IMPORTANT POINT
Levy of penalty and direction for confiscation of goods are clearly warranted where there is wilful disregard and deliberate defiance of statutory provisions of the Customs Act.

Headnote:(i) Customs Act, 1967-Sections 15(1), 68, 111(j), 112(a) and (b)-Central Treasury Rules-Rules 79 and 80-Deception and fraudulent acts leading to evasion of duty on part of a company-Wilful disregard and deliberate defiance of statutory provisions-Fraud practised by the company in connivance with its officials-Attempt made to defraud revenue and evade duty-Respondent 1, a company imported plants and machineries worth Rupees 600 crores for its refinery project-Imported goods were stored in private bonded warehouse-General bond of Rs. 120 crores was executed by respondent 1 to secure payment of customs duty-Payment was made by cheque-Cheque returned unpaid as funds not received in revenue account-Respondent then arranged funds to cover the cheque amount which was credited to Government s account-Show cause notice issued to respondent assessee on imported goods u/s 15(1)(c) of the Act-Commissioner held that duty could not be treated as paid in view of misdeclaration about availability of funds-It was held that charge of evasion of duty by mala fide intent, wilful mis-declaration, suppression of facts was established-However, CEGAT held that duty shall be treated to have been paid and that there could not be any confiscation as goods had been cleared under a permission-Whether CEGAT was justified in setting aside penalties-(No).
       Held : 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 message dated 24.2.1999 instructing to clear the goods at the current duty rate and not to expose to any change in the budget. His mala fide intents is apparent from the letters addressed by him to the Chief Commissioner and DRI authorities wherein he had significantly suppressed the fact that cheque had been tendered on the basis of a false declaration regarding availability of funds. All along he stuck to the plea that mere late realization was of no consequence and since cheque was not dishonored duty at post-budget rates cannot be levied.
       (2) Respondent No.3-Sri P.R. Ashok was fully aware of the fact about non-availability of funds. But he made a false declaration about sufficiency of funds. The cheque was not on a Bank at Jamnagar, but at Rajkot. This was a part of a well planned plan to perpetuate fraud.
       (3) Respondent No.4-Sri Nitin Bhat was in charge of Customs clearance 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.
       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(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. (Paras 42 to 44)
       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 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 willful 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. (Paras 46 and 47)
       (ii) WORDS AND PHRASES-Word fraud -Meaning-Intention to deceive-Deceit and injury to the person deceived-Fraud on Court.
       Held : 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 injury to the person deceived. Injury is something other than economic loss, that is, deprivation of property, whether movable or immovable or of money and it will include and any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non-economic or non-pecuniary loss. A benefit or advantage to the deceiver, will almost always call loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied. (Para 28)
       "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 willfully 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 deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. (Para 30)

JUDGMENT

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 (Respondent Nos. 5 to 7).

2. Backgrounds facts as projected by the appellant are as follows:

Sometime during 1997 respondent No.1 imported plants and machineries worth Rupees 600 crores for its refinery project. These imported goods were stored in private bonded warehouses, one of which is closed. The licences for the warehouses were valid upto 24.11.1999. General bond of Rs. 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.

3. 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 Rs. 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 was requested to complete the paperwork with customs authorities.

4. On 25.2.1999 respondent No.3 wrote a letter to the Superintendent of Central Excise Bonded Warehouse, Jamnagar, requesting him to pass necessary order for "out of charge" for the goods concerned. This letter is of considerable importance in the present dispute. This letter has to be considered along with letter of same date (i.e. 25.2.1999) written by respondent No.3 to Assistant Chief Accounts Officer (Excise & Customs) Rajkot. The controversy in the present matter basically revolved round this document. In the first letter reference was made to the challans issued for payment of duty on the bonded goods and the original acknowledgement of the Assistant Chief Accounts Officer towards payment of customs duty with applicable interest. The details of goods with relevant challans were also enclosed. The payment was made by cheque No. 1175298 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 the Assistant Commissioner and were accepted and processed. Consequently, the ware

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2004 Supreme(SC) 1260

IMPORTANT POINTLevy of penalty and direction for confiscation of goods are clearly warranted where there is wilful disregard and deliberate defiance of statutory provisions of the Customs Act.

Cases Referred (10)

IMPORTANT POINT
Levy of penalty and direction for confiscation of goods are clearly warranted where there is wilful disregard and deliberate defiance of statutory provisions of the Customs Act.