Custom, Excise & Service Tax Tribunal
Patel Engineering Ltd vs Chennai( Port Import) on 3 July, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
COURT HALL - III (VIRTUAL HEARING)
Customs Appeal No.41095 of 2015
(Both arising out of Order in Original No. 34734/2015 dated 29.1.2015 passed by
the Commissioner of Customs, Chennai - IV)
Patel Engineering Ltd. Appellant
Plot No. 76, H.No. 8-2-293/82/A/76
Road No. 9A, Jubilee Hills
Hyderabad - 500 033.
Vs.
Commissioner of Customs Respondent
Chennai II Commissionerate Custom House, 60, Rajaji Salai Chennai - 600 001.
And Customs Appeal No.41096 of 2015 Shri C.K. Singh, Senior Vice President Appellant Plot No. 76, H.No. 8-2-293/82/A/76 Road No. 9A, Jubilee Hills, Hyderabad - 500 033.
Vs.
Commissioner of Customs Respondent
Chennai II Commissionerate
Custom House, 60, Rajaji Salai
Chennai - 600 001.
APPEARANCE:
Shri Prakash Shah, Senior Advocate for the Appellant Shri Anoop Singh, Authorized Representative for the Respondent CORAM Hon'ble Shri P. Dinesha, Member (Judicial) Hon'ble Shri M. Ajit Kumar, Member (Technical) FINAL ORDER NOS. 40690 & 40691/2025 Date of Hearing : 16.01.2025 Date of Decision: 03.07.2025 Per M. Ajit Kumar, These appeals arise out of a common Order in Original No. 34734/2015 dated 29.1.2015 by the Commissioner of Customs, Chennai.
2
2. Brief facts are that the appellant M/s. Patel Engineering Ltd. imported Asphalt Batch Mix Plant Model DG2000, 160TPJ (impugned goods) along with accessories from China for home consumption. The appellant cleared the imported goods without payment of customs duty, under Notification No. 84/97-Cus dated 11.11.1997, as amended. On investigation initiated by the officers of DGCEI, Ahmedabad Zonal Office, Ahmedabad, it appeared that the machinery was intended to be withdrawn from the project which was in violation of the condition of the aforesaid Notification. Hence Show Cause Notice dated 25.7.2013 was issued to the appellant. After due process of law, the Ld. Adjudicating Authority denied the benefit of exemption under Notification No. 84/97-Cus dated 11.11.1997 and confirmed the demand of Rs.84,61,636/- along with interest and the amount already paid during investigation was also appropriated towards duty demand. The Ld. Adjudicating Authority also imposed equal penalty under sec. 114A of the Customs Act, 1962 on the appellant-company and Rs.2,00,000/- under sec. 112(a) and Rs.5,00,000/- under sec. 114AA of the Customs Act, 1962 on Shri C.K. Singh, Senior Vice President of the appellant-company. Hence this appeal.
3. Shri Prakash Shah, Ld. Senior Advocate appeared for the appellant and Shri Anoop Singh, Ld. Authorized Representative appeared for the respondent-department.
3.1 Shri Prakash Shah the Ld. Senior Advocate for the appellant submitted that the Appellant 1 is engaged in construction of various infrastructure project across. The Appellant no. 2 was the Senior Vice President of the Appellant no. 1 at the relevant time. Submissions were being made on behalf of both the appellants. The projects undertaken by the appellant included the projects funded by World Bank and 3 approved by GOI. Project Implementation Unit, Karnataka State Highways, issued Project Authority Certificate dated 31.12.2011 to enable the Appellants to procure Asphalt Batch Mix Plant DG 2000. imported the 'Asphalt Batch Mix Plant DG 2000' and filed Bill of Entry dated 26.03.2012 for home consumption. The Appellants claimed clearance thereof without payment of duty under Notification No. 84/97-Cus dated 11.11.1997, as amended. Based on purported intelligence that the imported goods were not to be permanently remain in the Project and was to be withdrawn after the Project was over, an investigation was initiated against the Appellant by the DGCEI, Ahmedabad Zonal Office, Ahmedabad. Statements of the employees of the Appellants company including the Appellant no. 2 were recorded wherein they stated that they were not entitled to exemption in view of their interpretation of Explanation II inserted in the Notification. Pursuant to the matter being taken up by the department by letter dated 06.09.2012, addressed to the Ld. Principal Secretary to Government, PW, Ports and Inland Transport Dept., Karnataka, the Project Director, PIU, KSHIP, Bangalore vide his Office Order dated 20.11.2012, cancelled the Project Authority Certificate dated 31.12.2011 issued to the Appellant, with immediate effect. SCN was issued to them in due course and was adjudicated by the impugned Order dated 29.01.2015 by the Respondent, who inter-alia denied the benefit of exemption and confirmed the entire duty demand of Rs. 84,61,636 along with applicable interest and imposed penalty on both the appellants. Further, the amount deposited during investigation was appropriated. The Ld. Counsel made the following submissions;
1. The denial of benefit of Notification No. 84/97-Cus, as amended, is ex-facie contrary to the binding orders of this Hon'ble 4 CESTAT and hence duty, interest and penalties are liable to be set aside
2. The project authority certificate was valid on date of import and its purported cancellation post the import does not affect the exemption claimed by the appellant
3. Purported admission of the officers of the appellant No. 1 cannot be the basis to deny the exemption, which is otherwise available in law.
