Case: Commnr. Of Customs, Kandla Vs. M/S. Essar Oil Ltd.

has quoted from In re Nice & Schreiber 123 F. 988 to give a plausible meaning for the said word. He says, the expression reasonable is a relative term, and the facts of the particular controversy must be considered before the question as to what constitutes reasonable can be determined." 43. 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.44. So far the respondents 2 to 4 are concerned, the Commissioners 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 that 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. 45. 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 4.46. As regards the Departmental Officials (respondent 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 removal for the purpose of cancellation of warehouse licence. All the three officers failed to take note the physical removal of approximately 20.000 Mts. Cargo covered under 84 Bills of Entry from the bonded warehouse could not have been possible in a short span of one day. The officers acted in undue haste and resorted to backdating as a accepted by them in their statements. It was noted that the three officers were located far apart from each other. Therefore, processing the files at various stages and/ or places on the same day is not practicable. The sequence of processing files confirmed the backdating of documents which was admitted by the officers. The prime responsibility for scrutinizing the relevant documents was on Sri A.C. Sharma who failed to do that. The other officers committed acts of omission under the overall guidance and supervision of Sri Sharma. The plea for protection under Section 155 of the Act was rejected. Penalty under Section 112(a) in respect of each of the officers was levied.47. 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.48. The manipulative role of respondents 2 to 7 have been clearly established. They were clearly active participants in the well-planned deception and fraudulent acts pleading 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.49.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]So far as Issue No.3 is concerned, in view of the operative portion of the order of the Commissioner was to the effect that the goods valued at Rs. 599,26,00046 was to be confiscated under Section 111(j) of the Act as the imported goods except good worth Rs. 73.93 crores which were covered by corporate guarantee. Redemption fine of Rs. 20 crores in view of confiscation was imposed. Total demand of Rs. 96,26,91.711/- was confirmed under Section 28(1) proviso of the Act as also in terms of statement made on behalf of respondent no.1 before the Gujarat High Court on 17.5.1999. The duty was worked out on the basis of computation in the show cause notice. Penalty of rupees ten crores was imposed on respondent no.1 under Section 112(b) of the Act. Penalty of rupees one crore was levied on respondent no. 2 under Section 112(a). Penalty of rupees 25 lakhs and rupees 10 lakhs was imposed on respondents 3 and 4 respectively under Section 112(a) of the Act. Penalty of rupees 5 lakhs was imposed on Shri A.C. Sharma, Deputy Commissioner of Central Excise. Rupees 50,000/- and rupees 25,000/- were imposed as penalty respectively on customs officials i.e. S.P. Chaudhary and Shri K.N. Thakar under Section 112(a) of the Act. Recovery of interest leviable under Section 17(2) and Section 28AB of the Act was directed. Direction was given that deposits made towards duty were to be adjusted against duty and interest liability as determined. As noted above appeals were filed before CEGAT by the present respondents. Their basic stand was that Section 15(1)(c) had no application and it was Section 15(1)(b) of the Act which applied. It was submitted that when the cheque has been cleared and honored 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.It is to be noted that the plea that in view of special statutory prescriptions reference to the trade notice was unnecessary does not appear to have been pleaded or considered by the CEGAT which proceeded only to determine the issue as to on which date the payment shall be reckoned to have been made. The entire case of the revenue was built around the alleged fraudulent acts of respondent no.1 and its officials and the customs officials. According to the revenue it was clearly a case where the declaration was done with fraudulent intention, with planned design to evade duty. Several aspects were highlighted to show that the respondent no.1 and its officials were acting with fraudulent intention. The Tribunal did not even consider the effect of those acts.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.44. So far the respondents 2 to 4 are concerned, the Commissioners findings were asRespondent 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 that 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 4.46. As regards the Departmental Officials (respondent 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 removal for the purpose of cancellation of warehouse licence. All the three officers failed to take note the physical removal of approximately 20.000 Mts. Cargo covered under 84 Bills of Entry from the bonded warehouse could not have been possible in a short span of one day. The officers acted in undue haste and resorted to backdating as a accepted by them in their statements. It was noted that the three officers were located far apart from each other. Therefore, processing the files at various stages and/ or places on the same day is not practicable. The sequence of processing files confirmed the backdating of documents which was admitted by the officers. The prime responsibility for scrutinizing the relevant documents was on Sri A.C. Sharma who failed to do that. The other officers committed acts of omission under the overall guidance and supervision of Sri Sharma. The plea for protection under Section 155 of the Act was rejected. Penalty under Section 112(a) in respect of each of the officers was levied.47. 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.48. The manipulative role of respondents 2 to 7 have been clearly established. They were clearly active participants in the well-planned deception and fraudulent acts pleading 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.