TMI Blog2002 (8) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... on, keeping in view the correct legal proposition relating to the facts referred to in the application and in accordance with the legal provisions in the Customs Central Excise laws. (iii) What is the correct and proper construction of the term 'on matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the Commissioner of Customs or the Commissioner of Investigation under sub-section (1) or sub-section (6) appearing in sub-section (7) of Section 32F of the Central Excise Act, 1944/Section 127C of the Customs Act, 1962. (iv) Whether the law empowers the Settlement Commission to increase the amount of duty disclosed in the application either on account of calculation mistake made in the Show Cause Notice or on account of new issues arising in course of settlement proceedings or incorrect application of law or otherwise in the Show Cause Notice. 2. M/s. Crest Communication Ltd. have filed an application before the Additional Bench Mumbai for settling their case relating to import of plant and machinery under the EPCG Scheme admitting the amount demanded in Show Cause Notice i.e. Rs. 1,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in this case as it appears that the Commissioner (Inv.) has in his report worked out the duty based on a classification, different from the ones given in the Bills of Entries under which the goods were cleared. Accordingly, the application was not entertainable. At this juncture, the Advocate for the applicant stated that the Special Bench is concerned with the four questions framed and any specific reference to the application filed by M/s. Crest Communications will have to be addressed when the application filed by the said applicant is taken up. Shri Doiphode said he will address the Bench when his turn comes up. 3.4 Shri Chatterjee, Advocate, thereafter made his submissions. He stated that the case pending for decision before the proper officer was with reference to the Show Cause Notice and in case he noticed any defect in the notice, he could rectify the defect by issuing a corrigendum or addendum and the noticee would meet the same in accordance with law. He pointed out that Commissioner (Appeals) is vested with powers to enhance the duty amount vide the second proviso to Section 128A(3) of the Customs Act, 1962. Similarly, the CEGAT is also vested with such powers un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot remit a case back to the Adjudicating Authority for enhancement of the duty liability. He went on to say that even though an application for settlement can be made without a Show Cause Notice, the expression any other matter relating to the case used in the Section 127C(6) would only mean such matters covered in the Show Cause Notice but not mentioned in the settlement application. Since the Settlement Commission has to pass orders in accordance with the provisions of the Act, as laid down in Section 127C(7), and in view of the fetters placed in Section 28(2) of the Act, any order by the Settlement Commission enhancing duty liability in excess of the Show Cause Notice amount would be a violation of the provisions of the Act. He, however, conceded that the provisions under Section 127J, no doubt, creates difficulty. He added that the term matter in Section 127J will have to be assigned the same meaning as in Section 127C(6) and (7), namely, those covered in the Show Cause Notice but not in the settlement application. He promised to file written submissions. 3.6 Shri Bhat, Advocate has submitted that since the settlement application is made in terms of Section 127B, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but confined to the issues raised in the Show Cause Notice only, as is evident from Section 127C(6). 3.8 Shri Vipin Jain, C.A. submitted that the final settled amount cannot be less than the admitted amount as there is no provision for refund. Conversely, the Commission cannot raise the duty liability more than Show Cause Notice amount. The settlement has to be between the amount in the Show Cause Notice and admitted in the application. The receipt of Show Cause Notice has been made a statutory requirement so that the contours of the dispute is well defined, and the Settlement Commission has to confine within the said contour only. The Settlement Commission cannot make out an altogether new case by escalating the duty liability on dispute. He also opined that even under Section 127B(2) Show Cause Notice is necessary so that the issues are crystallized. According to him, the Settlement Commission is not a forum to undertake any investigation. Even if the notice is issued before the expiry of 180 days, no application can be made until the expiry of 180 days as laid under Section 127B(2). As per definition, case is with reference to levy, assessment and collection of duty and since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission can correct the error in the notice and decide the case. 3.10 Shri Rohan Shah, Advocate submitted that the proceedings start with the issue of Show Cause Notice. The applicant may admit an amount which may be either more or less than the Show Cause Notice amount. The applicant admits a duty liability based on his conception of law, decisions rendered by different judicial fora, arithmetic etc. and in the process he is expected to be immaculately accurate and if he slips then he is condemned as not having made a full and true disclosure; whereas the Revenue can commit any mistake and it is not fatal. Such an approach is discriminatory. He also reminded the Bench that against the order of the Settlement Commission, there is no remedy by way of appeal and the law does not permit withdrawal of the application once it is filed. If the duty is paid in excess, there is no scope to claim refund. 3.10.2 Show Cause Notice sets the parameters of the proceedings. An applicant approaches the Settlement Commission hoping for settlement of the case within the parameters set out in the notice. He wondered whether the Commission will go through all steps as the Revenue would do like is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also on merit The Hon ble High Court of Mumbai vide their Order dated 25th February 2002 dismissed in limine the Writ Petition No. 267 of 2002 filed by M/s. Paul Industries against the aforesaid order of settlement dated 4-12-2001 of this Commission. 4.4 Section 127F deals with power and procedure of Settlement Commission whereas 127H deals with grant of immunity from prosecution, penalty, interest etc. when the applicant has cooperated with the Settlement Commission and made a full and true disclosure. 