Commissioner Of Customs, Kandla vs Essar Oil LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2004 Supreme(SC) 1270

SUPREME COURT OF INDIA
Arijit Pasayat : C.K.Thakkar
Commissioner Of Customs, Kandla
Versus
Essar Oil Ltd.And Ors.
Case No. : 4299-4305 of 2003
Date of Decision : 10/7/04
Advocates Appeared: R.Mohan : Nisha Bagchi : T.A.Khan : P.Parmeswaran : B.Krishna Prasad : Dushyant Dave : Jayant Das : Mahesh Agrawala : Manu Krishnan : Rishi Agrawal

Headnote:
A. Customs Act, 1962, Section 15(1)(c) and 111(j) - Contract Act, 1872, Section 17- Evasion of Customs Duty - Respondent No. 1 imported plants and machineries for its refinery project - It was alleged that fraud was practised by respondent No. 1 in connivance with the other respondents and an attempt was made to defraud revenue and evade duty- Assessee made payment of duty vide cheque dated 25.2.1999 making declaration that it had sufficient bank balance - On the basis of this declaration, goods cleared without payment of duty - Action was also taken against the customs officials i.e. respondent Nos. 5 to 7 for their alleged abatement in the action and the act of collusion - Commissioner confirmed the demand of duty and also directed confiscation of goods and imposition of penalty- The plea of bona fide error of judgment and lack of collusion with officers also rejected- CEGAT allowed the appeal treating the duty having been paid- Not proper- 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 -It 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- paras 37 t0 43
B. Customs Act, 1962, Section 15(1)(c) and 111(j)- Fraud in collusion with revenue officials- Commissioner observed that in respect of the imported goods the officials 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-The manipulative roles of respondents 2 to 7was clearly established- They were clearly active participants in the well-planned deception and fraudulent acts leading to evasion of duty- The order of CEGAT set aside and appeal allowed-paras 44 to 48
C- Fraudulent acts of assessee - Meaning of Fraud - Fraud" vitiates every solemn Sact-Fraud and justice never dwell together- Fraud is a conduct either by letter or words, which induces 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[Paras 31 to 40]

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 the4. 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 alongwith 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 w

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