COMMISSIONER OF CUSTOMS, KANDLAversusESSAR OIL LTD. AND ORS.

A                  COMMISSIONER OF. CUSTOMS, KANDLA
                                  v.
                       ESSAR OIL LTD. AND ORS.

                                OCTOBER 7, 2004

B                 [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 offunds, 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 offunds, 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.

          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.
F
          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

          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
H                                        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
    168                      SUPREME COURT REPORTS [2004) SUPP. 5 S.C.R.

A whereas action was actually taken by them on 26.2.1999, they manipulated
    the date to show it as 25.2.1999, and same was confirmed by sequence of
    processing of files. Redemption fine in lieu of confiscation of the goods
    was confirmed. Penalty was imposed on respondent no.1, its officers and
    departmental officers - the other respon~en~s.

B         CEGAT reversed the order of Commissioner. It held that as
    requirement of Section 68 of Customs Act 1962 was not complied, goods
    were liable to be assessed under Section 15(1)(b) and not under Section
                                                                                   .....'
    15(1)(c). Relying on Central Treasury Rules 79 and 80, it concluded that
                                                          1




    when cheque is honoured the date on which cheque is received by
C   concerned authorities is the date of payment. It also held that departmental
    officers were not liable to penalty. Hence the present appeal.

          Appellants contended that in view of fraudulent mis-declaration
    about availability of funds, it was immaterial that the date to be reckoned
    was the date of receipt of cheque by the department though it was cleared
D   subsequently. Any act based on fraud vitiates the entire transaction. They
    further contended that manipulation of dates on record by departmental
    officers was established.

        Respondent no.t contended that declaratinn about availability of
  funds was irrelevant as the only consequence of non-payment of duty on
E time was levy of interest; that there was no willftif misdeclaration; that
  they acted on reasonable belief about availability of funds; that Rule 8 of
  Central Excise Rules 1944 stated due date was date of payment by cheque
  even if cheque it was encashed later. Along with other respondents, they
  contended that for any unintentional breach penalty was not to be levied.
F         Allowing the appeals, the Court

        HELD 1.1. It has to be factually in each case concluded as to whether
  fraud is established. It would depend on the facts of each case. In the
  present case even if respondent no.1 's stand is accepted at the most there
G was assurance to provide funds. The same by no stretch of imagination,
  equated with funds already available. There is a gulf of difference between
  assurance to provide financial assistance and in reality providing finance
  assistance. In the latter case only there is availability of funds. [184-F, GI

          1.2. It is clear that respondent no;l was aware that there was no fund
H   available. In fact, from 3.3.1999 it accepted the position that there was no
                 COMMISSIONER OF CUSTOMS, KANDLA v. ESSAR OIL LTD.       169
fund available and was asking for time to arrange funds. This clearly A
indicated fraudulent motive and the declaration given was certainly
misdeclaration. Therefore, the CEGAT was not right in its conclusions
about inapplicability of Section 15(1)(c) to the facts of the case. The
demand of duty and order of confiscation by the Commissioner is clearly
sustainable. [185-C)
                                                                                B
     1.3 .The findings of CEGAT 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.
                                                                      [187-B)   C
     Dr. Vim/av. Delhi Administration, (1963) Supp. 2 SCR 585; Indian
Bank v. Satyam Febres (India) Pvt. Ltd., [1996) 5 SCC 550; S.P.
Chenga/varaya Naidu v. Jagnnath (1994) 1 SCC 1; Ram Chandra Singh v.
S~itri Devi and Ors., (2003) 8 SCC 319; Shrishti Dhawan (Smt.) v. Mis Shaw
Brothers, (1992] 1 SCC 534; Roshan Deen v. Preeti Lal, [2002) 1SCC100;          D
Ram Preeti Yadav v. UP. Board of High School and Intermediate Education,
[2003) 8 SCC 311; Ashok Leyland Ltd v. State of T.N. and Anr., (2004) 3
SCC 1 and Gowrishankar v. Joshi Amba Shankar Family Trust, (1996) 3 SCC
310, relied on

      Derry and Ors. v. Peek, (1886-90) All ER 1; _"f(hawaja v. Secretary of    E
State for Home Dept!., (1983) 1 All ER 765; Lazarus Estate Ltd. v. Beasley
[1956) 1 QB 702 and In re Nice & Schreiber 123 F. 987, referred to

     Webster's Third New International Dictionary; Black's Legal Dictionary;
Concise Oxford Dictionary; Halsbury's Laws of England; Words and Phrases        F
{Permanent Edition), referred to.