4. Without prejudice and in any event and assuming without admitting that the appellant is not entitled to exemption under Notification No. 84/97-Cus, the appellant is entitled to full exemption under Sr. No. 230 of Notification No. 21/2002-cus.
5. No interest can be recovered from the appellant under subsection 4 of Section 28 read with Section 28AA of the customs Act 1962.
6. The case is premature. There was no suppression of facts at the time of filing of the BE. The Appellant had admittedly complied with all the condition of the notification at the time of clearance of the goods for home consumption. Hence section 28(4) of the Act has no application and at the highest, is covered by Section 28(1) of the Act.
7. In any event, imposition of penalty on the appellant is liable to be set aside.
He prayed that the impugned order be set aside.
3.2 Shri Anoop Singh the Ld. Authorized Representative for the respondent stated that this is a case of suppression and mis- representation of facts and amounts to a fraud on the exchequer. The appellants officials in their statements have admitted that the impugned goods were not supplied to the project and was not intended to be brought into the project on a permanent basis and accordingly the project certificate also came to be cancelled by the Project Authority. He stated that fraud vitiates all transactions known to the law. The whole issue has hence to be viewed from that angle and not as a mere case of wrong assessment. Benefit claimed under any other notification also cannot be extended when fraud is involved. He drew 5 our attention to the allegations against the appellant at paras (6), (7) & (8) of the impugned order. The same are reproduced below for ease of reference;
"6. Summons was issued to M/s. Patel Engineering to furnish details of goods imported by them under Notification No. 84/97- Cus.Shri Brahmadev Prasad, Senior General Manager of M/s. Patel Engineering appeared on 13.8.2012. As per the information furnished by them. they had imported Batch Mix Plant from M/s Langfang D&G Machinery Technology Company Limited, China vide Bill of Entry number 6367918 dated 26.3.2012 and the said goods were cleared without payment of duty under Notification No. 84/97-Cus on the basis of project authority certificate number KSHIP: PAC: WEP-4:1:2011- 2012 dated 31.12.2011 issued by Karnataka State Highways Improvement project, Bangalore. The details are as Description of Invoice No. and Date Bill of Entry Assessable Goods number and Value date Asphalt Batch WD 2011032A dated 6367918 3,27,30,464 Mix Plant 15.2.2012 and dated (Model - DG WD2011032B dated 26.3.2012 2000) 16.2.2012 Shri Brahmadev Prasad was examined on the above and his Statement was recorded on 13.8.2012 under Section 108 of the Customs Act, 1962 wherein he has, inter-alia stated; that M/s. Patel Engineering had imported the aforesaid Asphalt batch Mix Plant vide bill of Entry number 6367918 from Langfang D&G Machinery Technology Company Limited, China and cleared from Chennai Custom House, that the said machinery procured under Customs duty exemption vide Notification No. 84/97 was used in the project but not supplied to the project and was not intended to be brought into the project on a permanent basis. Further, Shri Brahmadev Prasad vide letter dated 22.8.2012 submitted that as the said goods had not withdrawn from the project yet, they had correctly availed benefit of Notification No.84/97 Cus dated 11.11.1997. However, the said submission of M/s. Patel Engineering that the impugned goods had not been withdrawn from the project yet appeared misleading in view of their specific admission that the said goods had not been intended to be brought into the project on a permanent basis i.e. the fact remained that the goods would be withdrawn from the project after completion of work for which the goods are deployed.
7. Enquiries were further made with the project authority viz, Karnataka State Highways Improvement Project, Bangalore. The project authority after making the necessary enquiries at their end issued an order vide KSHIP-II:WB:EPC-PAC Cancellation:2012-
13/2410 dated 20.11.2012 inter-alia cancelling the project certificate to M/s Patel Engineering issued for Asphalt Batch Mix Plant DG 2000 6 (160TPH), Langfang DG Machinery Technology Co Ltd China. The project authority in their order at Para No.3 has specifically mentioned that the certificate was issued on the specific request of the contractor. Evidently the project authority cancelled the said certificate procured by M/s. Patel Engineering based on their specific request on finding that the said machinery was intended to be withdrawn from the project in violation of the condition to the Notification No.84/97 Cus. dated 11.11.1997.
