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The Commissioner of Customs Vs. Shri M. Naushad, Appraiser of - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT
Decided On
Judge
Reported in(2007)(114)ECC379
AppellantThe Commissioner of Customs
RespondentShri M. Naushad, Appraiser of
Excerpt:
1. the revenue is aggrieved with the order-in-original no. 30/2004 cus.adjn. (commr.) dated 31.8.2004 by which he has dropped the proceedings against three appraisals and one inspector of icd, bangalore. these officers of the customs department had also been charged in the show cause notice for having abetted in the offence of mis-declaration of the quantities of verified tiles imported under the impugned bills of entry. however, the commissioner after summing up the records had clearly noted that the revenue has not produced any evidence of abetting under section 112(a) of the customs act, which clearly lays down that the person to be charged under section 112(a) should have been involved deliberately in the act of abetting. there is no evidence to prove abetment of the officers, which.....
Judgment:
1. The revenue is aggrieved with the Order-in-Original No. 30/2004 Cus.

Adjn. (Commr.) dated 31.8.2004 by which he has dropped the proceedings against three appraisals and one inspector of ICD, Bangalore. These officers of the Customs Department had also been charged in the show cause notice for having abetted in the offence of mis-declaration of the quantities of verified tiles imported under the impugned bills of entry. However, the Commissioner after summing up the records had clearly noted that the Revenue has not produced any evidence of abetting under Section 112(a) of the Customs Act, which clearly lays down that the person to be charged under Section 112(a) should have been involved deliberately in the act of abetting. There is no evidence to prove abetment of the officers, which is relied in the show cause notice. Therefore, in the absence of evidence of abetting, the Commissioner has noted that the offences have not been brought out on them for levy of Section 114A of the Customs Act. The Section 112 reads as follows "in terms of the above section persons who have dealt with the goods should have done or abetting to do any act which act or omission would render such goods for confiscation under Section 111 or abets the doing or omission of such an act". The Section 112(b) has noted above also deals with "requisition and possession of the goods which are liable for confiscation". Charges made against the officers in the show cause notice are under Section 112(a) of the Act. The Commissioner has recorded the findings in para 198 to 211 as follows.

198. The next issue for consideration is the proposal in the show cause notice for imposition of penalty under Section 112(a) of the Customs Act, 1962 on the charge of abetment with the importer and the CHA on the following officers, namely, Shri M. Naushad, Shri.

T.M. Gopinath, and Shri. Amit Choudhary, Appraisers at ICD, Bangalore and Shri. Dharan Kumar, Inspector, ICD, Bangalore.

199. Specifically, the charge against Shri. M. Naushad, Appraiser is that in respect of Bill of Entry No. 2416 dated 5/4/2003, which was assessed by him, he was aware that there was discrepancy in the dimensions of the tiles declared in the Bill of Entry, invoice and the Packing List initially and the actual dimensions which was noticed at the time of examination. It is further alleged that he had assessed the said Bill of Entry initially on 5.4.2003 when the original invoice and the packing list were submitted which described the dimension of the tiles as 400 x 400 x 10 mm and 600 x 600 x 10 mm. Subsequently on account of amendment to the Bill of Entry made on 7.4.2003, wherein the description was changed from Ceramic Tiles to Vitrified Ceramic tiles, the goods were sent for examination first and as per the Examination Report, the dimension of the tiles was 500 x 500 x 10 mm and 600 x 600 x 10 mm and the Invoice and the Packing List were substituted. Shri. M. Naushad, Appraiser failed to notice the change in the dimension of the tiles and the substitution of the documents. Further, he failed to: cross check the arithmetical calculation on the quantity declared in the Bill of Entry with the packing list. Had he taken care to see these things, the evasion of duty by the importer could have been detected earlier. In view of this, he has been charged with abetting with the Importer and the CHA in the evasion of duty rendering himself liable to penalty under Section 112(a) of the Customs Act, 1962.