4.5 Section 127-I deals with provisions when the case may be sent back to the proper officer. 4.6 Section 127J stipulates that every order of settlement passed under sub-Section (7) of Section 127C shall be conclusive as to the matter stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force. 4.7 In this connection, it would be desirable to reproduce the provisions of Section 127B and sub-section (6) and (7) of Section 127C, 127J of Customs Act, 1962 which read as below : - Section 127B - Application for settlement of cases. Any imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner of Customs having jurisdiction and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. 4.9 Sub-section (7) of Section 127C - After examination of the records and the report of the Commissioner of Customs received under sub-section (1), and the report, if any, of the Commissioner (Investigation) of the Settlement Commission under sub-section (6), and after giving an opportunity to the applicant and to the Commissioner of Customs having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms is in relation to assessment documents and not in relation to the Show Cause Notice issued though the issue of Show Cause Notice is one of the conditions before approaching the Settlement Commission. 5.2 To our mind, it appears that the conditions for issuing of Show Cause Notice is for the purpose of giving an opportunity to the Department to summarise the case and evidence which may or may not lead to quantification of the amount. In the case of Bihari Silk Rayon Processing Mills (P) Ltd. v. Collector of Central Excise, Baroda reported in 2000 (121) E.L.T. 617 (Tribunal - LB), the Tribunal was considering the legal consequences of non-specifying the duty amount in the Show Cause Notice. In the said decision in para 2, the issues before the Larger Bench were the following :- 1. Whether the Show Cause Notice issued without quantification of demand is legal and valid? 2. Whether during the material period the Collector could have adjudicated upon, vide Section 11A (as it then existed) or it could only be the Asstt. Collector who was empowered to adjudicate. 5.3 In the matter before us, we are concerned with the conclusion arrived at in relation to (1) above. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in that process if the taxpayer is brought within the net he is caught, otherwise he has to go free. This principle in law is settled by this Court in India Carbon Ltd. Ors. v. State of Assam - 1997 (6) SCC 479 wherein this Court held Interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf . A Constitution Bench of this Court speaking through one of us (Hon'ble Bharucha, J) in the case of VVS Sugars v. Government of A.P. Ors. - 1999 (4) SCC 192 reiterated the proposition laid down in the Indian Carbon Ltd. s case (supra) in the following words The Act in question is a taxing statute and, therefore, must be interpreted as it reads, with no additions and no subtractions, on the ground of legislative intendment or otherwise. 5.6 The statutory provision in Chapter XIV A of the Customs Act, as referred to supra speaks of full and true disclosure to be made by the applicant while filing his application for settlement. Whether the applicant has made a full and true disclosure is to be examined by the Settlement Commission with reference to facts and law as disclosed to the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give immunity against prosecution or imposition of penalty. 5.9 The Hon'ble High Court of Madras in Sheikh Mohd. Rawther V.M. v. Settlement Commission - (99) 236 ITR 581 has held that the Settlement Commission is not meant to be an optional forum chosen by the assessee for settlement of tax liability of the assessee as also his liability for further proceedings or prosecution under this act or other Acts, even while the assessee continues to be dishonest and deliberately fails to make a full and true disclosure of the extent of income which he had not disclosed before the assessing officer. The machinery of the Settlement Commission is available to the assessee who after exhibiting dishonest conduct by filing a return in which true income has not been disclosed, have availed of the chance to correct himself by making a full and true disclosure before the Commission. There is no right in the assessee to invoke the Commission's jurisdiction even while he continues with his dishonest conduct. 5.10 It will be thus seen from the various rulings, cited above, that the procedure in Settlement Commission is a departure from the routine. It is the applicant who chooses to avail of sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual production which has been assumed to have been cleared so as to quantify the demand. He has sought to extend the scope of both. 6.5 The Hon ble Supreme Court in the case of VVS Sugars as referred to elsewhere has held that taxing statute must be interpreted as it reads with no additions or substitutions. As such, averaging principle for levy of tax is anathema to taxing law. The liability has to be specific and clear and not on the basis of any assumed figures. 6.6 The Principal Bench of the Commission while making the aforesaid observation was concerned with interpretation of the terms any other matter relating to the case not covered by application . The amount covered in the application and as settled in the terms of the Settlement, the Settlement Commission is at liberty to look into the case before it and the term case means levy, assessment and collection of duty of Customs which is pending before the proper officer. If on the examination of the case the Settlement Commission finds that the amount disclosed to the Settlement Commission in the application is not a full and true disclosure, the Commission is not debarred from examining the matters before it and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he laws and facts relating to the Settlement Commission. 