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9. The Director of M/s. Patel Engineering was summoned. He authorized Shri C.K. Singh, Senior Vice President to depose on his behalf. Statement of Shri C.K. Singh, Senior Vice President of M/s. Patel Engineering was recorded on 8.2.2013 wherein he has inter-alia stated; that he accepts the Customs duty liability of Rs. 84,61,636/- on Batch Mix Plant imported by M/s. Patel Engineering vide Bill of Entry number 6367918 dated 26.3.2012 from Langfang. China, that the decision to import goods was taken by their import department of M/s. Patel Engineering of which he was the head and the responsibility lie with him only; that he admitted the statements dated 13.8.2012 and 21.1.2013 given by Shri Brahmadev Prasad to be correct." The Ld. AR stated the actions of the appellants were pre-meditated and hence the appeal deserves to be rejected.
4. We have heard both sides and the material on record has been perused. We examine the issues raised by the appellant sequentially.
5. The denial of benefit of Notification No. 84/97-Cus, as amended, is ex-facie contrary to the binding orders of this Hon'ble CESTAT and hence duty, interest and penalties are liable to be set aside.
5.1 The appellant has submitted that interpretation by the revenue of the word "withdrawal" appearing in the notification, to mean even after completion of the project is erroneous and incorrect. They have relied upon the following judgments in their favour,
1) Schwing Stetter (I) Pvt. Ltd. - 2018 (364) E.L.T. 653 (Tri. - Chennai),
2) Tata Motors Limited - 2023 (7) TMI 192 CESTAT-Kolkata,
3) L & T Construction Equipment Ltd. Vs CCT, Bengaluru - 2023 (11) TMI 56
- CESTAT BANGALORE.
7to state that, the Explanation 2 to Notfn. 84/97-Cus. would only mean that the goods brought into the project should not be withdrawn by the contractor during the course of execution of the project. After the project is completed the contractor is well within his right to withdraw the capital goods and machinery used in execution of the project, since it does not form part of the structure of the project. After the project is completed the contractor is well within his right to withdraw the capital goods and machinery used in execution of the project, since it does not form part of the structure of the project. 5.2 We find that Explanation 2 was inserted in Notfn. 84/97-Cus. On 01.03.2008. Much before the import of the goods and filing of BE on 26.03.2012. The same is reproduced below;
"Explanation 2. - For the removal of doubts, it is hereby clarified that the benefit under this notification, in the case of goods supplied to the projects financed by the United Nations or an international organisation, is available when the goods brought into the project are not withdrawn by the supplier or contractor and the expression "goods are required for the execution of the project" shall be construed accordingly."
(emphasis added) The word to withdraw is commonly understood to means to remove something or take something away. When the word is not defined in the Act or notification it may be permissible to refer to the dictionary to find out the meaning of that word as it is understood in the common parlance. Black's Law Dictionary Ninth Edition defines 'withdraw' as;
"withdraw, vb. 1. (vt.) To take back (something presented, granted, enjoyed, possessed, or allowed) <withdraw blame>.
2. (vt.) To retract (one's words) <withdraw the objection>.
3. (vi.) To refrain from prosecuting or proceeding with (an action) <withdraw the petition for divorce>.
4. (vi.) (Of a lawyer) to terminate one's representation of a client before a matter is complete <withdraw from representation>. [Cases:
Attorney and Client 8
5. (vt.) To remove a juror <withdraw a biased juror>.
6. (vi.) To leave or retire (from a community or society).
7. (vi.) (Of a condition or immaterial thing) to vanish, depart."
The meaning as per Cambridge Dictionary [https:// dictionary. cambridge.org] "Withdraw: to take or move out or back, or to remove." The Merriam Webster Dictionary [https://www.merriam- webster.com/] gives a more elaborate explanation and defines withdraw as;
"1 a : the act of taking back or away something that has been granted or possessed b : removal from a place of deposit or investment c : (1) : the discontinuance of administration or use of a drug (2) : the syndrome of often painful physical and psychological symptoms that follows discontinuance of an addicting drug 2 a : retreat or retirement especially into a more secluded or less exposed place or position b : an operation by which a military force disengages from the enemy c : (1) : social or emotional detachment (2) : a pathological retreat from objective reality (as in some schizophrenic states) 3 : retraction, revocation 4 a : the act of drawing someone or something back from or out of a place or position b : coitus interruptus"
5.3 The meaning of statutory language is not always evident. But where the dictionary gives divergent or more than one meaning of a word, in that case it is not safe to construe the said word according to the suggested dictionary meaning of that word. For e.x., Blacks 9 Dictionary defines the word to mean, "To take back", "To refrain from prosecuting or proceeding with" etc. Similar is the case with the Merriam Webster Dictionary. The Apex Court in P.V. Indiresan (2) Vs Union of India, [(2011) 8 SCC 441], held that;
"In English language, many words have different meanings and a word can be used in more than one sense. Every dictionary gives several meanings for each word. The proper use of a dictionary lies in choosing the appropriate meaning to the word, with reference to the context in which the word is used. We cannot mechanically apply all and every meanings given in a dictionary. Nor can we choose an inappropriate meaning that the word may carry and then try to change the context in which it is used. The context in which the word is used determines the meaning of the word. A randomly chosen meaning for the word should not change the context in which the word is used. This is the fundamental principle relating to use of words to convey a thought or explain a position or describe an event."
