2004 (10) TMI 606 - SC - Indian Laws

Non-applicability of Trade Notice and false declaration regarding cheque payment - Cancellation of warehousing license obtained by fraud - Evasion of duty by mala fide intent - willful mis-declaration and suppression of facts - Confiscation - penalty - Involvement of respondents 2 to 7 - HELD THAT - The CEGAT on the Issue no.1 observed that Commissioner failed to notice about non-applicability of Trade Notice. It was held that there was finding recorded that facility of cheque 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. 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. From the record 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 (j) of the Act and rendered themselves liable to action under Section 112 (a) of the Act. Accordingly penalties as noted above were levied on the respondents 2 3 and 4. 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 allegations regarding accepted backdating or acting contrary to specific directions. Sri Sharma was given a clean chit in view of the finding recorded about the date on which receipt of payment has to be taken. Here again the allegations were not considered in the proper perspective. The findings regarding deemed removal are really inconsequential in the present dispute as the very foundation for removal was based on established fraud. Therefore it is not necessary in the present dispute to go into the question regarding effect of deemed removal. The Supreme Court found that the CEGAT did not properly consider the fraudulent acts and mis-declarations by the respondents. The manipulative roles of respondents 2 to 7 were clearly established and they were active participants in the fraud leading to duty evasion.

Summary

Issues Involved:
1. 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.
2. The date for determination of rate of duty, and whether the Warehouse License could be treated as cancelled as detailed in the impugned show cause notice.
3. Whether the charge of evasion of duty by malafide intent of wilful misdeclaration, suppression of facts with an intent to evade the payment of duty, etc. as alleged 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 the noticee M/s. EOL is leviable under Section 114 A or Section 112(a)/(b) of the Customs Act, 1962.
6. 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.

Issue-wise Comprehensive Details:

Issue 1:
- Commissioner: Held that duty could not be treated as paid on 25.2.1999 due to mis-declaration about availability of funds. The cheque was not honored until 17.3.1999.
- CEGAT: Concluded that duty was paid on 25.2.1999 since payment of cheque relates back to the presentation and the cheque was not dishonored.

Issue 2:
- Commissioner: Held that cancellation of warehousing license was obtained by fraud and Section 15(1)(c) was applicable.
- 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) was applicable.

Issue 3:
- Commissioner: Held that charge of evasion of duty by mala fide intent, wilful mis-declaration, suppression of facts was clearly established.
- CEGAT: Held that there was no willful mis-declaration, no evasion or short levy. The declaration was made under bona fide belief.

Issue 4:
- Commissioner: Held that goods were liable for confiscation under Section 111(j) as deemed removal was contrary to the permission and fraudulent intention was clearly established. Redemption fine of Rs. 20 crores was imposed.
- CEGAT: Held that there could not be any confiscation as goods had been cleared under a permission.

Issue 5:
- Commissioner: Held that Section 114A was not invokable. However, penalty of Rs. 10 crores was imposed under Section 112(b).
- CEGAT: Set aside the penalties holding that respondent nos.2 to 7 had not committed any breach.

Issue 6:
- Commissioner: Held that respondents 2 to 7 were involved in the fraud, and levied penalties under Section 112(a).
- CEGAT: Set aside the penalties holding that respondent nos.2 to 7 had not committed any breach.

Supreme Court Decision:
- The Supreme Court found that the Tribunal failed to consider the fraudulent acts and mis-declarations by respondent no.1 and its officials.
- It was held that the declaration about availability of funds was fraudulent, and the duty was not paid on 25.2.1999.
- The Supreme Court restored the order of the Commissioner, confirming the demand of duty, confiscation of goods, and imposition of penalties.
- The appeals were allowed with no order as to costs.