COMMISSIONER OF CUSTOMS, KANDLA versus ESSAR OIL LTD. AND ORS.

Citation: [2004] SUPP. 5 S.C.R. 166 · Decided: 07-10-2004 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
COMMISSIONER OF. CUSTOMS, KANDLA 
v. 
ESSAR OIL LTD. AND ORS. 
OCTOBER 7, 2004 
[ARIJIT PASAYAT AND C.K. THAKKER, JJ.] 
Fraud-Cheque with declaration of sufficiency of funds-Issued on 
indication of willingness by financial institution to provide necessary funds-
C On likelihood of its return for insufficiency of funds, drawer asking its bank 
time and arranging them after over two weeks whereupon cheque was 
honoured-Held that at the most there was assurance by financial institution 
to provide funds which could not be equated with funds already available-
As drawer of cheque was aware about non-availability of funds, it was a case 
of misdec/aration with fraudulent motive. 
D 
Customs Act, I 962 
Duty payment by cheque-Date of receipt is governed by Rule 20 of the 
Central Government Account (Receipt and Payment Rules, 1983)-Rule 8 of 
the Central Excise Rules, I 944 provides only the mode of payment and does 
E not wipe out effect of Rule 20-Rules 70 and 80 of Central Treasury Rules are 
inapplicable. 
F 
Duty payment by cheque on out-station bank-Permission to pay given 
with reference to a departmental trade notice-Held, Not open to drawer of 
cheque to contend that trade notice was of no consequence. 
Sections I 5(J)(b)/(c), 68-Warehouse licence-Cancellation obtained 
by fraud-Date for determination ofrate of duty-Held, in accordance with 
Section I 5(J)(c), it was date of its payment-It was not the day of deemed 
removal from the warehouse, as per Section I 5(b), as foundation for removal 
G was based on established fraud 
H 
Section I I 2(b)-Penalty-lmposition of-Revenue officers and employee 
of importer company actively participating in a well-planned deception and 
fraudulent acts leading to evasion of duty-Wilful aisregard and deliberate 
defiance of statutory provisions established-Held, Levy of penalty on them 
166 
COMMISSIONER OF CUSTOMS, KAND LA v. ESSAR OIL LTD. 
167 
was warranted 
A 
Words and phrases-'Fraud' 'Reasonable'-Meaning of 
Respondent No. 1 had imported plant and machinery for its refinery 
project and they were lying for a few years stored in their private bonded 
warehouse. Apprehending the possibility of imposition of duty on these B . 
goods in the coming budget, they got them assessed at prevalent duty. Next 
day they requested a financial institution for immediate release of 
necessary funds for payment of duty to avoid project cost over-run. On 
indication of willingness by said institution to do so, they made payment 
of duty to appellant revenue by cheque dated 25.2.1999. However, on 
25.2.1999 and 26.2.1999, as the banks had declared a strike, it was C 
accompanied with, in accordance with Trade Notice 75/85, a declaration 
that they had sufficient balance in their account. Their application for 'out 
of charge' order was accepted and warehousing licence cancelled, though 
goods were not physically removed. The cheque came for collection in 
appellant's bank on 27.2.1999, on a day when Union budget enhanced the D 
duty on the impugned goods from 'nil' to 5%. As funds were not received 
in appellant's bank, first respondent's bank prepared an inter office memo 
advising former that the cheque has been returned unpaid. On 1.3.1999 
respondent no.1 wrote to their bank that they were arranging for transfer 
of funds and requested them not to send that memo. On 3.3.1999 oral 
information was given by respondent no. 1 to Customs Authorities about · E 
non-availability of funds. The funds were finally arranged on 16.3.1999 
and the cheque was honoured on 17.3.1999. 
Appellant issued show cause notice against respondents. 
Commissioner adjudicating it confirmed allegations of deliberate F 
misdeclaration about availability of funds in their bank by respondent no.I 
and upheld the demand for enhanced duty as the same came into force 
before encashment of cheque. He also held that as cancellation of 
warehousing licence was obtained by fraud, the goods were liable to be 
assessed under Section 15(l)(c) of Customs Act, 1962. Against 
departmental officers it was found that they acted against specific direction G 
to them that date of cancellation of the warehousing licence should be when 
goods were actually removed from there; that they failed to take note that 
physica\ remova\ of huge quantity of cargo could not actually take place 
within a day; that they were located far apart from each other, so 
processing of file was at various stages was not possible on same day; that H 
16

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