200. The charges against Shri. T.M. Gopinath, Appraiser and Shri.

Dharan Kumar, Inspector, ICD are that when the Bill of Entry No. 2416 dated 5.4.2003 was sent for examination on 8/4/2003, they had noticed the discrepancy in the dimensions of the tiles. Whereas, the invoice and the packing list showed dimensions to be 400 x 400 x 10 mm and 600 x 600 x 10 mm, on actual examination, they found the dimensions to be 500 x 500 x 10 mm and 600 x 600 x 10 mm. This discrepancy was not recorded in their Examination Report on 8/4/2003 and the Bill of Entry and the connected documents were returned to the importer. The importer then replaced the original invoice and the Packing List with the fabricated ones showing the correct dimensions as observed during the examination and re-submitted the Bill of Entry for recording the Examination Report. The Inspector and the Appraiser incharge of the Examination recorded the examination report without highlighting the fact that there was a discrepancy in the documents submitted and also without noticing that the original documents have been substituted. It has been charged that they were aware of the substitution of the Invoice and the Packing List and despite such knowledge, they gave a factually incorrect report, thereby abetting the commission of the offence by the importer and the CHA. 201. The charge against Shri. Amit Choudhary, Appraiser is that he had assessed the Bill of Entry No. 25171 dated 28/12/2002 and as per the investigation, there was a mis-declaration of quantity of tiles in respect of the aforesaid Bill of Entry, wherein a quantity of 3976 sq. mtrs. of tiles was under-reported. He did not take adequate care to verify the quantity declared in the Bill of Entry with the Packing List resulting in evasion of duty, thereby abetting the commission of offence by the importer and rendering himself liable to penalty under Section 112(a) of the Customs Act, 1962.

202. Shri. Amit Choudhary, Appraiser submitted that he had assessed the Sill of Entry No. 21571 dated 28/12/2002 and while assessing, he assumed that the quantity declared in the Bill of Entry and the Invoice to be true and he did not seek clarification as to the number of pieces of tiles that were imported size-wise. The investigation has not led any evidence to show that he had connived with the importer in any manner and at best, the lapse on his part can be attributed to negligence. He also placed reliance on the Tribunal's Judgment in the case of Commissioner of Customs, New Delhi v. Hargobind Exports that only highlighting the dereliction of duty by the Customs Officer is not sufficient for imposition of penalty and in the absence of any evidence to show the knowledge of and the benefit to the departmental officers, the charge of abetment cannot be made against the officers.

203. I have considered the submissions of Shri. Amit Choudhary. The only charge against him is that he had assessed the Bill of Entry No. 21571 dated 28/12/2002 and in respect of the said Bill of Entry, there was mis-declaration of quantity which was unearthed by the investigation subsequently. If Mr. Amit Choudhary had shown adequate care, he could have probably detected the mis-declaration at the time of assessment itself. Investigation has not revealed whether in the said case, the assessment was on second check basis or on first check basis. If the method of assessment was on second check basis, the assessing officer, based on the declaration furnished by the party assesses to duty and thereafter, before the goods are cleared out of Customs charge, the examination of the goods is carried out.

In that case, the assessing officer will never know of any discrepancy unless at the examination stage the discrepancy is noticed and it is brought to the knowledge of the assessing officer.

Therefore, in this case, it cannot be alleged that Shri. Amit Choudhary knew of discrepancy and actively abetted the commission of the offence. None of the documents produced or the statements recorded by the investigation agency from the CHA or the importer make any adverse reference to the conduct of Shri. Amit Choudhary.

In fact, the Investigation Agency has never questioned either the CHA or the Importer regarding the conduct of Shri. Amit Choudhary in the matter at all. It is true that there may be mistakes committed in the matter of assessment. But that cannot be attributed to collusion with the importer or the CHA as has been rightly held by the Appellate Tribunal in the case of Commissioner of Customs, New Delhi v. Hargobind Export. Investigation has to prove that officers had the knowledge of mis-declaration by the importer and he derived some benefit from the importer for aiding the mis-declaration. In the absence of any such evidence, the charge of abetment cannot be sustained in law. Further, the Tribunal in the case of Commissioner of Customs, Mumbai v. M. Vasi 2003 155 ELT (312) held that "abetment presupposes the knowledge of the proposed offence and also presupposes the benefit to be derived from the abetment there from.... In the absence of conscious knowledge, penalty on charge of aiding and abetting would not sustain.

204. In the light of the above judicial pronouncement, I find that the investigation in this case has not brought out any evidence in support of their charge of abetment against Shri. Amit Choudhary.

Therefore, X cannot uphold the proposal for imposition of penalty under Section 112(a) of the Customs Act, 1962 against Shri. Amit Choudhary.

205. As regards, the charge against Shri. M. Naushad, the officer has denied the charges and has submitted that there is no evidence, either circumstantial or corroborative, so as to establish the act of abetment on his part. Further, there is no evidence in support of the allegation that he had connived with the importer in mis-declaration of the goods. At best, the lapse on his part may be held as dereliction of duty or negligence, which was not deliberate.

