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2015 (11) TMI 139 - BOMBAY HIGH COURT

2015 (11) TMI 139 - BOMBAY HIGH COURT - 2015 (325) E.L.T. 690 (Bom.) - Validity of order of Settlement Commission rejecting the balance Settlement Applications arising out of the second and third Show Cause Notices - In respect of first Show Cause Notice application was accepted by the commission - Held that:- Admittedly the Settlement Applications were filed by the Petitioners in the year 2012-2013. On the date when these Applications were filed under section 127B, section 28AB no longer remain .....

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at since section 28AB no longer remained on the statute-book, no interest was paid by them under the said section. Despite this, the Petitioners had undertaken that they would pay interest under section 28AA as and when determined by the Settlement Commission. Admittedly, the Settlement Commission, whilst ordering that the Settlement Applications (arising out of the 2nd and 3rd SCNs) are allowed to be proceeded with, did not impose any condition or direct the Petitioners to pay any interest

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ideration and in accordance with law. - Appeal disposed of. - Writ Petition No. 5633 of 2014 - Dated:- 9-10-2015 - S. C. Dharmadhikari And B. P. Colabawalla, JJ. For the Petitioners : Mr. Prakash Shah with Mr. Jaydeep C Patel, Mr. Jas Sanghavi i/b Yogesh Rohira For the Respondent : Mr Pradeep S. Jetly, Advocate JUDGMENT [ Per B.P. Colabawalla, J ] :- 1. Rule. Respondents waive service. By consent of parties, Rule made returnable forthwith and heard finally. 2. This Writ Petition under Article 22 .....

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uary, 2014 (Exh. B to the Petition) arises out of Show Cause Notice dated 29th / 31st January, 2013. In a nutshell, it is the case of the Petitioners that after common investigation in the matter, three Show Cause Notices dated 15th October 2012, 7th December, 2012 and 29th / 31st January, 2013 were issued to issued them. To settle the claims in these three Show Cause Notices, the Petitioners filed separate Settlement Applications before the Settlement Commission. In respect of first Show Cause .....

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rders on the ground that they violate the constitutional mandate enshrined in Article 14 of the Constitution and that they are arbitrary, unjust, erroneous on merits and passed in denial of the principles of natural justice. It is in these circumstances that the Petitioners are before us. 4. Before dealing with the rival contentions it would be necessary to advert to the brief facts of the case. Petitioner No.1 is the proprietor of M/s Jagdamba Crane Services and Petitioner No.2 is the son of Pe .....

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o the imports of old and used cranes by the proprietorship firm of Petitioner No.1. Pursuant to these investigations, a Show Cause Notice dated 15th October, 2012 (for short, the 1st SCN ), in respect of four such cranes which had been imported by Petitioner No.1 at the Mumbai Port, came to be issued to the Petitioners. In the 1st SCN it was inter alia alleged that the said cranes were undervalued and on that score, proposed to demand differential duty of ₹ 45,70,075/- under section 28 of .....

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as Co- Applicant, on 26th August, 2013 also filed a separate Settlement Application. In the said Applications, it was clarified that since section 28AB no longer remained on the statute book, no interest under the said section was paid/deposited before filing the Applications. However, the Petitioners assured that interest liability would be paid/deposited as and when determined by the Hon'ble Settlement Commission under section 28AA of the said Act. 7. Pursuant thereto, on or about 9th Jan .....

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pplication was liable to be rejected. In this view of the matter, Petitioner No.1 was called upon to explain in writing as to why the Settlement Application filed by him should be allowed to be proceeded with. A similar notice under section 127C dated 28th August, 2013 was also issued to Petitioner No.2 wherein his Settlement Application dated 26th August, 2013 was registered as Application No.SA(C)-556/2013. 8. In reply to the aforesaid notices issued under section 127C, the Petitioners filed a .....

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n relation to Petitioner No.2), the Settlement Commission allowed the Petitioners Application No.SA(C)-06/2013 and SA(C)-556/2013 to be proceeded with, subject to payment of interest on the admitted duty liability within 7 days from the date of receipt of the said letter. In compliance of the same, the Petitioners paid the balance amount of ₹ 13,78,448/- towards interest in respect of these Settlement Applications. 10. In the meanwhile, another Show Cause Notice dated 7th December, 2012 (f .....