      2. Rules 79 and 80 of the Treasury Rules were relied upon
overlooking the effect of the Central Government Account (Receipt and
Payment Rules, 1983) which clearly stipulates as to the relevant date of
receipt. Rule 20 is relevant in this regard. Rule 8 of Central Excise Rules, G
1944 really operates in different field together. It has nothing to do with
date of receipt. It only provides the mode of payment. It does not and
cannot wipe out effect of Rule 20 of Central Government Account (Receipt
and Payment Rules, 1983). Otherwise Rule 20 will become dead letter. This
question need not be gone into in great detail because clearly Rules 70
and 80 of Central Treasury Rules are not applicable as they are applicable H
    170                      SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A to situation indicated in Rule l(a) and have no application to present case.
                                                                  (184-C, D, E)

           Commissioner ofCentral Excise, Jaipur-/ v. Genus Overseas Electronics   <
    Ltd., (2003) 155 ELT 541, held inapplicable.

B         3.1. CEGAT did not consider the aberrations of departmental
    officers highlighted by the Commissioner and in a very cryptic manner
    dealt with the issues. No plausible reason has been indicated as to why
    the all~gations which are quite serious and the conclusions !n relation
    thereto recorded by the Commissioner were not to be maintained. Only
    an abrupt conclusion was reached that they had absolutely no connection
C   with the acceptance of cheques. (186-H; 187-A)

        3.2. 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
D 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. (187-CJ

         4. JJ is not open to respondent no.I to contend that trade notice is of
E   no consequence when the permission to pay by cheque on out-station bank
    was given with reference to the trade notice. (184-B)

         CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4299-
    4305 of 2003.

p         From the Judgment and Order dated 27.3.2003 of the Central Excise
    Customs and Gold (Control) Appellate Tribunal, West Regional Bench at
    Bombay in A.No.C/793 to 796, 700, 7_01 and 712 of2002-Bom in F.O. Nos.
    C.1/855-61/WZB/2003.

          R. Mohan, Additional Solicitor General, Ms. Nisha Bagchi, T.A. Khan,
G P. Parmcrswaran and B. Krishna Prasad with him for the Appellant.
          Dushyant Dave and Jayant Das, Mahesh Agrawala, Manu Krishnan,
    Rishi Agrawal and E.C. Agrawala with them for the Respondent Nos. 1-4.

        ·Devan Parekh, Sarvesh Singh, Ms. Nandini Gore and Mrs. Manik ·
H   Karanjawala for the Respondent Nos. 5-6.
       COMMISSIONER OF CUSTOMS, KANDLA v. ESSAR OIL LTD. [PASAYAT, J.]      171
     Ajay Sharma, Ru~esh Kumar, Ms. Neelam Sharma and Tara Chandra                 A
Sharma for the Respondent No.7.

      The Judgment of the Court was delivered by

      ARIJIT PASAYAT, J. These appeals by the Revenue are directed
against the common judgment passed by the Customs Excise and Gold                  B
(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,
1962 (in short the 'Act') levied/imposed on respondent no.I Mis Essar Oil
Limited (hereinafter referred to as the 'assessee'), its officers (Respondents     C
nos. 2 tQ 4) and officials of the Customs Department (Respondent nos. 5 to
7).

      Backgrounds facts as projected by the appellant are as follows:

      Sometime during 1997 respondent no. l imported plants and machineries        D
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. I under Section 59(2) of the Act to secure
payment of customs duty. Between 18 and 23 .2.1999 respondent no. l
submitted 84 ex-bonds bills of entry which were assessed to customs duty at        E
the prevalent rate and corresponding TR-6 Challans for payment of duty
were handed over to the assessee.

      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        F
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. l 00 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            G
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.

                                                                                   H
    172                        SUPREME COURT REPORTS [2004) SUPP. 5 S.C.R.

A          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
B   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
C   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. I 999 addressed to the Chief Accounts
D   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. I I 75298 dated 25.2. I 999. A
    declaration was made that respondent no. I had "sufficient bank balance" in
    its account in State Bank of Saurashtra, Jamnagar on whom the cheque was
E   drawn and same shall be honored and cleared by the bankers "as and when
    presented by the concerned office": On 25.2. I999 the application was endorsed
    for acceptance by the Assistant Commissioner and were accepted and
    processed. Consequently, the warehousing licence was cancelled on the
    strength of the cheque payment though the goods were not physically moved
    from the warehouse.
F
          After the banks strike was over, the cheque was deposited for collection
    at the Rajkot, on 27.2.1999. On the same day at the close of office hour the
    rate of customs duty was enhanced from nil basic duty to 5% on the Union
    Budget.

G         On 1.3.1999 respondent no.1 wrote to his bank that they were arranging
    for transfer of funds from Mumbai by 2.3.1999. As the funds were not
    received in the revenue accounts, respondent no.l's banker at Saurathtra
    prepared an inter office memo advising appellant's bank at Rajkot that the
    cheque issued by respondent no. I had been returned unpaid. However, the
H   memo was not sent to the bank, as respondent no. I wrote several letters to
       COMMISSIONER OF CUSTOMS, KAND LA v. ESSAR OIL LTD. [PASAYAT, J.]   J73

 their banks at Jamnagar requesting that cheque be withheld till funds were     A
 arranged by them. On I6.3.1999 finally respondent no.I arranged funds to
 cover the cheque amount which was honored and credited to the Government's
 account on I 7.3 .1999.