Regarding the charge that he was aware of the change in the dimensions of the goods under importation, when compared to the declaration given in the Bill of Entry No. 2416 dated 54.2003, Shri.

M. Naushad, Appraiser has stated that when the Bill of Entry was given to him on 5/4/2003, he assessed the same accepting the declaration of the party and the party paid duty accordingly. On 7/4/2003, the party came up with an amendment to the Bill of Entry for changing the declaration of the goods from Ceramic tiles to Vitrified Ceramic Tiles; at that point of time he ordered for first Check Examination i.e., examination first and assessment later.

Subsequently, when the 8111 of Entry was returned to him on 9/4/2003, he perused the Examination Report, which stated that the pods were in accordance with the declarations given in the Invoice and the Packing List. He did not notice the substitution of invoice and the packing list which was due to oversight and there was no deliberate attempt on his part to connive with the party in evasion of Customs Duty. He relied upon the judgment of the Tribunal in the case of CC, New Delhi v. Hargobind Exports and Ors. In in support of his contention and Commissioner of 206. I have considered his submissions very carefully. There is no doubt that there are lapses on the part of the officer in the assessment of goods imported vide Bill of Entry No. 2416 dated 5.4.2003. If he had taken care and inquired into the matter, it might be possible that he could have detected the mis-declaration on the part of the importer. In the instant case, its dear that there is negligence and lack of efficiency in discharging of duties; that by itself, does not constitute a misconduct. As has been rightly held by the Hon'ble Apex Court in the case of J. Ahmed v. that "lack of efficiency or attainment of highest standard in discharge of duty attached to a public office would not ipsofacto constitute misconduct. The negligence or lapse on the performance of duty or error of judgment in evaluating a developing situation may be negligence in discharging of duty but would not constitute misconduct.

207. Similarly, in the Tribunal judgment relied upon by the noticee, Shri. M. Naushad, it is clear that to prove abetment, investigation has to bring on record evidences which proves prior knowledge of the offence to be committed and benefits to be gained by the officer for aiding the commission of the offence. No such evidence has been brought out by the Investigation in the instant case. Therefore, I am unable to accept the proposition in the show cause notice for imposition of penalty against Shri. M. Naushad under Section 112(a) of the Customs Act, 1962. Accordingly, I drop the proceedings proposed against him.

208. As regards Shri Dharan Kumar, Inspector and Shri. T.M. Gopinath, Appraiser who were incharge of examination, they have also denied the charges levelled against them. They have submitted that they had examined the goods as per the directions given by the assessing officer, which was to examine 5% of the goods from the 10 containers under import. They had accordingly recorded the dimensions as 500 x 500 x 10 mm and 600 x 600 x 10 mm as noticed by them even though the original documents showed the dimensions to be 400 x 400 x 10 mm and 601) x 600 x 10 mm. The substitution of the documents, namely, the invoice and the packing list by the importer and the CHA changing the dimensions and showing the correct one was lost sight of due to oversight anti pressure of work and there were no ulterior motives on their part. They have also relied upon the judgments relied upon by the other officers in support of their contention.

209. I have considered their submissions carefully. Here also I find that there are serious lapses on the part of the examining officers.

They could have in their Examination Report brought out clearly, the difference they noticed in the actual dimensions of the tiles under importation when compared to the documents submitted. They have not done so. Thus there is a mistake and omission on their part, but there is nothing on record to show that this was an intentional one.

As has been held in the judicial pronouncements cited above, and also in the case of A.N. Bhat Collector of Customs, , wherein it was held that "mere negligence or want of diligence on the part of Customs officers in clearing the goods would not ipsofacto render their act culpable inviting penal consequences in law. "Applying the ratio of this decision, I hold that the penal action proposed against the officers under Section 112(a) of the Customs Act is not sustainable in law, in the facts and circumstances of the case.

210. However I hasten, to make it very clear here that the observations made above are only in respect of the charges proposed against the Customs Officers under the provisions of the Customs Act, 1962. The question of initiating departmental action against the officers is a matter that should be considered separately by the proper authorities on the basis of a proper enquiry. The observations made here in above, has nothing to do with the investigation and out come of such proceedings, because such action does not form part of these adjudication proceedings.

(a) I order that vitrified tiles imported under Bills of Entry No. 21571 dated 28th December 2002, 501 dated 20th January 2003 and 2416 dated 5th April 2003 shall be classified under Chapter Heading 6907.90 of the Customs Tariff and Chapter Heading 6905.10 of the Central Excise Tariff.