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ter alia proposing to demand differential duty amounting to ₹ 1,62,70,028/- leviable on 17 consignments of used cranes and accessories alongwith interest in terms of section 28AB of the said Act. We must mention here that in the 3rd SCN, an ex-parte decision of the Additional Director General, Directorate of Revenue Intelligence, was also communicated to the Petitioners vide paragraph 25(xii) thereof whereby Respondent No.2 had appropriated a sum of ₹ 41,79,324/- (out of ₹ 50,0 .....

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to the 3rd SCN was issued by Respondent No.2 under which Respondent No.2 recalled its erroneous ex-parte decision communicated vide the said 3rd SCN. Thus it is the case of the Petitioners that its limited challenge became infructuous and therefore there is no question of any appeal pending in relation to the 3rd SCN before any Tribunal or Court. 12. Be that as it may, with a view to settle the claim even under the 2nd SCN and the 3rd SCN (as amended), on 26th August, 2013 the Petitioners filed .....

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signed by his son - Petitioner No.2. This was done because Petitioner No.1 was detained under COFEPOSA since 14th August, 2013. 13. The settlement Applications arising out of the 2nd and 3rd SCNs were numbered as SA(C)559-560/2013 and SA(C)557- 558/2013 respectively. With reference to these Settlement Applications, a statutory notice dated 29th August, 2013 under section 127C of the said Act was issued by the Settlement Commission to the Petitioners wherein the above Applications were registere .....

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ith. 14. In reply thereto, the Petitioners on 3rd September, 2013 replied to the aforesaid notice and gave their detailed explanation inter alia submitting that since section 28AB of the said Act no longer remained on the statute book, no interest under the said section had been paid/deposited before filing the said Applications. It was however submitted that the Petitioners would deposit the interest liability as and when determined by the Settlement Commission under section 28AA. 15. After the .....

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g before the Settlement Commission on 3rd December, 2013. By its Final Order No.03/FINAL/ORDER/CUS/SK/2014 dated 29th January, 2014 the Settlement Commission allowed the Settlement Applications filed by the Petitioners arising out of the 1st SCN dated 15th October, 2012 on the terms and conditions mentioned in the said order. However, the Settlement Applications arising out of the 2nd SCN dated 7th December, 2012 and the 3rd SCN dated 29th / 31st January, 2013 came to be rejected by the Settleme .....

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t admissible. The Settlement Commission opined that by its notice dated 29th August, 2013 it was pointed out to the Petitioners about the non-payment of interest by them and also stated that the said Applications would be liable for rejection on that count. Since the Petitioners had not paid any interest whilst submitting their Settlement Applications on 26th August 2013, the mandatory provisions of section 127B were not complied with, and therefore, rejected the said Settlement Application Nos. .....

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Nos.SA(C)557- 558/2013 were rejected by the Settlement Commission vide its order dated 31st January, 2014 (Exh B to the Petition). Being aggrieved by these two orders, the Petitioners have approached us in our writ jurisdiction under Article 226 of the Constitution of India. 18. In this background, Mr Prakash Shah, learned counsel appearing on behalf of the Petitioners, submitted that the impugned orders dated 29th January, 2014 and 31st January, 2014 were passed on a totally incorrect interpret .....

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ted from the Act with effect from 8th April 2011, reference to the said section erroneously continued in section 127B(1). In fact, reference to section 28AB in section 127B(1), was substituted with section 28AA only by the Finance (No.2) Act, 2014 with effect from 6th August, 2014. Since section 28AB was deleted from the Act with effect from 8th April, 2011 and their Settlement Applications were filed only thereafter, the Petitioners were not required to statutorily deposit / pay any amount towa .....

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013 and after considering this letter, the Settlement Commission, vide its letters dated 13th September, 2013 ordered that Settlement Application Nos. SA(C)559-560/2013 (arising out of the 2nd SCN) and Settlement Application Nos. SA(C)557-558/2013 (arising out of the 3rd SCN), were allowed to be proceeded with, without imposing any condition to pay/deposit any interest under sections 28AA or 28AB of the said Act. Once having so ordered, the Settlement Commission could not have rejected the Appli .....