         Investigations were carried out by various governmental agencies and
  respondents 2 to 4 were arrested on 6.5.I999. Their bail application was B
  rejected by concerned magistrate. On I 7.5.1999 the Gujarat High Court granted
  bail to them on the unconditional undertaking by the:r counsel appearing
  before the High Court that the amount of enhanced customs duty will be paid
· in three instalments by 3 I st July, I 999. On 22.8. I 999 a show-cause notice
  was issued to the respondent no. I-assessee proposing to levy duty on the C
  imported goods under Section I 5( I)( c) of the Act°:· It was alleged that fraud
  was practised by respondent no. I in connivance with the other respondents
  and an attempt was made to defraud revenue and evade duty. Reference was
  made to the background facts as highlighted above. It was also pointed out
  that Mr. J.K. Singh, Director of the respondent no. I -company stated that
  there was no requisition for imported goods in February, I999. Statement of D
  respondent no.2 recorded on 5.5. I 999 showed that funds were expected to be
  arranged, respondent no.1 decided to make payment by cheque. Respondent
 no.2 admitted that discussions were held with ICICI Ltd. on 3.2.1999. Funds
 were not provided by_ the said financial institution and ultimately the funds
 were arranged from the Punjab National Bank. Statements ofNitin Bhatt and E
  P.R. Ashok i.e. respondent nos. 4 and 3 respectively were recorded which,
  inter a/ia, indicated that respondent no. l wanted to avoid any adverse impact
  of the budget. Investigation further revealed that sufficient fund was not there
  in respondent no.l's account till evening of24.2.~999. False declaration was
  made regarding sufficiency of funds on 25 .2. I 999. Investigation also revealed
 that one of the departmental officials i.e. respon~ent no.6 A.K. Thaker had F
 manipulated dates and instead of the actual date of26..2.I999, he had indicated
 that the action was taken on 25.2.1999. Statement of Shri L. Ghosh, Chief
 Manager of State Bank of Saurashtra at Jamnagar indicated that the cheque
 as issued by respondent no. I was intended to be returned to the clearing bank
 at Rajkot and telephonic information to this effect was given to the Chief G
 Manager of the bank at Rajkot. A written notice was prepared. The same was
 not sent at the request of respondent no. I and contrary to the established
 practice and procedure of the bank and governing regulations cheque was not
dishonored. The instructions of State Bank of Saurashtra Manual, inter alia,
provides and requires that non-payment of clean demand bill must be advised
to the purchasing office and advice must be sent by telegram. The advice is     H
    174                       SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A to be sent not later than the close of the day following the close of the day
    following the presentation of the Bill. A departure was made in the present
    case. The concerned Bank was requested not to dishonour the cheque. As late
    as on 3rd March, 1999 oral infonnation was given to Customs officials about
    non-availability of funds. Thereafter on several dates the assessee requested
B   the Banks to delay action at their ends. The trade notice referring to which
    letter was written to accept cheque was not applicable to the Banks strike as
    the same was a pre-notified strike and was for two days.

           Statement of Mr. Rak Hashiya, of State Bank of Saurashtra, Rajkot was
    to the effect that normal procedure was to return the cheque on the day it is
C   presented if the funds were not there. His further statement was to the effect
    that he had advised N.C. Goplani that the cheque may be retained for two to
    three days only after both the customs authorities and the respondent no. I
    give consent letter, failing which the cheque was to be returned. He was
    informed on 5.3.1999 that there was no written consent of the customs
    authorities. The show cause notice referred to the correspondences between
D   respondent no. I and the b_ankers. It was alleged that the undertaking in the
    letter of respondent no. I dated 25.2.1994 clearly shows fraudulent attempt to
    misuse the bonafide facilities given in terms of trade notice as the respondent
    no. I was fully aware that they had not received the funds at Jamnagar. After
    referring to the various aspects the investigating authority came to conclude
E   that the duty rate on February I 999 was effectively nil and hence any variation
    could only be upwards. Though no funds were transferred to the respondent's
    bank in the evening of24.2. I999, a letter was issued containing clear me11tion
    about availability of funds. The accusations in essence were that there was
    deliberate mis-declaration to ensure evasion from rate changes. Since the rate
    of duty was enhanced prior to encashment of cheque, there was liability to
F   pay enhanced rate of duty. The clearance of goods was effected without
    payment of appropriate duty. There was no requirement of the imported
    goods by respondent no. I which created a fiction of deemed duty payment
    and deemed removal, with the full" knowledge that there was non-availability
    of funds. There was no scope of clearance in terms of Section 68 in the
G   absence of duty being paid. The cancellation of warehousing licence was
    obtained by fraud as duty had not been deposited. Hence duty payable is
    covered under Section 16(l)(c) of the Act. Action was taken against the
    customs officials i.e. respondent nos. 5 to 7 for their alleged abatement in the
    action and the act of collusion as established by manipulation of records.
    They had done or omitted to do acts which acts or omissions rendered the
H   goods liable for confiscation. Accordingly, respondent no. I was required to
        COMMISSIONER OF CUSTOMS, KAND LA v. ESSAR OIL LTD. [PASA YAT, J.]    17 5
show cause as to why goods removed contrary to terms of the permission for          A
such removal should not be confiscated under Section I I IG), and since goods
were removed on cancellation of licence based on false declaration without
payment of duty at the rate prevalent on I 7.3. I 999, duty shall not be demanded
and it was proposed in addition, to levy penalty on respondents 2 to 7 and
interest on respondent no. I.
                                                                                    B
      The Commissioner framed six issues. They are as follows:

       (i)   Whether duty could be treated to have been paid on the 25th
             February, I 999 (the date of presentation of the cheques by Mis.
             EOL) in the facts and circumstances of the case;                       C
       (ii) 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;

       (iii) Whether the charge of evasion of duty by malafide intent of
             wilful misdeclaration, suppression of facts with an intent to evade D
             the payment of duty, etc. as alleged in the show cause notice is
             established;

       (iv) Whether the goods are liable to confiscation under Section I I lG)"
            of the Customs Act, 1962;
                                                                                    E
       (v) To determine the appropriate penal clause invokable whether
            penalty against the noticee Mis. EOL is leviable under Section
            114 A or Section I I2(a)/(b) of the Customs Act, I962;

       (vi) The extent of involvement of the individual persons vis-a-vis
            evidence on record to sustain the charge of collusion on the part       F
            of the employees of notice viz. M/s. EOL and the officers of the
            department as detailed in the show cause notice.

      After considering show-cause reply filed by respondent no. I the
Commissioner Customs House, Kandla (in short 'Commis~ioner') confinned              G
the demand of duty and also directed confiscation of goods and imposition
of penalty. It is to be noted that respondent no. I, inter alia, contended that
there was no certainty that the rate of duty will be enhanced and that they
acted under a bona fide belief that the funds would be available on 25.2. I 996.
They also claimed bona fide error of judgment and lack of collusion with
                                                                                    H
    176                       SUPREME COURT REPORTS (2004] SUPP. 5 S.C.R.

A officers. The stand was not accepted by the Commissioner. Appeals were
    filed before CEGA T by the present respondent.

          So far as Issue no. I is concerned, the Commissioner held that the duty
    could not be treated as paid on 25.2.1999 in view of the mis-declaration
    about availability of funds. The fact that funds were not available was not
B   disclosed till 3 .3 .1999, even though concerned respondents had definite and
    specific knowledge. Commissioner relief upon Banks' specific instructions
    regarding return of cheques in case of non-availability of funds. Reference
    was made to the cheque dishonour memo which was prepared but not issued
    due to request of the assessee. It was concluded that had the assessee correctly
C   disclosed the facts, the application dated 25.2.1999 would not have been
    accepted.

           The CEGAT on the Issue no. I 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
D   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.

          With regard to Issue no.2, it was observed by the Commissioner that
    cancellation of warehousing license was obtained by fraud. Reference was
E   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(l}(c) were applicable.

          CEGAT held that as duty shall be treated to have been paid on 25.2.1999,
F   requirements of Section 68 were complied with and, therefore, Section 15(l)(b)
    and not Section 15(l)(c) was applicable.

          As regards Issue no.3, Commissioner held that charge of evasion of
    duty by ma/a fide intent, wilful mis-declaration, suppression of facts was
    clearly established.
G
           CEGAT held that there was no willful mis-declaration, no evasion or
    short levy. The declaration was held to have been made under bona fide
    belief.

          Answering Issue no.4, Commissioner held that goods were liable for
H
            COMMISSIONER OF CUSTOMS, KANDLA v. ESSAR OIL LTD. [PASAYA T, J.]   . l 77

(
    confiscation under Section 11 IQ) as deemed removal was contrary to the             A
    permission and fraudulent intention was clearly established. However,
    redemption fine of Rs.20 crores was imposed.

         CEGA T held that there could not be any confiscation as goods had
    been cleared under a pennission.
                                                                                        B
          As regards applicability of Section l 14A, under Issue no.5, it was held
    said provision was not invokable. However, penalty of Rs.IO crores was
    imposed under Section I 12(b).