(b) The assessable value of the vitrified tiles imported under Bill of Entry No. 2416 dated 5th April 2003 is determined @ Rs. 46,08,848/- under Rule B of Customs Valuation Rules 1988 read with Section 14 of the Customs Act, 1962; (c) The maximum retail price for the vitrified tiles imported vide Bill of Entry No. 2416 dated 5.4.2003 shall be taken at Rs. 950/- sq. mtr. for the purpose of calculation of countervailing duty.

(d) I hold that 11,094.60 sq. mtrs. of 'Vitrified Tiles' imported vide Bill of Entry 2416 dated April 2003 valued at Rs. 45,63,216 is liable to confiscation under the provisions of Section 111(l) and 111(m) of the Customs Act, 1962; (e) I hold that 16,545.60 square meters of vitrified tiles, valued at Rs. 68,83,437 (CIF imported vide Bill of Entry No. 21571 dated 28th December 2002 and 501 dated 20' January 2003 are liable to confiscation under Section 111(m) and (l) of the Customs Act, 1962.

(f) I confirm the demand for differential duty of Rs. 15,53,751/-, Rs. 9,04,162/- and Rs. 10,64,383/- in respect of Bills of Entry No. 2416 dated 5th April 2003, 21571 dated 28th December 2002 and 501 dated 20 January 2003 respectively under the provisions of Section 23(1) of the Customs Act, 1962; (g) I hold that the anti-dumping duty of Rs. 43,95,658/- and Rs. 30,94,318 and Rs. 35,36,364 is liable to be paid under Section 28(1) of the Customs Ad, 1962 read with Notification No. 73/2003 Customs dated 1st May 2003 on the goods imported vide Bills of Entry bearing No. 2416 dated 5th April 2003, 21571 dated 28th December 2002 and 501 dated January 2003 respectively; (h) I further hold that interest shall be paid on the above demand of duty specified in Sl. Nos. (f) and (g) above under the provisions of Section 28AB of the Customs Act, 1962; (i) The amount of Rs. 20,00,000/- paid vide Challans dated 12th April 2003 and 16th April 2003 paid by MIS GM Exports shall be appropriated towards the above duty demands. I further order that Bank Guarantee of Rs. 18 lakhs executed by M/s. GM Exports for goods provisionally released under Bill of Entry 2416 dated 5th April 2003 shall be encashed and adjusted towards the duty demands.

(j) I confiscate the quantity of 8119.84 Sq. mtrs of vitrified tiles seized from the various godowns of M/s. GM Exports under the provisions of Section 111(l) and 111(m) of the Customs Act, 1962.

However, I give art option to M/s GM Exports to redeem the said quantity of 8119.84 sq. mtrs. Vitrified tiles valued at Rs. 33,70,638/- at various godowns on payment of redemption fine of Rs. 10,00,000/- (Rupees Ten lakhs only) under the provisions of Section 125 of the Customs Act, 1962. Further, they shall be liable to pay anti-dumping duty on the said goods at the time of redemption. The said option to redeem the goods shall be exercised within 30 days from the date of receipt of this order.

(k) I impose a penalty of Rs. 35,22,296/- (Rupees Thirty five lakhs twenty two thousand two hundred and ninety six only) on M/s. G.M. Exports under Section 114A of the Customs Act, 1962.

(l) I impose a penalty of Rs. 10,00,000/- (Rupees Ten lakhs only) on Shri. Anil Kothari, of M/s. G.M. Exports under Section 112(a) of the Customs Act, 1962.

(m) I impose a penalty of Rs. 2,00,000/- (Rupees Two lakhs only) M/s. Sri Ganesh Shipping Agency, CHA, Bangalore under Section 112(n) of the Customs Act, 1962.

(n) I impose a penalty of Rs. 50,000/- (Rupees Fifty thousand only) on Shri. Lalit Kumar, Manager of the CHA firm under the provisions of Section 112(a) of the Customs Act, 1962.

(o) I impose a penalty of Rs. 25,000/- (Rupees Twenty five thousand only) each on Shri. Shanmugam, Office Assistant and Shri. Vishwanath Shetty of M/s. Ganesh Shipping Agency under the provisions of Section 112(a) of the Customs Act, 1962.

(p) I drop the proceedings initiated against Shri. M. Naushad, Shri.

T.M. Gopinath and Shri. Amit Choudhary, Appraisers and Shri. Dharan Kumar, Inspector of ICD, Bangalore.