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given and the Settlement Commission in that case directed the Petitioners to pay/deposit a sum of ₹ 13,78,448/- towards interest, which was duly paid/deposited by the Petitioners. This is how the Settlement Application Nos. SA(C)-06/2013 & No. SA(C)-556/2013 arising out of the 1st SCN came to be allowed by the Settlement Commission. As far as the Settlement Applications arising out of the 2nd and 3rd SCN are concerned, he submitted that admittedly the Settlement Commission did not impo .....

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hat even today if the Settlement Commission imposes a condition to pay interest as determined it, the Petitioners would pay/deposit the same before their Settlement Applications are heard de novo by the Settlement Commission. Looking to all this, Mr. Shah submitted that there has been a gross miscarriage of justice which ought to be rectified by us. He, therefore, submitted that both the impugned orders dated 29th January, 2014 and 31st January, 2014 ought to be set aside insofar as they hold th .....

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the record before it and bordered on perversity. In this regard, Mr Shah was at pains to point out that in the 3rd SCN, vide paragraph 25(xii) thereof, Respondent No.2 had sought to appropriate a sum of ₹ 41,79,324/- (out of ₹ 50,00,000/- paid by Petitioner No.1 during the course of investigations), towards alleged duty liabilities on the cranes imported and assessed more than five years before the date of the 3rd SCN. It was this ex-parte decision and not the 3rd SCN that was subje .....

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1. Whilst this Appeal was pending, on 24th May, 2013 an Addendum to the 3rd SCN was issued by Respondent No.2 under which Respondent No.2 himself recalled his erroneous ex-parte decision communicated vide the said 3rd SCN. He, therefore, submitted that the Appeal before the CESTAT had become infructuous and in fact the said Appeal has been subsequently withdrawn. In light of this, Mr. Shah submitted that there was no violation of the provisions of section 127B which inter alia stipulate that no .....

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ismissing the Petitioner's Settlement Application Nos. SA(C) 557-558/2013 arising out of the 3rd SCN, on this ground. For all the aforesaid reasons, Mr Shah submitted that the impugned orders were unsustainable and ought to be set aside by us in our writ jurisdiction under Article 226 of the Constitution of India and the Settlement Applications arising out of the 2nd and 3rd SCNs be remanded back to the Settlement Commission for a de novo consideration. 22. On the other hand, Mr Jetly, learn .....

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s paid by the Petitioners before filing the Settlement Applications arising out of the 2nd and 3rd SCNs. In these circumstances, the Settlement Commission was fully justified in rejecting Settlement Application Nos.SA(C)559-560/2013 (arising out of the 2nd SCN) and Nos.SA(C)557-558/2013 (arising out of 3rd SCN). 23. It was the submission of Mr Jetly that merely because section 28AB of the said Act was not on the statute-book on the date when the above mentioned Settlement Applications were filed .....

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provisions of section 127B and therefore, the Settlement Commission cannot be faulted in rejecting the above mentioned Settlement Applications. Mr Jetly also relied upon the following three judgments :- (a) Uttam Chand Sawal Chand Jain v/s Union of India, reported in 2014 (299) E.L.T. 45 (Bom.) (Para 8); (b) Union of India v/s K. Amishkumar Trading Pvt.Ltd., reported in 2011 (273) E.L.T. 49 (Bom.) (Para 9); (c) Union of India v/s Valecha Engineering Ltd., reported in 2010 (249) E.L.T. 167 (Bom) .....

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08-1998 by section 102 of Finance (No.2) Act, 1998 (21 of 1998). The object for inserting this Chapter was that the door to settlement with an errant and defaulting tax-payer should be kept open, keeping in mind the primary objective to raise revenue. The Legislature was of the view that a rigid attitude would inhibit a one-time tax evader or an unintending defaulter from making a clear breast of his affairs and unnecessarily strain the investigation resources of the Government. The settlement m .....

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e statutory provisions of the said Act. The first provision is section 28AB which deals with payment of interest on delayed payment of duty in special cases. We must mention here that sections 28AB was deleted from the Act and replaced with section 28AA w.e.f. 08-04-2011. Before its deletion, section 28AB read as under:- 28-AB. Interest on delayed payment of duty in special cases.- (1) Where any duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the .....