(emphasis added) 5.4 In the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.: (1987) 1 SCC 424, the Supreme Court held as under:
"Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when the object and purpose of its enactment is known. With this knowledge, the statute must be read first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute maker, provided by such context its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses the court must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place."
(emphasis added) 5.5 We find that Notification No. 84/97-Cus dated 11.11.1997 exempts all the goods imported into India for execution of projects financed by the United Nations or an International Organisation and approved by the Government of India. These projects are time bound 10 projects and do not run in perpetuity. The notification also does not state as to what should be done to the goods which have availed of the exemption after the completion of the project. There is also no requirement to re-export the goods after their use in the project. In the context of the situation the phrase "goods brought into the project are not withdrawn by the supplier or contractor" found in Explanation 2 (supra), has to be understood as not being withdrawn when the project is in operation. More so when it is followed by, "expression "goods are required for the execution of the project" shall be construed accordingly," it further cements the meaning in the context of the goods being required for the execution of the project and not afterwards. This view is also supported by the judgments cited by the appellant and listed at para 5.2 above.
5.6 However, this conclusion is of not much importance to the issue here, since as pointed out by revenue, the appellant has admitted that the impugned goods were not supplied to the project and was not intended to be brought into the project on a permanent basis and accordingly the project certificate also came to be cancelled by the Project Authority, which is a sine qua non for availing the exemption. 5.7 We find that this is a case where the Ld. Commissioner has come to a conclusion that the appellants by suppressing and mis- representing facts have sought an unfair tax advantage. The whole matter hence needs to be looked at from the angle of fraud. The Hon'ble Supreme Court in S.P. Changalvaraya Naidu Vs Jagannath [1994 (1) SCC 1], has held that 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. In Ram Chandra 11 Singh v. Savitri Devi and Ors. [2003 (8) SCC 319], the Apex Court held as under;
"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.
(emphasis added) The matter needs to be examined accordingly.
6. The project authority certificate was valid on date of import and its purported cancellation post the import does not affect the exemption claimed by the appellant.
6.1 The appellant has stated that the Project Authority Certificates was validly issued, and its purported cancellation is invalid and cannot be relied upon to deny the post facto exemption already granted to the Appellant without demur. In this regard, they have relied on the following judgements:
A) CC vs Sneha Sales Corporation -2000 (121) ELT 577 (SC) B) Ajay Kumar & Co v CC, 2006 (205) ELT 747 Affirmed by Supreme Court - 2009 (238) ELT 387 C) Overseas (P) Ltd. v. Union of India [2003 (161) E.L.T. 47 (Bom.) 6.2 While it is true that once a project authority certificate is produced at the time of the import the appellant is eligible for the exemption claimed, it is equally true that conditional exemptions cast a continuing obligation on the importer to fulfill the conditions of the exemption until the obligation is complete. In M/s Mediwell Hospital and Health Care Pvt. Ltd. Vs. Union of India, [(1997) 89 ELT 425 12 / AIR 1997 SUPREME COURT 1623], the Apex Court examined a case where the appellant was entitled to get the certificate for duty free import from the appropriate authority for the notified equipment, on the condition that the appellant-importer gives free treatment to at least 40 per cent of the outdoor patients as well as free treatment to all the indoor patients belonging to the families with an income of less than Rs. 500/- p.m. The Hon'ble Court observed that the very notification granting exemption must be construed to cast continuing obligation on the part of all those who have obtained the certificate from the appropriate authority and on that basis to have imported equipment without payment of customs duty. It further held;
"The competent authority, therefore, should continue to be vigilant and check whether the undertakings given by the applicants are being duly complied with after getting the benefit of the exemption notification and importing the equipment without payment of customs duty and if on such enquiry the authorities are satisfied that the continuing obligation are not being carried out then it would be fully open to the authority to ask the person who have availed of the benefit of exemption to pay the duty payable in respect of the equipments which have been imported without payment of customs duty. Needless to mention the government has granted exemption from payment of customs duty with the sole object that 40% of all outdoor patients and entire indoor patients of the low income group whose income is less than Rs.500/- p.m. would be able to receive free treatment in the Institute. That objective must be achieved at any cost, and the very authority who have granted such certificate of exemption would ensure that the obligation imposed on the persons availing of the exemption notification are being duly carried out and on being satisfied that the said obligations have not been discharged they can enforce realisation of the customs duty from them."