(q) The aforesaid adjudication levies shall be paid by the respective persons within 30 days from the date of receipt of this order.

2. These findings are challenged by the Revenue on a simple ground that there was sufficient evidence available for penalizing these officers.

Except for making the statement in grounds of appeal, the Revenue has not produced any statements of the officers or of the importer or the CHA implicating the officers in the Act of abetment. Therefore, the learned Counsels strenuously argued and contended that the finding given by the Commissioner is correct in law. It is submitted that the officers' failure to perform their duty of examining the documents would at best only amount to dereliction of duty and would not be an offence under Section 112(a) for penalizing them under Section 114A. A lapse on the part of the officers in scrutinizing the documents cannot be considered as an act of abetment.

3. The learned Counsels rely on the judgment of this Bench rendered in the case of A.P. Sales v. CC, Hyderabad 2006 (198) 309 (Tri.-Bang.) wherein this bench after considering the judgments of Apex Court, High Court of Madras and Tribunal have clearly laid down that if there is any dereliction of duty that would be a cause for the Government to proceed under the CCR Rules. It has been laid down in the light of the higher court's judgments that for charging under Section 112(a) and penalizing under Section 114A, the officer's involvement in the offence and abetment should be established. Their collusion with importer and CHA has to be brought out in the show cause notice explicitly. It is their submission that all the ingredients of the Section have not been complied with and in absence of any evidence, the dropping of charges on these officers is justified and requires to be upheld.4. On the other hand, the learned JDR strenuously argued the matter in terms of the grounds made out and contended that the officers have not performed their duty which led to the appellants availing the benefit, which otherwise they were not entitled to. He submits that the Tribunal in the case of Zaki Anwar v. CCE 2006 (197) ELT 510 (Tri.-Del.) pertaining to Custom Inspector has not been granted the benefit of setting aside the penalty imposed under Section 114, for not examining the goods which resulted in higher drawback claim of the export. The learned Counsel on the other hand distinguished the judgment on the ground that the Tribunal ought not to have deferred with the ruling of CC, New Delhi v. M.I. Khan . The said ruling was not distinguishable. It is also pointed out that in the present case, there is no charge on the officers for not having examined the goods and that has resulted in granting of higher drawback claim. Therefore, it is submitted that this judgment is distinguishable and the ruling of A.P.Sales (supra) of this bench would clearly apply to the facts of the case.

5. On a careful consideration of the submissions made and on perusal of the Commissioner's order which is extracted supra, we notice that the ingredients for proving the charge of abetment as required under Section 112(a) has not been brought out in the show cause notice. There is no admission made by the Customs Officers in abetting in the offence charged. The importer and the CHA have not involved the officers. The officers have not been benefited in any way. The lapse on their part in not scrutinizing the documents would at best be dereliction of duty, for which they can be proceeded in terms of CCR Rules. The act of offence is not a penal offence committed by them for involving them along with the offence of the importer and the CHA. The ruling rendered in the case of A.P. Sales (supra) is exhaustive and deals with the present situation, while the situation in the case of Zaki Anwar (supra) is different and the facts are clearly distinguishable. The judgment rendered in the case of CC, New Delhi v. M.I. Khan (supra) is not distinguishable in the present case and so also the findings rendered by this bench in the case of A.P. Sales (sales). The findings rendered in the case of A.P. Sales (supra) in Para 5-7 are noted herein below.

5. On a careful consideration, it is seen that appellants were acting as Superintendent and Inspector in the 0/0 The Commissioner of Central Excise, Goa. They were charged to have involved themselves in the fraudulent exports, made by the Globe Fashion (Exim) India Goa. The Commissioner has absolved them from this charge by holding that the Revenue has not proved that there are some extraneous consideration for their action. He has clearly noted that there is dereliction of duty.

For the purpose of imposing penalty under Section 114(i), the revenue has to prove that the appellants have abetted in the offence or have colluded with the exporters and CHA. This charge has not been made in the show cause notice. The charge is not explicit and the only ground made out is that the appellants ought to have examined the containers fully and discovered discrepancies in the documents vis-a-vis the contents in the containers. Ld Commissioner has clearly held that there is only dereliction of duty. In the circumstances, the charge of the revenue under Section 114 and consequence imposition of the penalties are required to be set aside. Furthermore on this very issue the citations relied by the appellants clearly apply to the facts of the case. In the case of CC, New Delhi v. Hargovind Export , the Tribunal has clearly held that penalty cannot be imposed under Section 114 of the Customs Act on the mere charge of dereliction of duty and the benefit has to be given to the officers.

