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Under Water Services Company Limited And Others Versus Union of India And Others

2016 (9) TMI 880 - BOMBAY HIGH COURT

Rejection of settlement applications - proper disclosures not made amounting to non-cooperation - duty and interest under clause (c) to the 1st proviso to section 127B(1) - settlement of cases under Chapter XIV-A - Held that: - The settlement machinery was meant for providing a chance to a tax-evader who wants to turn over a new leaf as recommended by the Direct Taxes Inquiry Committee. - The majority view of the Settlement Commission was in grave error in coming to the conclusion that the S .....

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the case was allowed to be proceeded with - It was not correct on the part of the of the Settlement Commission (the majority view) to reject the Settlement Applications of the Petitioners on the ground of non payment of any admitted duty and interest as required under Section 127B. - Classification of goods - reclassification of the fitments to the Pontoon, alongwith the Pontoon - grounds of rejection - Held that: - In view of the fact that the Settlement Commission itself had allowed the Se .....

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e Petitioners could not have been rejected on this ground, as well. - Matter remanded to the Settlement Commission to decide the Settlement Applications filed by the Petitioners on merits and in accordance with law and uninfluenced by any views of the majority or minority - petition disposed off - decided in favor of petitioner. - Writ Petition No. 1523 of 2015 - Dated:- 16-9-2016 - S. C. Dharmadhikari And B. P. Colabawalla, JJ. Mr. Sujay Kantawala a/w Mr Brijesh Pathak, for the Petitioners .....

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s been passed by the 3rd Respondent in the Settlement Applications filed by the Petitioners arising out of a common Show Cause Notice ( SCN ) dated 9th February, 2012. The Settlement Commission that passed the impugned order comprised of three Members. One Member settled the case of the Petitioners (the minority view) whereas the other two Members rejected the Settlement Applications filed by the Petitioners and sent the matter back for adjudication (the majority view). Taking exception to the m .....

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le of the said Barge / Pontoon, the said equipments and the fitment charges. Upon import of the said Barge / Pontoon, the Petitioners declared the same as a Barge for claiming benefit of duty exemption (effective rate of duty Nil) as per Item No.352 of the said Notification No.21/2002- Cus dated 1st March, 2002. The said Barge / Pontoon was later registered as USC-1 with the Indian Register of Shipping. As per the advice received by the 1st Petitioner, the said Barge / Pontoon was cleared by ava .....

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of the same, the Applicant deposited a sum of ₹ 50 lakhs on 28th October, 2011 and thereafter the seized Barge / Pontoon was provisionally released. During the investigation being done by the DRI, it dawned on the 1st Petitioner that a mistake had occurred, in as much as they had paid customs duty on the equipment and fitting charges separately which otherwise were part of the main Barge / Pontoon, as was evident from the Bill of Entry No. 755132 dated 24th March, 2007. According to the Pe .....

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case as per the provisions of the Customs Act, 1962. Accordingly, in or around 22nd October, 2013, all three Petitioners filed 3 separate Settlement Applications. Even though the SCN demanded duty in the sum of ₹ 43,80,845/-, the Petitioners admitted the duty amount of ₹ 63,27,559/- for the said Barge / Pontoon as a whole including the equipments and fitments thereon. Hence, additional duty in the sum of ₹ 19,46,714/- was admitted by the Petitioner. A detailed calculation of th .....

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r, 2013 under section 127C(1) of the Customs Act, 1962 inter alia directing the Petitioners to explain in writing as to why these Applications should be allowed to be proceeded with. By the said notice, an answer was also sought for in relation to the discrepancies mentioned in the said notice. (e) The Petitioners filed a detailed reply to this notice vide their Advocate's letter dated 7th November, 2013 and furnished all the details. A perusal of this letter indicates that all the discrepan .....

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pplications took place on 26th March, 2014 when none appeared on behalf of the Revenue and neither any report was filed by the Revenue. Accordingly, Respondent No.3 was pleased to direct the Revenue to file its report within seven days. Finally, the Revenue filed its report vide its letter dated 15th April, 2014 which was received by the office of the 3rd Respondent on 19th May, 2014. In answer to the said report, the Petitioners also filed their detailed written submissions (which are annexed a .....