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ate of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 28, till the date of payment of such duty: Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 151-A, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days fro .....

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s reduced by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the interest shall be payable on such reduced amount of duty. Explanation 2.-Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the interest shall be payable on such increased or further increased amount of duty. 27. With effect from 08-04-201 .....

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er sub-section (2), whether such payment is made voluntarily or after determination of the duty under that section. (2) Interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as the Central Government may, by notification in the Official Gazette, fix, shall be paid by the person liable to pay duty in terms of section 28 and such interest shall be calculated from the first day of the month succeeding the month in which the duty ought to have been paid or fro .....

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against the said payment at any subsequent stage of such payment. 28. Despite the fact that section 28AB was deleted and replaced with section 28AA w.e.f. 08-4-2011, no corresponding amendment was carried out in section 127B. In other words, even though section 28AB no longer remained on the statute book, a reference to the said section (28AB) continued in section 127B. 29. On the dates when the Settlement Applications arising out of the 1st, 2nd and 3rd SCNs were filed by the Petitioners (i.e. .....

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re the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification, undervaluation or inapplicability of exemption notification or otherwise and such application shall be disposed of in the manner hereinafter provided: Provided that no such app .....

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under section 28-AB: Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court: Provided also that no application under this sub-section shall be made in relation to goods to which section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed: Provided also that no application under .....

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ich his application shall be liable to be rejected. (2) Where any dutiable goods, books of account, other documents or any sale proceeds of the goods have been seized under section 110, the applicant shall not be entitled to make an application under sub-section (1) before the expiry of one hundred and eighty days from the date of the seizure. (3) Every application made under sub-section (1) shall be accompanied by such fees as may be specified by rules. (4) An application made under sub-section .....

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of his duty liability which has not been disclosed before the proper Officer, the manner in which such liability is incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by the Rules. Clause (c) of the 1st proviso to subsection (1) of section 127B clearly stipulates that no such Settlement Application shall be made unless the Applicant has paid the additional amount of customs duty accepted by him along with interest due und .....

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dment was carried out in clause (c) of the 1st proviso to section 127B(1). In fact, to bring it in line with the other provisions of the Act, section 127B was also thereafter amended by Finance (No.2) Act, 2014. The notes on clauses of the Finance (No.2) Bill, 2014 inter alia mentions that clause 78 of the Bill seeks to amend clause (c) of the 1st proviso to sub-section (1) of section 127B to substitute the figures and letters 28AA , for the words and figures and letters section 28AB to align it .....

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as may be specified by rules, and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification, undervaluation or inapplicability of exemption n .....

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cer; (b) the additional amount of duty accepted by the applicant in his application exceeds three lakh rupees; and (c) the applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28-AA: Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court: (1-A) ………….. (2) … … … … ( .....

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, a reference to the said section continued in clause (c) of the 1st proviso to section 127B(1), till 06-08-2014. It was only when section 127B(1) was amended, by Finance (No.2) Act, 2014, that reference to section 28AB , in clause (c) of the 1st proviso to section 127B(1) was substituted with section 28AA . 32. In the present case, admittedly the Settlement Applications were filed by the Petitioners in the year 2012-2013. On the date when these Applications were filed under section 127B, sectio .....

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e of the Authorities that since section 28AB no longer remained on the statute-book, no interest was paid by them under the said section. Despite this, the Petitioners had undertaken that they would pay interest under section 28AA as and when determined by the Settlement Commission. Admittedly, the Settlement Commission, whilst ordering that the Settlement Applications (arising out of the 2nd and 3rd SCNs) are allowed to be proceeded with, did not impose any condition or direct the Petitioners t .....

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resent case inasmuch as the Petitioners had undertaken that they would pay interest under section 28AA, as and when determined by the Settlement Commission. In fact, this course of action was itself undertaken by the Settlement Commission in respect of the 1st SCN when it ordered that the Settlement Applications arising out of the 1st SCN were allowed to be proceeded with subject to payment of interest on the admitted duty liability within seven days from the date of receipt of the said order. I .....