          Commissioner held that respondents 2 to 7 were involved in the fraud,
    in answering Issue no.6. They were held liable to penalty under Section             C
    l 12(a).

          CEGA T set aside the penalties holding that respondent nos.2 to 7 had
    not committed any breach.
                                                                                        D
           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 11 IQ) 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 ofRs.96,26,91.711 was confinned under Section E
    28(1) proviso of the Act as also in tenns of statement made on behalf of
    respondent no.I 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.I under Section l 12(b) of
    the Act. Penalty of rupees one crore was levied on respondent no.2 under F
    Section 112(a). Penalty of rupees 25 lakhs and rupees 10 lakhs was imposed
    on respondents 3 and 4 respectively under Section l 12(a) of the Act. Penalty
    of rupees 5 lakhs was imposed on Shri A.C. Sharma, Deputy Commissioner
    of Central Excise. Rupees 50,000 ahd rupees 25,000 were imposed as
    penalty respectively on customs officials i.e. S.P. Chaudhary and Shri K.N.
    Thakar under Section l 12(a) of the Act. Recovery of interest leviable under G
    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 detennined. As noted above appeals were filed before CEGA T by
    the present respondents. Their basic stand was that Section 15(l)(c) had no
    application and it was Section 15(1)(b) of the Act which applied. It was H
    178                       SUPREME COURT REPORTS (2004] SUPP. 5 S.C.R.

A   submitted that when the cheque has been cleared and honore~ 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. I 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
B   Commissi~ner is not tenable ..

          The revenue supported the order of the Commissioner. As noted above
    CEGA T held that the Commissioner had not recorded any finding regarding
    non-applicability of the trade notice. There was no findings recorded by the
    Commissioner that the cheque payment facility was not available because of
C   false declaration. The Commissioner only decided the issue as to what
    constitutes the date of payment. Since the cheque was honored it was to be
    held that date of payment was on 25.2.1999 though, in fact, it was cleared
    on 17.3.1999. Requirements of Section 58 were complied with and, therefore,
    Section 15(l)(b) was applicable ·and not Section 15(l)(c) as held by the
    Commissioner. There wa5 ·no willful declaration and the declaration about
D   availability offunds was made under bona fide belief. The direction regarding
    confiscation was set aside, The penalties on respondent no. I and its officials
    and the customs officials were set aside. It is to be noted that the Tribunal
    referred to Rules 79 and 80 of the Central Treasury Rules (in short 'Treasury
    Rules') to conclude that when the cheque is honored is the date on whieh
E   cheque was received by the concerned authorities is the date of payment.

           In support of the appeals learned Additional Solicitor General submitted
    that the Tribunal has lightly brushed aside the various points which had been
    taken note of by the Commissioner. Whether the date to be reckoned is the
    date of receipt of cheque by the department though it is cleared subsequently
F · is really of no consequence in view of the fact that fraudulent mis-declaration
    was made about availability of.funds, with the clear knowledge that funds
    were not available. Any act based on fraud vitiates the entire action taken.
    The CEGAT also failed to notice that the intention of respondent no. I and
    its officials is clearly borne out from the fact that they managed to obtain
    declaration from respondent no.6 as if the documents were cleared on
G 25 .2.1999, when the statements of the concerned witnesses clearly show that
     it was done on 26.2.1999. The proved manipulation of records further
    strengthened the department's view. It was pointed out that relevant factual
    aspects placed by the department before the CEGA T had not been considered.
    On the other hand it recorded some findings which were based on conjectures •
H and/or surmises. The effect of fraudulent action and the mis-declaration were
        COM MISSIONER OF CUSTOMS, KANDLA v. ESSAR OIL LTD. [PASAYAT, J.]    179

not considered. On the contrary it was observed that there was no mis-             A
declaration and a bona fide mistake had been committed because of the
assurance given by the financial institutions for providing funds. The
established position is of manipulation of records to show as if action was
taken on 25.2.1999, when in reality the action was taken on 26.2.1999. It not
only kept out of consideration the fact that without sufficient funds cheque
was given to the customs officials, but also gave a clean chit to the officials    B
on purported ground of absence of practice prevailing in the division. It was,
argued that the Tribunal's judgment suffers from non-consideration of relevant
materials, consideration of irrelevant materials and. recording of findings
contrary to the materials on record both on issue of fact and law.

      In response, Mr. Dushyant Dave, learned senior counsel appearing for
                                                                                   c
respondent no. I submitted that the declaration, if any, made about availability
of funds was really not relevant in view of the Act, more particularly, Sections
17, 46, 58 and 55. With reference to sub-section (2) of Section 47 it was
submitted that consequences for non-payment under Section 46 were laid
down. Section 72 deals wi.th the situation when the importer is unable to pay      D
and consequentially interest becomes chargeable. This made the position clear
that only consequence of non-payment of duty in time is levy of interest.

