SETTLEMENT COMMISSION - CUSTOMS AUTHORITY?

[Mr. M. GOVINDARAJAN]

Settlement Commission under Customs Act

The Customs, Central Excise and Service Tax Settlement Commission provides an alternate dispute resolution mechanism for taxpayers who wish to resolve tax disputes in a spirit of conciliation rather than litigation. Chapter V of the Central Excise Act 1944, Section 83 of the Finance Act, 1994 (Service Tax) and chapter XIV of the Customs Act 1962, contain provisions for ‘settlement of cases’ through the Commission.  The Commission has its Benches at Chennai, Mumbai, Kolkata and Delhi

Who can make application?

Any taxpayer to whom a show cause notice has been issued and the case is still to be adjudicated, can make an application in the prescribed form, containing a full disclosure of his accepted duty liability and  interest, while arguing against those issues which he contests.

Procedure

The Commission refers the Application of the Taxpayer to the authority who has issued the show cause notice for review and comments. Thereafter, the Commissioner (Investigation) appointed to each of the Benches of the Commission (Chennai, Delhi, Kolkata and Mumbai) examines the application before a hearing is fixed in the matter. The taxpayer or his duly authorized representative (which means an advocate or consultant or employee of the Applicant) are required to make an application in the forms notified for the purpose and shall be given opportunity to be heard in person. Thereafter, the Commission issues a speaking order on the application in final settlement of the tax dispute.  Every order of settlement passed is conclusive as to the matters stated therein and no matter covered by such order is reopened in any proceeding by the Department.

Powers of Commission

The Commission is also duly empowered to grant immunities against prosecution, fines and penalties, where deemed fit.   No such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under section 127B.  An immunity granted to a person shall stand withdrawn if such person fails to pay any sum specified in the order of the settlement passed within the time specified in such order, or fails to comply with any other condition subject to which the immunity was granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted.  An immunity granted to a person may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person had, in the course of the settlement proceedings, concealed any particulars, material to the settlement or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had no such immunity been granted.

Where, during the pendency of any proceeding before it, the Settlement Commission is of the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, it may, by order, attach provisionally any property belonging to the applicant in such manner as may be specified by rules.  The said provisional attachment shall cease to have effect from the date the sums due to the Central Government for which such attachment is made are discharged by the applicant and evidence to that effect is submitted to the Settlement Commission.

Commission - Customs Authority?

The Settlement Commission may, if it is of opinion that any person who made an application for settlement under section 127B has not co-operated with the Settlement Commission in the proceedings before it, send the case back to the proper officer who shall thereupon dispose of the case in accordance with the provisions of this Act as if no application under section 127B had been made.

Section 127F of the Act provides that Settlement Commission shall have all the powers which are vested in an officer of the customs under this Act or the rules made there under.   Where an application made under section 127B has been allowed to be proceeded with under section 127C, the Settlement Commission shall, until an order is passed under of section 127C (5), have, subject to the provisions of Section 127C (4) of that section, exclusive jurisdiction to exercise the powers and perform the functions of any officer of customs under this Act in relation to the case.

This has been confirmed by the Delhi High Court in BHAVIK S. THAKKAR VERSUS UNION OF INDIA & ORS. - 2023 (2) TMI 681 - DELHI HIGH COURT

In the above said case the petitioner is in the business of trading and brokerage of MS scrap.  The petitioner imported certain consumer goods like deodorants, body spray, Dover soaps and perfumes etc., from White City Trading LLC, Dubai in a container.  Bill of Entry was filed on 09.03.2012 at ICD, Tughlakabad, New Delhi.  In the Bill of Entry the petitioner declared all the goods as ‘mixed deodorants’ and paid customs duty to the tune of Rs.4,25,429/-. 

The Directorate of Revenue Intelligence (‘DRI’ for short), on receipt of intelligence information about the said mis-declaration, reached the ICD to intercept the container.  The said container loaded on a truck in the exit lane, ready to exit from the said ICD since the same has received clearance from the Customs Authorities.  The said container was detained vide panchnama dated 13.03.2012.  On examination of the said container the Authorities found that there was huge quantity of other goods such as soaps, performs, cigarettes.  The said container was seized by the DRI officers under the provisions of Customs Act, 1962 (‘Act’ for short) vide panchnama dated 14.03.2012.