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ent Applications could not have been rejected on that ground. Considering that Mr Shah very fairly stated before us that even today they are wiling to pay the interest due under section 28AA as and when determined by the Settlement Commission, we think that it would just, fair and in the interest of justice if Settlement Application Nos.SA(C)559-560/2013 and SA(C)557-558/2013 (arising out of 2nd and 3rd SCNs) are remanded back to the Settlement Commission for a de novo consideration. It is accor .....

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ted 31st January, 2014 (Exh B to the Petition), the Settlement Commission held that apart from non-payment of interest, the Petitioners had not complied with an additional mandatory requirement as set out in the 2nd proviso to section 127B(1) viz. that no Settlement Application can be entertained by the Settlement Commission in cases which are pending in the Appellate Tribunal or any Court. 34. In this regard, Mr Jetly submitted that the Settlement Commission was fully justified in coming to the .....

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tified in holding that the Petitioners had failed to fulfill the condition that no Appeal relating to the case was pending before the Appellate Tribunal. 35. On carefully perusing the papers and proceedings in Writ Petition, we find that this argument is wholly fallacious. Firstly, the 3rd SCN dated 29/31-02-2013 has not been adjudicated at all. In the said SCN, an ex-parte decision of the Additional Director General, Directorate of Revenue Intelligence was communicated to the Petitioners vide p .....

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issued by Respondent No.2 under which Respondent No.2 recalled its earlier ex-parte decision communicated vide the said 3rd SCN. Therefore, even the challenge to the said decision became infructuous and as stated earlier, the said Appeal pending before the CESTAT was subsequently withdrawn. This being the case, we find that in the facts of the present case, the Settlement Commission was totally in error in coming to the conclusion that the Petitioners' Settlement Applications could not be en .....

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oners in their Settlement Applications. In this view of the matter, we find that the Settlement Commission ought not to have rejected Settlement Application Nos.SA(C)557-558/2013 (arising out of 3rd SCN) on the ground that the Petitioners' Settlement Applications did not fulfill the condition set out in the 2nd proviso to section 127B(1). 36. Having come to the conclusion that the Settlement Commission was in error in rejecting the Settlement Applications of the Petitioners arising out of th .....

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had dismissed the Settlement Application of the Petitioners on the ground that the Petitioners did not fulfil the condition precedent for entertaining the Settlement Application as provided in clause (a) of the 1st proviso to section 127B(1) of the said Act. This was on the ground that the Baggage Declaration Form required to be filed, was not filed by the Petitioners, thus disentitling the Petitioners from making an application for settlement before the Settlement Commission under section 127B( .....

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e was clause (a) of the 1st proviso to section 127B(1). In the facts of the present case, the Revenue contends that clause (c) of the 1st proviso to section 127B(1) has not been complied with. As discussed earlier, we have rejected this argument. We therefore find that the reliance placed on this judgment is wholly misplaced. 37. The next judgment relied upon by Mr Jetly is in the case of K. Amishkumar Trading Pvt. Ltd. (supra). In this judgment, a Division Bench of this Court has held that the .....

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view of the fact that when they filed their Settlement Applications under section 127B, section 28AB did not remain on the statute-book at all [even though a reference to the same continued in section 127B(1)]. In fact, though not required by law, the Petitioners had fairly given an undertaking that they would deposit interest under section 28AA as and when determined by the Settlement Commission. Whilst ordering that the Petitioners' Settlement Applications (arising out of the 2nd and 3rd .....

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udgment relied upon by Mr Jetly is in the case of Valecha Engineering Ltd. (supra). The facts of this case reveal that a Show Cause Notice was issued to the Respondent therein under section 124 read with section 28 of the Customs Act, 1962. The demand in the said Show Cause Notice was for duty under the Act along with interest. On receipt of the said Show Cause Notice, an Application came to be filed by the Respondent therein under section 127B. In this Application, the Respondent had specifical .....

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st, was pleased to direct that the interest paid by the Respondent could not be charged and therefore had to be refunded within 30 days. It was this direction of refund that was challenged by the Union of India before this Court. After considering the facts in that case, the Division Bench held that the Settlement Commission suo motu could not have ordered refund of interest in the Settlement Application of the Respondent who had not even sought for refund of interest paid, or for waiver of inte .....

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