      The show cause notice itself indicated that the goods were removed on
25.2.1999. There was no wilful mis-declaration. There was a special procedure      E
available when the banks were on strike. Rule 79(l)(b) of the Treasury Rules
clearly indicate the date which is to be reckoned for ascertaining the date on
which amount is treated to be paid, The mis-declaration aspect is relevant
only for the purpose of Section 28 and for considering whether extended
period of limitation applies. That issue is not relevant in the present case and
only issue is whether Section 15(1 )(b) or Section 15(1 )(c) is applicable. A      F
factual finding has been arrived at by CEGAT to hold that there was rio
wilful mis-declaration.

      Residually it was submitted that for any unintentional breach penalty is
not to be levied. The view of the Tribunal is a possible view and, therefore,
no interference is called for. Similar arguments were advanced by responde~        G
nos. 2 to 4 and the custom authorities (respondents 5 to 7). It was submitted
that there was no question of any abetment and/or collusion.

      The submissions need careful consideration. It is to be noted that the
plea that in view of special statutory prescriptions reference to the trade        H
    180                       SUPREME COURT REPORTS.. [2004] SUPP. 5 S.C.R.

A notice was unnecessary does not appear to have been pleaded or considered
    by the CEGA T which proceeded only to detennine 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. I and
    its officials and the customs officials. According to the revenue it was clearly
B   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. I and its officials were acting with fraudulent intention. The
    Tribunal did not even consider the effect of those acts.

           By "fraud" is meant an intention to deceive; whether it is from any
C   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 hann whatever caused to any person in
    body, mind, reputation or such others. In short, it is a non-economic or non-
D   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. See Dr. Vim/a v. Delhi
    Administration, (1963] Supp. 2 SCR 585 and Indian Bank v. Satyam Febres
E   (India) Pvt. Ltd., [1996] 5 sec 550.

          A "fraud" is an act of deliberate deception with the design of securing
    something by taking unfair advantage of another. It is a deception in order
    to gain by another's loss. It is a cheating intended to get an advantage. See
    S.P. Changalvaraya Naidu v. Jagannath, (1994] I SCC 1.
F
          "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 detenninative stand
    as a response to the conduct of the fonner either by words or letter. It is also
    well settled that misrepresentation itself amounts to fraud. Indeed, innocent
G   misrepresentation may also give reason tO claim relief against fraud. A
    fraudulent "'!isrepresentation 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
H   which the representations proceeded may not have been bad. An act of fraud
             COMMISSIONER OF CUSTOMS, KAND LA v. ESSAR O!L LTD. [PASA YAT, J.]   181

     on court is always viewed seriously. A collusion or conspiracy with a view        A
     to deprive the rights of the Ors., 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.     B
     (See Ram Chandra Singh v. Savitri Devi and Ors., [2003] 8 SCC 319).

            "Fraud" and collusion vitiate even the most solemn proceedings in any
     civilized system of jurisprudence. It is a concept descriptive of human conduct.

..   Michael Levi likens a fraudster to Milton's sorcerer, Comus, who exulted in
     his ability to, 'wing me into the easy hearted man and trap him into snares,.     c
     It has been defined as an act of trickery or deceit. In Webster's Third New
     International Dictionary "fraud" in equity has been defined as an act or
     omission to act or concealment by which one person obtains an advantage
     against conscience over another or which equity or public policy forbids as
     being prejudicialto another. In Black's Legal Dictionary, "fraud" is defined
     as an intentional perversion of truth for the purpose of inducing another in b
     reliance upon it to part with some valuable thing belonging to him or surrender
     a legal right; a false representation of a matter of fact whether by words or
     by conduct, by false or misleading allegations, or by concealment of that
     which should have been disclosed, which deceives and is intended to deceive
     another so that he shall act upon it to his legal injury. In Concise Oxford E
     Dictionary, it has been defined as criminal deception, use of false representation
     to gain unjust advantage; dishonest artifice or trick. According to Halsbury's
     Laws of England, a representation is deemed to have been false, and therefore
     a misrepresentation, if it was at the material date false in substance and in
     fact. Section I 7 of the Indian Contract Act, I 872 defines "fraud" as act
     committed by a party to a contract with intent to deceive another. From F
     dictionary meaning or even otherwise fraud arises out of deliberate active
     role of representator about a fact, which he knows to be untrue yet he succeeds
     in misleading the representee by making him believe it to be true. The
     representation to become fraudulent must be of fact with knowledge that it
     was false. In a leading English case i.e. Derry and Ors. v. Peek (1886-90) All G
     ER I what constitutes "fraud" was described thus: (All ER p. 22 B-C) "fraud"
     is proved when it is shown that a false representation has been made: (i)
     knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether
     it be true or false". But "fraud" in public law is not the same as "fraud" in
     private law. Nor can the ingredients, which establish "fraud" in commercial
     transaction, be of assistance in determining fraud in Administrative Law. It H
    182                        SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A has been aptly observed by Lord Bridge in Khawaja v. Secretary of State for
    Home Dept!., [1983] 1 All ER 765, that it is dangerous to introduce maxims
    of common law as to effect of fraud while determining fraud in relation of
    statutory law. "Fraud" in relation to statute must be a colourable transaction
    to evade the provisions of a statute. "If a statute has been passed for some
    one particular purpose; a court of law will not countenance any attempt
B   which may be .made to extend the operation of the Act to something else
    which is quite foreign to its object and beyond its scope. Present day concept
    of fraud on statute has veered round abuse of power or ma/a fide exercise of
    power. It may arise due to overstepping the limits of power or defeating the
    provision of statute by adopting subterfuge or the power may· be exercised
C   for extraneous or irrelevant considerations. The colour of fraud in public law
    or administration law, as it is developing, is assuming different shades. It
    arises from a deception committed by disclosure of incorrect facts knowingly
    and deliberately to invoke exercise of power and procure an order from an
    authority or tribunal. It must result in exercise of jurisdiction which otherwise
    would not have been exercised. The misrepresentation must be in relation to
D   the conditions provided in a section on existence or non-existence of which
    the power can be exercised. But non-disclosure of a fact not required by a
    statute to be disclosed may not amount to fraud. Even in commercial
    transactions non-disclosure of every fact does not vitiate the agreement. "In
    a contract every person must look for himself and ensures that he acquires
E   the information necessary to avoid bad bargain. In public law the duty is not
    to deceive. See Shrisht Dhawan (Smt.) v. Mis. Shaw Brothers., (1992] 1 SCC
    534.