The petitioner admitted that he was the actual importer of the goods in the container.  The petitioner requested the DRI Officers for the provisional release of the goods since the same were likely to be deteriorated.  No reply has been given to the letters of the petitioner by DRI Officers. 

The DRI Officers completed the investigation and issued a show cause notice on 12.09.2012 to the petitioner.  In the said show cause notice the market value of all the imported goods was arrived at Rs.2,32,12,380/-.  It was further proposed to explain as to why imported goods should not be confiscated under Section 111(d), (f),(g), (j), (l) and (m) of the Act.  The show cause notice also proposed to impose penalty on the petitioner under sections 112(a), 112(b), 114A, 114AA of the Act.  Instead of giving reply to the show cause notice the petitioner issued several letters to the Commissioner of Customs, ICD (respondent No. 3) for the provisional release of seized goods.  He also placed his intention before the Commissioner to move to the Settlement Commission for redressal.

The Commissioner of Customs allowed the request of the petitioner for the provisional release of goods subject to condition.  The petitioner shall submit 100% bank guarantee equivalent to duty amount and separate indemnity bond with bank guarantee of 10% of the assessable value.  The petitioner did not respond to the conditions and he requested for inspection of seized goods and drawal of sample of the seized goods.  His request was acceded to.  On inspection of goods and drawal of sample, the petitioner found that all the cigarettes had expired and had no market value left.  Therefore the petitioner requested for abandonment of title of cigarettes vide his letter dated 01.02.2013.  His request was not at all considered.

The petitioner, then, filed an application before the Settlement Commissioner on 28.04.2014 after paying Rs.27,88,010/- the duty calculated by him after excluding the value of damaged cigarettes.  The Settlement Commission settled the case under section 127C (5) of the Act on the condition that the petitioner should pay Rs.49,54,921/-, the complete customs duty on all imported products including cigarettes, vide its order on 19.08.2014.  The Settlement Commission also imposed a penalty of Rs.2 lakhs upon the petitioner and a fine of Re.1 lakh in lieu of confiscation of the imported goods.  The petitioner complied with the order issued by the Settlement Commission.

The detention certificate was issued by the Commissioner of Customs, ICD.  NoC was also given for the release of the seized goods to the petitioner vide letter dated 30.09.2014 by the Commissioner of Customs, ICD. The Commissioner further informed in the said letter that under the provisions of Regulations  6(1)(1) of the Handling of Cargo in Customs Area Regulations, 2009 (‘HCCAR’ for short) read with Public Notice No. 26/2010, date 02.03.2010 no demurrage/detention charge of rent may be levied upon the petitioner.  The said letter further stated that violation of aforesaid Regulations would attract penal action under HCCAR.

The respondent No. 2 denied the waiver of the demurrage charges since no request for waiver would be entertained in case where any penalty/fine/personal penalty/warning has been imposed by the Settlement Commission.   Being aggrieved against the above said order, the petitioner filed a writ petition before High Court.

The petitioner submitted the following before the High Court-

• The Settlement Commission cannot be considered as a Customs Authority as the former is an independent as the Settlement Commission under the Act.

• Moving an application for settlement before Settlement Commission was not an admission of offence.
• The order passed by the Settlement Commission is not an adjudicating order.

The High Court analyzed the provisions of Section 127F of the Act and observed that the Settlement Commission is provided with the power to impose penalty or fine under the Act only.  Further the said section provided that the Settlement Commission shall have the powers vested in an officer of the Customs under the Act or the Rules made there under.  The High Court held that the Settlement Commission has all the powers that are vested in officer of the customs.

The High Court did not agree with the contention of the petitioner that when the penalty is imposed by the Settlement Commission which is an independent body constituted under Section 32 of the Central Excise Act, 1944 then the policy of CONCOR would not apply to the petitioner.  The High Court held that even if the penalty is imposed by the Settlement Commission, then the same has been imposed by the Settlement Commission by exercising the power vested in it of the officer of the Customs and thus, penalty imposed by the Settlement Commission would be treated as a penalty imposed by a Customs Authority.