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Settlement Commission comprised of three Members. One Member of the Settlement Commission settled the case of the Petitioners and ordered that (i) since the duty was settled at ₹ 43,80,845/- and Petitioners had already paid more than this amount, no further amount was payable on this score; (ii) since excess payment has been made in this case, there was no question of payment of any interest; (iii) a fine of ₹ 50,000/- be imposed as a fine in lieu of confiscation and granted immunit .....

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y admitting any additional duty and interest in terms of the demand in the SCN dated 09.02.2012, and as required under Section 127B. According to them, the disclosures for settlement were only a request to reclassify the fitments to the Pontoon, alongwith the Pontoon, and adjust the duty paid initially in 2007 against the fitments classified under the respective CTH. In view of the above, the other two Members rejected the Settlement Applications of the Petitioners for not making proper disclosu .....

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submitted that the findings of the Settlement Commission are wholly perverse. He submitted that the mandate of Section 127B inter alia clearly stipulates that no Settlement Application shall be entertained unless the Applicant has paid the additional amount of customs duty accepted by him along with interest [clause (c) to the 1st proviso to section 127B(1)]. He submitted that this was a condition precedent before the Applicant approached the 3rd Respondent for settlement of its case. If this c .....

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datory requirement before their Settlement Applications could be entertained by the Settlement Commission. In light of this, the Petitioners were asked to give their written explanation within a period of 7 days. In reply to this notice, the Petitioners, by their letter dated 7th November, 2013 stated that the Petitioners had already erroneously paid an amount of ₹ 65,41,741/-, at the time of clearance of the Barge covered by Bill of Entry No.755132 dated 24th March, 2007. Additionally the .....

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awala submitted that the findings of the majority view that the Petitioners were guilty of non payment of any admitted duty and interest as required under clause (c) to the 1st proviso to section 127B(1) was wholly perverse and contrary to the record. He submitted that once the Settlement Commission, being satisfied with the explanation given by the Petitioners regarding payment of duty and interest and allowing the Settlement Applications to be proceeded with, could not turn around and reject t .....

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, he brought to our attention the record of the proceedings before the Commission itself wherein the submissions of the Advocate for the Petitioners were recorded that they were not disputing the change in classification proposed by Revenue in the SCN and that they have now accepted the classification of the whole Barge with the fittings under heading 8905 which attracts duty of 5%. Mr. Kantawala submitted that even in the Settlement Applications filed before the Settlement Commission, it was ca .....

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to pay any such interest if determined by the Settlement Commission. d. It is submitted that no appeal or any matter in respect of the matters covered by the present application is pending in the Appellate Tribunal or any court e. The said goods are not covered by the Notification issued under section 123 of the Customs Act, 1962 nor any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed f. The present application is not made for interpretation .....

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ment Applications filed by the Petitioners be remanded back to the 3rd Respondent for being decided afresh after giving a de novo hearing to the Petitioners. 8. On the other hand, Mr. Jetly, learned counsel appearing on behalf of the Respondents, sought to support the impugned order. He submitted that in the facts of the present case, admittedly the Petitioners had not paid the amount of duty along with interest thereon as demanded in the SCN. The Petitioners were, therefore, guilty of not compl .....

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ne of classification as recorded by the majority view of the 3rd Respondent, and therefore, he submitted that the majority view in the impugned order is fully justified and legal and required no interference by us in our writ jurisdiction under Article 226 of the Constitution of India. 9. We have heard the learned counsel for the parties at length and perused the papers and proceedings in the Writ Petition as well as the annexures thereto. Before we deal with the present controversy, it would be .....

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ew that a rigid attitude would inhibit a one-time tax evader or an un-intending defaulter from making a clean breast of his affairs and unnecessarily strain the investigation resources of the Government. The settlement machinery was thus meant for providing a chance to a tax-evader who wants to turn over a new leaf as recommended by the Direct Taxes Inquiry Committee (popularly known as the Wanchoo Committee ). Keeping the aforesaid objective in mind, this Chapter viz. Chapter XIV-A, was inserte .....

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ttlement of cases. - (1) Any importer, exporter or any other person (hereinafter referred to as the applicant in this chapter) may, in respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled, in such form and in such manner 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 .....