The Commissioner's dropping the demands have been upheld by the Tribunal. The finding recorded in Para 6 of the order is reproduced herein below.

We have considered the submissions of both the sides. The show cause notice was issued to the Assistant Collector, Superintendent and Inspector who were posted at Air Cargo Complex, Indira Gandhi International Airport, New Delhi for imposition of penalty under Section 114(iii) of the Customs Act on the ground that they had abetted the doing or omission of the act or mis-declaring the goods with a view to claim wrongful drawback amount which was not due to them. The Commissioner, under the impugned Order, after examining the evidences brought on record and referring to various statements came to the conclusion that the entire conduct of these Respondents would throw a serious doubt about discharging their duty properly but it is not sufficient to penalize them under Section 114 of the Customs Act. The Commissioner has given his findings that there is no evidence on record to show that any act or omission on the part of the Respondents has rendered the goods liable for confiscation under Section 113 of the Customs Act. In the appeal filed by the Revenue; it has not been highlighted that there is any material to show that the Respondents had connived with the exporter in mis-declaring the good. What has been mentioned in the Memorandum of Appeal, filed by the Revenue, only highlights the dereliction of the duty by the Respondents which is hot sufficient for imposing penalty under Section 114 of the Customs Act. The learned Advocate has emphasized that there is no allegation or proof of consideration having been demanded by the Respondents or paid or supposed to be paid by the exporter. We also observe that this aspect has also been mentioned in the impugned order. The exporter, Shri Kuldeep Singh, has clearly denied knowing any of the Respondents personally. In his statement, he has only mentioned that one Shri Akhilesh Kala knew the Assistant Collector. But Shri Akhilesh Kala has not been traced out during investigation nor he has participated in the adjudication proceedings. Further again some allegation is that Shri Akhilesh Kala had told Shri Kuldeep Singh that he (Akhilesh Kala) knew the Assistant Collector which is not sufficient material to come to the conclusion that the Assistant Commissioner had abated the act of mis-declaration of the consignment for the purpose of claiming the drawback. The learned Advocate has relied upon the decision in the case of M. Vasi, Supra, wherein the Tribunal has held "Abatement presupposes knowledge of the, proposed offence and also presupposes benefit to be derived by the abettors therefrom." Nothing has been brought on record by the Revenue to show the knowledge of and the benefit to, the Respondents. In view of this, we find no reason to interfere with the impugned order in so far as it relates to dropping of the charges against the three Respondents, namely. Shri W.L. Hang Shing, Shri M.I. Khan and Shri R.K. Sharma. All the appeals filed by the Revenue are thus rejected.

The Tribunal in the case of CC v. M.I. Khan (supra) on identical facts has dismissed the Revenue appeal by holding in Para 12 as follows: We have considered the submissions advanced by both the sides. On the question whether the provisions of Section 155 would provide a bar to the initiation of adjudication proceedings against Officers of the Customs as in the present case we find that the Supreme Court decision in Costao Fernandes case (supra) has gone into this question (though in that case the proceedings related to criminal prosecution). It was observed that in the facts of the case, it will not be proper to disallow the protection under Section 155 to the Officer. We also observe that the protection available under Section 40 of the Central Excise Act, 1944 had been allowed to Asst.

Collector of Central Excise acting in the exercise of his statutory powers. Section 40 of the Central Excise Act, 1944 is in pan materia with Section 155 of the Customs Act, 1962. Following the ratio of the Supreme Court decision in Costao Fernandes case (supra) and the High Court decision in G.H. Industries, we are satisfied that there is no legal infirmity in the order passed by the Commissioner dropping the proceedings against the Respondents in these three appeals. We therefore find no reason to interfere with the impugned order in so far as they concern with the three Respondents viz., S/Shri M.I. Khan, R.K. Sharma and Hangshing.P.K. Sharma v.CC, New Delhi 2002 (148) E.L T. 6581 has also allowed the appeal by setting aside the penalty on the Inspector. Finding recorded in Para 5 is reproduced herein below: We have heard the rival submissions. We find that the Department's entire case is built on the date found in the computer entered against the number allotted to the appellant. We note that presently simultaneously data is recorded in the documents and fed into the computer. Thus, there should have been a hard copy of Bill of Entry where the examination report was recorded and was alleged to have been recorded by the appellant. We find that there is no mention whatsoever as to what happened to this hard copy of the Bill of Entry bearing the examination report under the signature of the appellant. Moreover, in the Customs Bills of Entries are not examined by the Inspector on their own but they are allotted the Bill of Entry and marked to the officers concerned. The Department has not produced any evidence to show that this particular bill of entry on which the impugned examination report was recorded, was allotted to or marked to the appellant.