(emphasis added) 6.3 Hence, we find that merely because the project authority certificate was valid on date of import could not be the basis to hold that the duty has been discharged correctly, without following the conditions of the exemption notification. The cancellation of the certificate post the import would affect the duty benefit claimed by the appellant and could lead to the denial of exemption under the said 13 notification. The judgments cited by the appellant above relate to a case where scrips / licenses were procured by the original allottee fraudulently and then sold to the appellant, which were subsequently cancelled. In such a situation it was held that the imports were made by the appellants on the bona fide belief of holding valid licenses hence the benefit was allowed. In this case the importers themselves are involved in the fraud and hence the case laws are distinguished. 6.4 The appellant has further stated that, the cancellation of the Project Authority Certificates was admittedly, at the behest of the office of the Commissioner of C. Excise, LTU, Bangalore, and there was no independent consideration or inquiry by the Project Authority. They have submitted that no opportunity of hearing was afforded to the Appellants by Project Authority before the purported cancellation of Project Authority Certificates. The order issued by the Project Authority does not even refer to any personal hearing granted to the Appellants. They have relied upon the judgment of the Hon'ble Madras High Court in Gemini Metal Works vs Union of India & Ors, 1985 (22) E.L.T. 27(Mad.) in their favour for the violation of natural justice perceived by them.
6.5 Revenue officials who suspect a violation of the conditions of the Project Authority Certificates are duty bound to bring it to the notice of the appropriate authority. This Tribunal cannot go into any purported deficiency in the decision, if any, of the Project Authority. So long as it has not been challenged before the appropriate authority and modified or annulled it must prevail. The appellant has not brought any such action to our notice and hence the cancellation of the project certificate is final and binding. A 5 Judge Bench of the Hon'ble Supreme Court of 14 India in Smt Ujjam Bai Vs State Of U.P [AIR 1962 SUPREME COURT 1621], held;
"A taxing authority which has the power to make a decision on matters falling within the purview of the law under which it is functioning is undoubtedly under an obligation to arrive at a right decision. But the liability of a tribunal to err is an accepted phenomenon. The binding force of a decision which is arrived at by a taxing authority acting within the limits of the jurisdiction conferred upon it by law cannot be made dependent upon the question whether its decision is correct or erroneous. For, that would create an impossible situation. Therefore, though erroneous, its decision must bind the assessee. Further, if the taxing law is a valid restriction the liability to be bound by the decision of the taxing authority is a burden imposed upon a person's right to carry on trade or business. This burden is not lessened or lifted merely because the decision proceeds upon a misconstruction of a provision of the law which the taxing authority has to construe. Therefore, it makes no difference whether the decision is right or wrong so long as the error does not pertain to jurisdiction." (emphasis added) What has been stated by the Hon'ble Court in the case of a taxing authority, is also applicable in the case of any authority deciding on a dispute. It makes no difference whether the decision is perceived by a party to the dispute to be wrong. So long as it is not modified or annulled by the jurisdictional appellate forum, it binds the parties concerned. Hence the judgment of the Hon'ble Madras High Court cited by the appellant should have led them to pursue the remedy for the cancelled project certificate, before the appropriate appellate authority failing which the matter of cancellation attains finality and it affects the exemption claimed.
7. Purported admission of the officers of the appellant cannot be the basis to deny the exemption, which is otherwise available in law.
7.1 We find that Section 58 of the Indian Evidence Act, 1872 as it stood at the relevant time, states that a fact does not need to be proved in any proceeding if the parties or their agents admit it, or if it is admitted by writing under their hands before the hearing, or if it is deemed to have been admitted by their pleadings under any rule of 15 pleading in force at the time. The principle behind this section was that a court only decides disputed facts, so facts that are not in dispute need not be proved.
7.2 Shri Brahmadev Prasad, Senior General Manager of M/s Patel Engineering Ltd, in his statement recorded on 13.08.2012 under section 108 of the Customs Act 1962 has submitted that M/s Patel Engineering had imported the impugned Asphalt Batch Mix Plant and cleared the same from Chennai Customs. The said machinery procured under Customs duty exemption notification no. 84/97-Cus dated 11.11.1997, was used in the project but not supplied to the project and was not intended to be brought into the project on a permanent basis. Shri CK Singh Senior Vice President of M/s Patel Engineering Ltd in his statement recorded on 08.02.2013 has agreed with the statement given by Shri Brahmadev Prasad and stated the same to be true and correct he also accepted the customs duty liability for not fulfilling the criteria of the notification and admitted to having paid part of the duty amount. It is also seen that the Project Authority after making the necessary enquiries at their end issued an order dated 20.11.2012 cancelling the project certificate to M/s Patel Engineering issued for the impugned machine. The Project Authority in their order had mentioned that the certificate was issued on the specific request of the contractor.