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y, or a shipping bill, in respect of import or export of such goods, as the case may be, and in relation to such bill of entry or shipping bill, a show cause notice has been issued to him by the proper officer; (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-AB: Provided further that no application shall be enterta .....

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n of the goods under the Customs Tariff Act, 1975 (51 of 1975). (1-A) Notwithstanding anything contained in sub-section (1), where an application was made under sub-section (1) before the 1st day of June, 2007 but an order under sub-section (1) of section 127-C has not been made before the said date, the applicant shall within a period of thirty days from the 1st day of June, 2007 pay the accepted duty liability failing which his application shall be liable to be rejected. (2) Where any dutiable .....

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lied) 11. There have been certain amendments to this section in 2014 and 2015 which are not really germane to decide the controversy before us. Be that as it may, as can be seen from the above reproduction, section 127B(1) gives an opportunity to a person to approach the Settlement Commission to settle a case relating to him before the same is adjudicated, and have the same settled. For this purpose, the said person has to make an Application before the Settlement Commission in such form and in .....

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he additional amount of customs duty accepted by him along with interest due under section 28AB. We must mention here that in the year 2014, Section 127B was amended and inter alia the words section 28AB , appearing in clause (c) of the 1st proviso to section 127B(1) was substituted with the words section 28AA . The 4th proviso to Section 127B(1) stipulates that no Settlement Application under this sub-section shall be made for interpretation of the classification of the goods under the Customs .....

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riting as to why the application made by him should be allowed to be proceeded with and after taking into consideration the explanation provided by the applicant, the Settlement Commission, shall, within a period of fourteen days from the date of the notice, by an order, allow the application to be proceeded with or reject the application, as the case may be, and the proceedings before the Settlement Commission shall abate on the date of rejection : Provided that where no notice has been issued .....

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1), call for a report along with the relevant records from the Commissioner of Customs having jurisdiction and the Commissioner shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission : Provided that where the Commissioner does not furnish the report within the aforesaid period of thirty days, the Settlement Commission shall proceed further in the matter without the report of the Commissioner. (4) …………. (5 .....

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cation made by him should be allowed to be proceeded with. After taking into consideration the explanation provided by the Applicant, the Settlement Commission shall within a period of 14 days from the date of the notice, by an order, allow the Application to be proceeded with or reject the Application. Reading the provisions of sections 127B and 127C, it is clear that before the Application is allowed to be proceeded with, the Settlement Commission has to be satisfied that the mandatory require .....

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down under Section 127B of the Customs Act, 1962 and also inform the Commission whether the bar as set out under Section 127L of the Customs Act, 1962 is applicable in their cases. This notice was duly replied to by the Petitioners, by their letter dated 7th November, 2013. By this detailed reply, the Petitioners not only answered the discrepancies that were raised by the Settlement Commission but a categorical statement was made in the said reply that the Settlement Applications have not been m .....

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,41,741/-). This amount was far in excess of the duty demanded in the SCN of ₹ 43,80,845/-. In view of the above, the Petitioners prayed that the Settlement Applications filed by them be allowed to be proceeded with. After receiving this reply, the Settlement Commission passed an order dated 12th November, 2013 under which it was ordered that the Settlement Applications filed by the Petitioners be allowed to be proceeded with. All these facts have been taken into consideration by the Singl .....

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itioners had explained that they had not made any additional payment of duty because in the past they had deposited the amount of duty which was far in excess of what was demanded in the SCN. This explanation was accepted by the Settlement Commission, and it was only thereafter that the case was allowed to be proceeded with. We, therefore, think that it was not correct on the part of the of the Settlement Commission (the majority view) to reject the Settlement Applications of the Petitioners on .....

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ification of the goods under the Customs Tariff Act, 1975. Such a declaration was categorically given by the Petitioners in their reply dated 7th November, 2013 before the Settlement Commission ordered that the Settlement Applications of the Petitioners are allowed to be proceeded with. That apart, the records of the proceedings before the Commission on 26th March, 2014 (Exh. E , page 148 of the paper book), also clearly indicate that the Petitioners were not disputing the change in the classifi .....

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