6. The Apex Court in the case of Coasto Fernandes (supra) has clearly held that the Customs Officer is entitled to protection from under Section 155 read with Section 106 of the Customs Act. The ratio of this judgment would apply to the facts of the case. The Madras High Court in the case of Shri Vasudeva Bank v. UOI has analysed the phrase "good faith" in detail on this aspect and has given the protection to Govt. servants discharging their statutory duties. The finding recorded in Para 20 to 32 as follows: 20. From the above exposition of Governmental liability, emerges the further question as to what constitutes good faith which would protect Government servants in the discharge of their statutory duties.

21. The meaning of the term "good faith" can be gathered from the following Law Lexicons: Good faith requires not, indeed logical infallibility but due care and attention.

Good faith", therefore, means absence of knowledge that a preference was intended.

Funk & Wagnalls. (New Standard Dictionary of the English Language (1953).

Good faith - the observance of, or the intention to observe, honesty and fair dealing; absence of intention to deceive.

In good faith" Bankruptcy Act, 1883, would seem to mean innocent of the knowledge, and of the means of knowledge, that there is an adverse bankruptcy.

A thing is to be deemed to be done in good faith, within the meaning of this Act, where it is in fact done honestly, whether it is done negligently or not.

That section is obviously founded on the distinction pointed out in Jones v. Gordon (1877) L.R. 2 App. Cas. 616, by Lord Blackburn, between the case of a person who was 'honestly blundering and careless', and the case of a person who has acted not honestly, that is, not necessarily with the intention to defraud, but not with an honest belief that the transaction was a valid one, and that he was dealing with a good bill.

Sale of Goods Act, 1893: A thing is done "in good faith" when it is, in fact done honestly, whether it be done negligently or not.

A statutory definition of the term is, an honest intention to abstain from taking any unconsientious advantage of another, even through the forms and technicalities of law, together with an absence of all information or belief of facts which would render the transaction unconscientious.

As applied to the holder of a forged cheque, to establish good faith there must not only be an absence of knowledge of any invalidity, but an absence of circumstances which would put an ordinarily prudent man upon inquiry.

As an element tending to rebut malice in libel and slander, good faith requires proper consideration for the character and reputation of the person whose character is likely to be injuriously affected by the publication. There must be absence, not only of all improper motives, but of negligence.

Good faith in adverse possession - In the law of adverse possession, whether general or statute the term means free from a design to defraud those who appear to have a better title than the claimant's.

His possession must be free from stealth.

Good faith in stock issue. - In the valuation of property for which stock in a corporation is issued, "good faith" consists in the belief that a prudent and sensible man would hold in the ordinary conduct of his own business affairs.

"Good Faith" defined. Act XLV of 1860, Section 52; Act IX of 1908, Section 2(7); Act X of 1897, Section 3(20); Bengal Act I of 1899, Section 3(17); Bombay Act I of 1904, Section 3(20), Burma Act I of 1898, Section 2(25) E.B. & A. Act I of 1909, Section 5(21); Madras Act I of 1891, Section 3(11); Punjab Act I of 1898, Section 2(22); U.P. Act I of 1904, Section 4(17).

Nothing is said to be done or believed in good faith which is done or believed without due care and attention. (Penal Code, Section 52).

A thing shall be deemed to be done in "good faith" where it is in fact done honestly, whether it is done negligently or not. Act X of 1897 (General Clause) Section 3(20); Eng. Bill of Exchange Act, 1892, Section 90.

Nothing shall be deemed to be done in good faith which is not done with due care and attention. Act IX of 1908. (Limitation) Section 2(7).

25. Under the definition of the term in the Limitation Act "nothing shall be deemed to be done in good faith which is not done with due care and attention". This is a stricter definition than the one adopted in Section 3(20) of the General Clauses Act, 1897, under which "a thing shall be deemed to be done in "good faith" where it is in fact done honestly, whether it is done negligently or not": 13 I.C. 260. See also 1 Bom. 296 (Good faith and notice).

The words "good faith" have no technical legal signification, but are to be taken in their ordinary acceptation, and mean simply, honestly in belief, purpose, or conduct. Cf. Butcher v. Stead (1875) L.R. 7H.L. 839; In re Avery (1887) L.R. 36 Ch.D. 307 Ex parte Watson L.R. (1888) 21 Q.B.D. 301.