7.3 The appellant has not pleaded before us that the statement was retracted or was false. Hence it was a case of deliberate deception with the design of securing something by taking unfair advantage, which is a fraud. Even in the case of retraction, it is for the person who claims retraction to prove that the statement was made under force, duress, coercion etc. [See K.P Abudul Majeed Vs. Commissioner of 16 Customs [2014 (309) ELT 671 (Ker)]; Surjeet Singh Chhabra Vs. UOI [1997 (89) ELT 646 (SC)]; K.I. Pavuny Vs. Assistant Collector (HQ), Cochin [(1997) 3 SCC 721] Further as observed by the Hon'ble Apex Court in Avadh Kishore Das Vs Ram Gopal and Ors. [AIR (1979) SC 861], Section 31 of the Indian Evidence Act, 1872 establishes that evidentiary admissions, while not conclusive proof, create an estoppel and shift the burden of proof. Unless shown incorrect, they serve as effective proof of the facts admitted. 7.4 If the appellant was found having violated the notification conditions of using the imported goods in the project funded by World Bank and approved by the Project Authority, then not only did it violate the continuing obligation under the notification claimed but the intention showed that the attempt was to misuse the exemption and this fact was suppressed while claiming the exemption. This amounts to a fraud. It was clearly a suppression of fact from the department with the intention to fraudulently evade payment of duty. In Commissioner of Customs, Kandla Vs M/s Essar Oil Limited & Ors. [2004 (172) E.L.T. 433 (S.C.)] it was held;
"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 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."
It is now well settled that fraud vitiates all solemn acts. Any advantage obtained by practicing fraud is a nullity. The Hon'ble Gujarat High Court in Trafigura India Private Limited vs Union Of India [2023-TIOL- 737-HC-AHM-CUS], held as under;
"17. The extended period of five years under sub- section (4) of Section 28 could indeed be invoked by the authorities since the petitioners were found guilty of suppression of facts regarding RVC 17 [Regional or Domestic Value Content] content in the Origin Certificate. The suppression is not always concealment of facts. The suppression can take form of suggesting wrong facts and to obtain some advantage, which may not be available upon the disclosure of correct and genuine facts. Suppression may manifest itself in misrepresentation also. In the present case, the misrepresentation became suppression, as the exemption benefit or preferential duty benefit was obtained by putting forth wrong facts, which did not constitute eligibility to earn the exemption from the Basic Customs Duty. By suggesting wrong details and by subscribing untruth, essential conditions regarding RVC was not fulfilled. It partook suppression in eye of law and within the meaning of sub-section (4) of Section 28."
(Emphasis supplied) Hence due to the admission of the officers of the appellants company and the resultant cancellation of the project certificate by the Project Authority, the benefit of the exemption notification has to be denied. Revenue has no choice in the matter.
8. Without prejudice and in any event and assuming without admitting that the appellant is not entitled to exemption under Notification No. 84/97-Cus, the appellant is entitled to full exemption under Sr. No. 230 of Notification No. 21/2002-cus. 8.1 The appellant has stated that the Commissioner was bound in law to examine the alternate claim of the exemption as proceedings under Section 28 of the Act is to decide whether any duty is short paid or non-paid. They have submitted that it is a settled principle of law that even if an assessee has not claimed benefit of an exemption notification at the time of assessment, he is not debarred, prohibited, precluded or prevented from claiming such benefit at a later stage. The Appellant relies on the following judgements:
A) Share Medical Care vs Union of India, 2007 (209) E.L.T. 321 (S.C.) B) H.C.L. Limited vs Collector of Customs, New Delhi, 2001 (130) E.L.T. 405 (S.C.) C) M/s. Neoteric Informatique Limited Versus Commissioner of Customs (Import), 2023 (9) TMI 141 - CESTAT Chennai 18 D) Farida Shoes Pvt. Ltd. vs Commissioner of Customs (Seaport-Import), Chennai, 2024 (4) TMI 482 - CESTAT Chennai 8.2 As discussed above fraud vitiates all solemn acts. Any advantage obtained by practicing fraud is a nullity. At this stage one cannot claim the benefit of another notification to get over the problem they find themselves in. When fraud is involved the parameters of consideration of any request will be different. In Ram Chandra Singh Vs Savitri Devi and Ors. [2003 (8) SCC 319], the Apex Court held that 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.
