2003 (3) TMI 396 - AT - Customs

Payment of duty by cheque - Date of payment - Rate of duty - Demand - Limitation - Confiscation and penalty

Summary

Issues Involved:
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.
2. The date for determination of rate of duty, and whether the warehouse licence could be treated as cancelled as detailed in the impugned show cause notice.
3. Whether the charge of evasion of duty by mala fide intention of wilful misdeclaration and suppression of facts with an intent to evade payment of duty as held in the show cause notice is established.
4. Whether the goods are liable to confiscation under Section 111(j) of the Customs Act 1962.
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.
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.

Issue-wise Detailed Analysis:

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 held 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. The plea of EOL that unless the cheque is dishonoured by the bank, payment made would date back to the date when cheques were handed over, was not tenable. The Commissioner observed that there is overwhelming evidence to conclude that the duty cannot be treated to have been paid on the 25th February, 1999, as EOL had no balance in their account for encashment of the impugned cheques and had knowingly misdeclared to the department that they have sufficient bank balance.

Findings:
The Trade Notice and the procedure set out thereunder, which was followed by EOL, provide for payment of duty by cheque in certain circumstances. The Central Treasury Rules also provide for payment of Government dues by cheque. The law as to what is the date of payment in cases where payment is made by cheque is well settled. The date of presentation of cheques by M/s. EOL, i.e., 25-2-99, is to be treated as the date of payment of duty as the cheques were not specifically dishonoured. The Commissioner's reliance on an Inter Office Memo prepared by State Bank of Saurashtra with remarks "returned unpaid" does not amount to dishonour as per Section 138 of the Negotiable Instruments Act.

Issue No. 2: The date for determination of rate of duty, and whether the warehouse licence could be treated as cancelled as detailed in the impugned show cause notice:
The Commissioner held that the goods have been removed from the warehouse contrary to the terms of the licence cancellation order, resulting in clearance of Customs bonded goods without payment of duty. The Commissioner 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.

Findings:
The date of payment of duty is 25-2-99, which is the date of presentation of cheques. All the requirements of Section 68 of the Customs Act have been complied with by M/s. EOL. The relevant rate of duty applicable to imported goods shall be the rate in force on the date on which goods are actually removed from the warehouse. The Tribunal's decision in the case of Montana Valves & Compressors (P) Ltd. is applicable to the facts of the present case. The Commissioner's reliance on the Apex Court decision in the case of Chowgule & Co. Pvt. Ltd. is misplaced. The provisions of Section 15(1)(b) of the Customs Act will apply, and the date of removal from the warehouse is 25-2-99.

Issue No. 3: Whether the charge of evasion of duty by mala fide intention of wilful misdeclaration and suppression of facts with an intent to evade payment of duty as held in the show cause notice is established:
The Commissioner held that the appellants gave a false declaration on 25-2-99 without having sufficient balance in their account, and 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.

Findings:
The charge of evasion of duty is not established. The ingredients of the proviso to Section 28(1) which has been invoked are not met. The declaration given on 25-2-99 regarding availability of sufficient balance in the bank account was made under a bona fide belief that funds would be released to EOL by ICICI on 25-2-99. The Commissioner's conclusion that the declaration on 25-2-99 was false and intentional is incorrect. The action of M/s. EOL in pursuing the matter of cancellation of licence cannot amount to any wilful misstatement or suppression of facts.

Issue No. 4: Whether the goods are liable to confiscation under Section 111(j) of the Customs Act 1962:
The Commissioner held that the goods are liable to confiscation as deemed removal from the Customs bonded warehouse was contrary to the permission for deemed removal (cancellation of the warehouse licence) as the warehoused goods had escaped payment of appropriate duty.

Findings:
The provisions of Section 111(j) are not applicable. The goods have been cleared with the proper officer's permission. The finding that the goods were cleared without payment of duty is not sustainable. The reliance placed by the Commissioner on the Apex Court judgment in the case of Jain Shudh Vanaspati Ltd. is misplaced.

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 held that the provisions of Section 114A are not applicable as it is not a case of short levy. However, he 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:
In view of the earlier finding that the goods are not liable to confiscation under Section 111(j), penal action under Section 112 cannot be sustained. The Commissioner himself having held that it is not a case of short levy, he cannot impose penalty under Section 112(b). The penalty imposed upon M/s. EOL cannot sustain and is accordingly set aside.

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:
The Commissioner held that Shri S.R. Agarwal 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:
The goods in dispute were not liable to confiscation under Section 111(j). Hence, no penal action lies against the officers of M/s. EOL. The factual position regarding the promise by ICICI to release funds proves the bona fides of Shri S.R. Agarwal. The charge of aiding and abetting against Shri Thaker and Shri Choudhary cannot sustain.

Conclusion:
- The date of presentation of cheques by EOL i.e. 25-2-99 is the date of payment of Customs duty on the goods in question.
- The date for determination of rate of duty is 25-2-99.
- The charge of evasion of duty is not established.
- Confiscation of goods under Section 111(j) of the Act is not sustainable.
- Penalties imposed on M/s. EOL and the officers of M/s. EOL and officers of the Department are set aside.
- The duty payable on the goods in question is Rs. 60,03,13,424/- and the demand of Rs. 36,23,78,287/- paid in excess is set aside. The appeals are allowed with consequential relief of refund of Rs. 36,23,78,287/- to M/s. EOL in accordance with law.