1999. There was no wilful mis-declaration. There was a special procedure available when the banks were on strike. Rule 79(1)(b) of the Treasury Rules clearly indicate the date which is to be reckoned for ascertaining the date on which amount is treated to be paid. The mis-declaration aspect is relevant only for the purpose of Section 28 and for considering whether extended period of limitation applies. That issue is not relevant in the present case and only issue is whether Section 15(1)(b) or Section 15(1)(c) is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other's loss. It is a cheating intended to get an advantage. (See S.P. Changalvaraya Naidu v. Jagannath [1994 (1) SCC 1]. 31. ''Fraud'' as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes 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. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury enures therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false". But "fraud" in public law is not the same as "fraud" in private law. Nor can the ingredients, which establish "fraud" in commercial transaction, be of assistance in determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawaja v. Secretary of State for Home Deptt. (1983) 1 All ER 765, that it is dangerous to introduce maxims of common law as to effect of fraud while determining fraud in relation of statutory law. "Fraud" in relation to statute must be a colorable transaction to evade the provisions of a statute. "If a statute has been passed for some one particular purpose, a court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which is quite foreign to its object and beyond its scope. Present day concept of fraud on statute has veered round abuse of power or mala fide exercise of power. It may arise due to overstepping the limits of power or defeating the provision of statute by adopting subterfuge or the power may be exercised for extraneous or irrelevant con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentation, if it was at the material date false in substance and in fact. Section 17 of the Contract Act defines fraud as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud, arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of the fact with knowledge that it was false. In a leading English case Derry v. Peek [(1886-90) ALL ER Rep 1: (1889) 14 AC 337 (HL)] what constitutes fraud was described thus; (All ER p. 22 B-C). 'Fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false'." 34. This aspect of the matter has been considered recently by this Court in Roshan Deen v. Preeti Lal [2002 (1) SCC 100] Ram Preeti Yadav v. U.P. Board of High School and Intermediate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Strong reliance was placed by learned Counsel for respondent no. 1 on Derry's case (supra). It was pleaded that respondent no. 1 had acted with reasonable belief about availability of fund. Merely because funds were not actually released, it cannot be held to be a mis-declaration. It is to be noted that it has to be factually in each case concluded as to whether fraud is established. It would depend on the facts of each case. In the present case even if respondent No. 1's stand is accepted at the most there was an assurance to provide funds. The same by no stretch of imagination, equated with funds already available. There is a gulf of difference between assurance to provide financial assistance and in reality providing finance assistance. In the latter case only there is availability of funds. 41. The word "reasonable" signifies "in accordance with reason". In the ultimate analysis it is a question of fact; whether a particular act is reasonable or not depends on the circumstances in a given situation. 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learance related work. In his letters to the Customs authorities he clearly stated about availability of funds when moving for cancellation of warehouse licence. He also played active part in ensuring that the Bank does not return the cheque. 44. In view of the aforesaid, it was concluded by the Commissioner that in respect of the imported goods the aforesaid three persons have done or omitted to do acts which acts or omissions have rendered such goods liable for confiscation and they had also abetted in acts which they knew or had reasons to believe that the goods are liable to confiscation under Section 112(i) of the Act and rendered themselves liable to action under Section 112(a) of the Act. Accordingly penalties as noted above were levied on respondents 2, 3 and 4. 45. As. regards the Departmental Officials (respondents 5 to 7) the Commissioner took note of several factors. (1) As regards Sri S.P. Chaudhuri it was noted that notwithstanding specific direction of Superintendent (Tech). Jamnagar to the effect 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 rem ..... 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