8.3 The Hon'ble Supreme Court in GOVERNMENT OF NCT OF DELHI & ANR. Vs M/S BSK REALTORS LLP & ANR. [2024 INSC 455 / ARISING OUT OF SLP (CIVIL) NO ..... DIARY NO(s) 17623/2021, dated: 17/05/2024] examined whether suppression of the first round of litigation by the appellants constitutes a material fact, thereby inviting an outright dismissal of the appeals at the threshold. The judgment is relevant in as much as it relates to the treatment of a fraudulent act in appeal proceedings. Relevant portion is extracted below;
28. A Bench of two Hon'ble Judges of this Court in S.J.S. Business Enterprises (P) Ltd v. State of Bihar and others [(2004) 7 SCC 166] held that a fact suppressed must be material; that is, if it had not been suppressed, it would have influenced the merits of the case. It was held thus:
"13. As a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the courts to deter a litigant from abusing the process of court by deceiving it. But the suppressed fact must be a material one in the sense that 19 had it not been suppressed it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the court, whatever view the court may have taken [...]
14. Assuming that the explanation given by the appellant that the suit had been filed by one of the Directors of the Company without the knowledge of the Director who almost simultaneously approached the High Court under Article 226 is unbelievable (sic), the question still remains whether the filing of the suit can be said to be a fact material to the disposal of the writ petition on merits. We think not. [...] the fact that a suit had already been filed by the appellant was not such a fact the suppression of which could have affected the final disposal of the writ petition on merits."
29. Further, a Bench of two Hon'ble Judges of this Court in Arunima Baruah v. Union of India and others [(2007) 6 SCC 120] following the aforesaid dictum, held thus:
"12. It is trite law that so as to enable the court to refuse to exercise its discretionary jurisdiction suppression must be of material fact. What would be a material fact, suppression whereof would disentitle the appellant to obtain a discretionary relief, would depend upon the facts and circumstances of each case. Material fact would mean material for the purpose of determination of the lis, the logical corollary whereof would be that whether the same was material for grant or denial of the relief. If the fact suppressed is not material for determination of the lis between the parties, the court may not refuse to exercise its discretionary jurisdiction. It is also trite that a person invoking the discretionary jurisdiction of the court cannot be allowed to approach it with a pair of dirty hands. But even if the said dirt is removed and the hands become clean, whether the relief would still be denied is the question."
30. Law is well settled that the fact suppressed must be material in the sense that it would have an effect on the merits of the case. The concept of suppression or non-disclosure of facts transcends mere concealment; it necessitates the deliberate withholding of material facts--those of such critical import that their absence would render any decision unjust. Material facts, in this context, refer to those facts that possess the potential to significantly influence the decision- making process or alter its trajectory. This principle is not intended to arm one party with a weapon of technicality over its adversary but rather serves as a crucial safeguard against the abuse of the judicial process.
(emphasis added) 20 A similar legal position would obtain in the case of an importer who seeks to avail the benefit of a notification fraudulently and when discovered seeks the benefit of another notification. In the circumstances, the judgments cited by the appellant which relate to non-fraudulent cases are not applicable to the facts of this case. 8.4 Further Sr. No. 230 of Notification No. 21/2002-cus., is a conditional notification which requires certain action to be undertaken and verified before the exemption is granted and cannot be done at this stage. Exemptions are an exception to the general rule, hence if a notification requires a thing to be done in a particular manner, it should be done in that manner or not at all.
9. No interest can be recovered from the appellant under subsection 4 of Section 28 read with Section 28AA of the customs Act 1962.
9.1 Once the appellant is not eligible for the exemption notification, duty not paid needs to be paid with interest. We find that interest is necessarily linked to the duty payable, such liability arises automatically by operation of law. As per the Hon'ble Supreme Court's judgment in Commissioner of Central Excise, Pune Vs M/s SKF India [2009-TIOL-82-SC-CX] interest is leviable on delayed or deferred payment of duty for whatever reasons. The relevant portion is as below;
"9. Section 11A puts the cases of non-levy or short levy, non-payment or short payment or erroneous refund of duty in two categories. One in which the non-payment or short payment etc. of duty is for a reason other than deceit; the default is due to oversight or some mistake and it is not intentional. The second in which the non-payment or short payment etc. of duty is "by reason of fraud, collusion or any wilful mis- statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty"; that is to say, it is intentional, deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently. Section 11A, however allow the assessees in default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases 21 where the non-payment or short payment etc. of duty is by reason of fraud collusion etc. are dealt with under sub-section (1A) of section 11A and the cases where the non-payment or short payment of duty is not intentional under sub-section (2B).