26. Bearing these principles in mind, if we examine the facts of this case, the points which fall for consideration are three in number viz., whether, when the cheroot tobacco had been pledged to the plaintiff bank, the defendant or its servants broke open the lock of the godown; secondly, whether the action of the Government in attaching the cheroot tobacco pledged to the plaintiff bank for the amount due on the beedi tobacco, is illegal and male fide; and thirdly, whether by reason of any act or omission on the part of the Government servants negativing good faith, after the disposal of the claim petition preferred by the State in favour of the plaintiff bank, the defendant would be liable in damages. In all these points I have come to the same conclusion as both the Courts below and here are my reasons.

27. Point 1: Both the Courts have found that the defendant or its servants did not break open the godown of Rahamatullah and remove the goods to Sundaram Pillai's godown and that what happened was that on the application of the surety Sundaram Pillai the Excise authorities permitted the transfer of the excisable goods which were slowly purloined from the godown of Rahamatullah, to the well-protected godown of Sundaram Pillai. Point I raised by the plaintiff bank rightly failed.

28. Point 2: I have already reproduced Rule 215 of the Central Excise Rules which states that the provisions of Sections 168, 189 and 192 of the Sea Customs Act has to be applied mutatis mutandis.

Therefore, for the words "customs house" we have to substitute the words "bonded warehouse". The cheroot tobacco was in the bonded warehouse of Sundaram Pillai. On the date when the Government attached the cheroot tobacco for the duty payable on the beedi tobacco, the Government was well within its rights to attach the same. The tobacco belonged to Rahamatullah but was in the custody of Sundaram Pillai and the Excise Department attached the tobacco.

There is nothing illegal or unlawful in the conduct of the Excise Department. It has power under Section 11 to attach the goods, viz., the cheroot tobacco for duty due on other tobacco for which duty had not been paid by Rahamatullah. Section 11 completely gives power to the Government to take the action it did. Therefore the defendant is not liable either for the resultant deterioration or for the lesser price which the tobacco fetched in the Court sale. Point 2 also fails.

29. Point 3: Both the Courts below have found that first of all the order of the learned Subordinate Judge who disposed of the claim petition did not amount to an adjudication in regard to the Government's right to enforce the realization of the duty on the beedi tobacco by attaching the cheroot tobacco. The learned Subordinate Judge himself in paragraph 7 of his order (Exhibit A-II) states "Whether the pledge will affect the Government's right to claim duty or not is another matter". Again in paragraph 9 he states: 'The next question is whether the petitioner gets any charge by virtue of the attachment effected under Section 11 of the Act....

That question does not however arise for consideration in this matter in view of my finding that the respondent bank has got a charge on the goods attached". Secondly, both the Courts below have found that after the dismissal of the claim petition the Department did not object to the plaintiff in any way proceeding against the attached tobacco and that the plaintiff completely failed to show that the Department unnecessarily and improperly withheld the tobacco and that the detention of the goods was the direct cause of the alleged deterioration of the tobacco and its fetching a low price. Therefore, point 3 also rightly failed.

30. The plaintiff has throughout failed to show want of good faith on the part of the Excise Officials. It is not for the Union Government to establish its good faith but it is for the plaintiff bank to establish its want of good faith. On the failure of the plaintiff bank to establish want of good faith on the part of the Union Government, the two consequences follow, viz., that the plaintiff bank is barred from filing this suit under Section 40(1) of the Central Excises and Salt Act, 1944, and that this suit instituted for an act done or ordered to be done, after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of, which has been the case here because the attachment was effected certainly long prior to six months of the date when the suit was instituted, would be barred by limitation under Section 40(2).

7. In view of the above noted judgments, the penalty under Section 114 of the Customs Act is not sustainable, as the appellants have not done or have omitted to do any act which act or omission would render such goods liable to confiscation, nor they have abetted in doing or in omission of such act which shall attract penalty provisions or imposing penalty on them. Both the appeals are allowed with consequential relief by setting aside the impugned order in so far as these appellants are concerned.

5.1 It is also seen that Revenue has not brought out any cogent evidence in the show cause notice nor in the grounds of appeal to implicate the Customs Officers in the offences charged. Therefore, the order passed by the Commissioner dropping the charges against these officers is justified and requires to be upheld. There is no merit in these appeals and the same are rejected.


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