          In that case it was observed as follows:

F          "Fraud and collusion vitiate .even the most solemn proceedings in any
    civilized system of jurisprudence. It is a concept descriptive of human conduct.
    Michael levi likens a fraudster to Milton's sorcerer, Comus, who exulted in
                              •
    his ability to, 'wing me into the easy-hearted man and trap him into snares'.
    It has been defined as an act of trickery or deceit. In Webster's Third New
G   International Dictionary fraud in equity has been defined as an act or omission
    to act or concealment by which one person obtains an advantage against
    conscience over another or which equity or public policy forbids as being
    prejudicial to another. In Black's Legal Dictionary, fraud is defined as an
    intentional perversion of truth for the purpose of inducing another in reliance
    upon it t6 part with some valuable thing belonging to him or surrender a legal
H   right; a false representation of a matter of fact whether by words or by
        COMMISSIONER OF CUSTOMS, KANDLA v. ESSAR OIL LTD. [PASAYA T,J.)      183

conduct, by false or misleading allegations, or by concealment of that which        A
should have been disclosed, which deceives and is intended to deceive ·another
so that he shall act upon it to his legal injury. In Concise Oxford Dictionary,
it has been defined as criminal deception, use of false representation to gain
unjust advantage; dishonest artifice or trick. According to Halsbury's Laws
of England, a representation is deemed to have been false, and therefore a
misrepresentation, if it was at the material date false in substance and in fact.   B
Section 17 of the Contract Act defines fraud as act committed by a party to
a contract with intent to deceive another. From dictionary meaning or even
otherwise fraud arises out of deliberate active role of representator about a
fact which he knows to be untrue yet he succeeds in misleading the representee
by making him believe it to be true. The representation to become fraudulent        C
must be of the fact with knowledge that it was false. In a le.ading English case
Derry v. Peek, (1886-90) ALL ER Rep 1: (1889) 14 AC 337 HL what
constitutes fraud was described thus : All Er p. 22 B-C

      'Fraud is proved when it is shown that a false representation has been
made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly,       D
careless whether it be true or false'."

      This aspect of the matter has been considered recently by this Court in
Roshan Deen v. Preeti Lal, [2002] I SCC 100, Ram Preeti Yadav v. UP.
Board of High School and Intermediate _k,ducation, [2003] 8 sec 311, Ram            E
Chandra Singh 's case (supra) and Ashok Leyland Ltd. v. State of T.N and
Anr., [2004] 3 sec 1.