6.8.2 The starting point under sub-section (1) of Section 127B for making an application to the Settlement Commission as stated supra, amongst other, is also the issue of Show Cause Notice. The Show Cause Notice contains allegations along with evidence gathered by the investigating agency and thereafter, if possible, quantify the duty. Under Customs Laws, the Customs Officer can take also decision on various matters and also pass orders. The Tribunal had occasion to examine whether that decision or order passed by Customs Officers could be rectified under Section 154 of the Customs Act, 1962. In the case of Hindustan Fertilizer Corporation v. Collector of Customs reported in 1993 (63) E.L.T. 648 (Tribunal), a Larger Bench of the Tribunal consisting of Five Members has concluded as below : 48. Section 27 is not the only Section relating to refund of money under the Customs Act. Section 27 applies only in those cases of refund of import duty which arises pursuant to an order of assessment made by an officer lower in rank than Assistant Collector and does not cover other cases of repayment or refund of export duty and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en so understood. Craies on Statute Law observes as follows: There is a well-known principle of construction that where the legislature uses in an Act a legal term which has received judicial interpretation, it must be assumed that the term is used in the sense in which it has been judicially interpreted unless a contrary intention appear. 6.9.2 Similarly, in the case of Benarasi Debi v. Income-tax Officer - AIR 1964 SC 1742, the Hon'ble Supreme Court as observed as below : ...The relevant rule of construction is clearly stated by Viscount Buckmaster in Barras v. Aberdeen Steam Trawling and Fishing Co. Ltd., 1933 AC 402 at p. 411 thus: It has long been a well-established principle to be applied in the consideration of Act of Parliament that where a word of doubtful meaning has received a clear judicial interpretation the subsequent statute which incorporates the same word or the same phrase in a similar context, must be construed so that that word or phrase is interpreted according to the meaning that has been previously assigned to it. 6.10 In this background, it would be appropriate to examine the recommendation of the Wanchoo Committee under which the Settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t approaches the Settlement Commission and agrees to pay the duty liability which had not been paid though otherwise payable and in exchange if there is a full and true disclosure and cooperation, to get immunity from such misdemeanour/infringement. 6.12 In the judgment referred to in para 6.10.2 above, the Hon'ble Supreme Court held that the Settlement Commission is a Judicial Tribunal. Section 127M of the Customs Act, 1962 provides that the proceedings before the Settlement Commission are judicial proceedings. Under sub-section (7) of Section 127C of the Act, the Settlement Commission is required to pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner of Customs or Commissioner (Inv.) under sub-Section (1) or sub-section (6) and under Section 127 J of the Act, such order shall be conclusive as to the matters stated therein. In view of the above provisions, it appears to us that the Commission cannot be constrained by the confines of the Show Cause Notice. It may be useful in this context to refer to Maxwell on Interpretation of Statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im which may or may not have come to the notice of the investigating agency while issuing the Show Cause Notice. For these reasons, the applicant can disclose more amount than the amount mentioned in the Show Cause Notice. (ii) Whether the amount indicated by the applicant as admitted liability can be varied by the Settlement Commission, keeping in view the correct legal proposition relating to the facts referred to in the application and in accordance with the legal provisions in the Customs Central Excise laws. Ans.: In view of the reasons referred in answer to question (i) supra, the reply for this is in the affirmative. (iii) What is the correct and proper construction of the term 'on matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the Commissioner of Customs or the Commissioner of Investigation under sub-section (1) or sub-section (6) appearing in sub-section (7) of Section 32F of the Central Excise Act, 1944 / Section 127C of the Customs Act, 1962. Ans.: On a plain reading of the provisions of sub-section (7) of Section 127C of the Customs Act, it appears that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct amount of duty liability of the applicant in accordance with law. (iv) Whether the law empowers the Settlement Commission to increase the amount of duty disclosed in the application either on account of calculation mistake made in the Show Cause Notice or on account of new issues arising in course of .settlement proceedings or incorrect application of law or otherwise in the Show Cause Notice. Ans.: From the various interpretations of the law discussed elsewhere, it is clear that the Settlement Commission has to decide the application made in the matter before it in accordance with the provision of the Act. If the Settlement Commission is to take a decision in accordance with the Act, the various provisions of the Customs Act are applicable. The Settlement proceeding implies determination of correct amount of duty payable in the matter before the Commission. Therefore, the Settlement Commission has to look into all aspects of the case including calculation mistakes, new issues and any other matters where the Settlement Commission thinks true and proper for an effective order of settlement. The Additional Bench, Mumbai shall dispose of the case of M/s. Crest Commun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings will be limited only to amount and charges framed in the SCN. Needless to say that if the Commission starts going beyond the SCN, no Applicant shall perhaps ever approach the Commission on such matters as Department itself or even CEGAT cannot go beyond the SCN. 9. I would like to submit some detailed reasons regarding my views on the last two points where I am of the view that the Commission cannot go beyond the SCN. The Commission is a creation of law viz Customs Act, 1962 and Central Excise Act, 1944 and its powers and procedures are well-defined in these Statutes. The Heading of this chapter is Settlement of cases . In my humble view case generally starts with the SCN. It is only the applicant who can go to the Commission and not the department. Whenever an applicant feels guilty, wants to admit his mistakes and wants to restart a clean life, he can go before the Commission. It is an alternative/optional remedy that the applicant has; otherwise the normal channel of adjudication and appeal are open to him. It is not necessary that the applicant should admit the entire amount mentioned in the Show-cause of the demand notice. Whatever amount he admits, the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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