10. Sub-section (2B) of section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under section 11AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment of the duty. What is stated in Explanation 2 to sub-section (2B) is reiterated in section 11AB that states where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty under sub-section (2B) of section 11A, shall, in addition to the duty, be liable to pay interest. It is thus to be seen that unlike penalty that is attracted to the category of cases in which the non-payment or short payment etc. of duty is "by reason of fraud, collusion or any wilful mis- statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty", under the scheme of the four sections (11A, 11AA, 11AB & 11AC) interest is leviable on delayed or deferred payment of duty for whatever reasons."
(emphasis added) The same legal positions prevails under the Customs Act, 1962 also. The appellant have voluntarily paid duty at the stage of investigation itself after accepting the non-eligibility of the impugned goods for exemption. The non-eligibility for exemption was also established by the cancellation of the project certificate and hence interest for the amount is also payable.
10. The case is premature. There was no suppression of facts at the time of filing of the BE. The Appellant had admittedly complied with all the condition of the notification at the time of clearance of the goods for home consumption. Hence section 28(4) of the Act has no application and at the highest, is covered by Section 28(1) of the Act.
10.1 The appellant has submitted that section 28(4) of the Act has no application in the facts of the present case. The present case, at the highest, be covered by Section 28(1) of the Act. There was no suppression of facts at the time of filing of the BE and the case if at all 22 is premature. The Appellant had admittedly complied with all the condition of the notification at the time of clearance of the goods for home consumption. They have stated that the SCN was issued on 25.07.2013. The date of import was on 26.03.2012. Thus, the entire demand is beyond period of the normal period of one year and clearly barred under Section 28 of the Act. The Project Authority Certificate was correctly issued by the Project Authority. The department was fully aware or deemed to fully aware of the fact that the imported goods were not to be permanently remain in the Project in view of its allegation that the nature of imported machinery is such that it would be removed from the project on completion of the project. The invocation of extended period is otherwise clearly not applicable in facts of the present case, which involves interpretation of exemption notification and interpretation of the Appellants is in consonance with the orders of this Tribunal.
10.2 We find that the dispute in this case as made out by revenue is one involving fraud. It is backed by the un-retracted statement made by the appellants officials and cancellation of the project certificate by the Project Authority.
10.3 The belief, knowledge and intention of the parties involved are a part of evidence. A blame worthy conduct is often shrouded in secrecy and it is at times impossible to adduce direct evidence of the same. Documentary evidences in such cases are not forth coming. Hence the belief, knowledge and intention of the parties involved in these activities are effectively brought to life through the statements of those who are in the know of things. Voluntary statements, which are admissible as evidence are the most effective proof of law and can't be ignored. We have found earlier that the appellant has not pleaded that 23 the statement was retracted or were false. The statements of company officials and the cancellation of project certificate disclosed the issue to be a case of deliberate deception with the design of securing something by taking unfair advantage, which is a fraud. Hence the matter cannot be treated as premature and the extended period of time was correctly invocable.
11. In any event, imposition of penalty on the appellant is liable to be set aside.
11.1 The appellant has stated that the entire case is based on the interpretation of notification and understanding and belief of the Appellants. Further, in the facts of the present case, there can be no intent to evade the duty as not only the claim for exemption under notification 84/97-Cus was correct, but the Appellants were also entitled to complete exemption under sr. no. 230 of notification no. 21/2002-Cus dated 01.03.2002.
11.2 We find that the fact of having been involved in a blameworthy conduct has been admitted by the appellant and has resulted in their project certificate being cancelled by the Project Authority. Any breach of a civil obligation under the Act is a blameworthy conduct by the assessee. In this case mens rea is also established amounting to fraud. The issue of an act being done in 'good faith' was examined by the Hon'ble High Court of Punjab, in Harbajan Singh Vs State of Punjab [AIR 1961 Punj 215]. It held:
"Good faith therefore implies, not only an upright mental attitude and clear conscience of a person, but also the doing of an act showing that ordinary prudence has been exercised according to the standards of a reasonable person. 'Good faith' contemplates an honest effort to ascertain the facts upon which exercise of the power must rest. It must, therefore, be summed as an honest determination from ascertained facts. 'Good faith' precludes pretence or deceit and also negligence and recklessness. A lack of diligence, which an honest man of ordinary prudence is accustomed to exercise, is, in law, a want of good faith." (emphasis added) 24 In the light of the admission made by the appellant company's officials it is clear that their actions were not guided by good faith. Hence no ground has been made out for setting aside the penalty.
12. Having considered the submissions made by the appellant in detail, we do not find any de-merit in the impugned order, and it merits to be upheld. Both the appeals, challenging the same hence needs to be dismissed and is so ordered. The appeals are disposed of accordingly.
(Order pronounced in open court on 03.07.2025)
(M. AJIT KUMAR) (P. DINESHA)
Member (Technical) Member (Judicial)
Rex