      Suppression of a material document would also amount to a fraud on
the court. see Gowrishankar v. Joshi Amba Shankar Family Trust, [1996] 3
sec 310 and S.P. Chengalvaraya Naidu 's case (supra).                               F
      "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. Although negligence is not
fraud but it can be evidence on fraud; as observed in Ram Preeti Yadav's
~~~·                                                                                G
     In Lazarus Estate Ltd. v. Beasley, (1956) 1 QB 702, Lord Denning
observed at pages 712 & 713, "No judgment of a Court, no order of a
Minister can be allowed to stand if it has been obtained by fraud. Fraud
unravels everything." In the same judgment Lord Parker LJ observed that             H
    184                        SUPREME COURT REPORTS (2004) SUPP. 5 S.C.!l.

A fraud vitiates ail transactions known to the law of however high a degree of
    solemnity. (page 722).

          It is not open to respondent no. l to contend that trade notice is of no
    consequences when the permission to pay by cheque on out-station bank was
    given with reference to the trade notice. The effect of the manipulation of
B   records to show as if action was taken on 25.2. I 999 and not on 26.2. I 999
    was also not considered by the CEGA T in the proper perspective.

          Rules 79 and 80 of the Treasury Rules were relied upon overlooking
    the effect of the Central Government Account (Receipt an_d Payment Rules,
C    I983) (in short 'Receipt Rules') which clearly stipulates as to the relevant
    date of receipt. Rule 20 is relevant in this regard. Learned counsel for the
    respondent referred to Rule 8 of Central Excise Rules, 1944 (in short the
    'Central Excise Rules'). It was submitted that a Full Bench of CEGAT
    considered effect of said Rule 8 in Commissioner of Central Excise, Jaipur
    -1 v. Genus Overseas Electronics Ltd (2003) I55 ELT 54I and held that due
D   date was the date of payment by cheque even if the cheque is encashed later.
    Rule 8 really operates in different field together. It has nothing to do with
    date ofreceipt. It only provides the mode of payment. It does not and cannot
    wipe out effect of Rule 20 of the Receipt rules. Otherwise Rule 20 will
    become dead letter. We need not go into that question in detail because
E   clearly the Rules 70 and 80 of the Treasury. Rules are not applicable as they
    are applicable to situations indicated in Rule I(a), and have no application to
    present case.

           Strong reliance was placed by learned counsel for respondent no. I on
    Derry's case (supra). It was pleaded that respondent no. I had acted with
F   reasonable belief about availability of fund. Merely because funds were not
    actually released, it cannot be held to be a mis-declaration. It is to be noted
    that it has to be factually in each case concluded as to whether fraud is
    established. It would depend on the facts of each case. In the present case
    even if respondent no. I's stand is accepted at the most there was an assurance
    to provide funds. The same by no stretch of imagination, equated with funds
G   already available. There is a gulf of difference between assurance to provide
    financial assistance and in reality providing finance assistance. In the latter
    case only there is availability of funds.

         The word "reasonable" signifies "in accordance with reason". In the
H   ultimate analysis it is a question of fact; whether a particular act is reasonable
        COMMISSIONER OF CUSTOMS, KAND LA v. ESSAR OIL LTD. [PASAYAT,J.]    185

or not depends on the circumstances in a given situation. It is often said that   A
"an attempt to give a specific meaning to the word "reasonable" is trying to
count what is not number and measure what is not space". The author of
"Words and Phrases" (Permanent Edition) has quoted from In re Nice &
Schreiber 123 F.987, 988 to give a plausible meaning for the said word. He
says, "the expression "reasonable" is a relative term, and the facts of the       B
particular controversy must be considered before the question as to what
constitutes reasonable can be determined".

      From the factual scenario described it is clear that respondent no. I 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      C
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 (I)(c) to the
facts of the case. The demand of duty and order of confiscation by the
Commissioner is clearly sustainable.
                                                                                  D
     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          E
EPL) or the contractors for such goods. lncharge 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      F
expose to any change in the budget. His ma/a 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.       G
      (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.
                                                                                  H
    186                       SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A         (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
B   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 G) of
    the Act and rendered themselves liable to action under Section 112 (a) of the
C   Act. Accordingly penalties as noted above were levied on the responde!lts 2,
    3 and 4.

        As regards the Departmental Officials (respondents 5 to 7) the
    Commissioner took note of several factors

D         (I) 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 that physical removal of approximately 20,000
E   Mts. Cargo covered under 84 Bills of Entry from the bonded warehouse
    could not have beeri possible in a short span of one day. The officers acted
    in undue haste and resorted to backdating as 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
F   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
    unde,r Section 155 of the Act was rejected. Penalty under Section I 12(a) in
G   respect of each of the officers was levied.

          CEGA T 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
H   in nature and the conclusions in relation thereto recorded by the Commissioner
         COMMISSIONER OF CUSTOMS, KANDLA v. ESSAR OIL LTD. [PASA YAT, J.]   187

were not to be maintained. Only an abrupt conclusion was reached that Sri          A
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 ~e taken. Here again the allegations were not
considered in the proper perspective. The findings regarding deemed removal        B
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              C
established. They were clearly active participants in the well-planned deception
and fraudulent acts leading to evasion of duty. They had played major role$
in the whole game of fraud and deception. There was clearly willful disregar4
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.

       The appeals are allowed with no order as to costs.

V.S.                                                          Appeals allowed.