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2009 (8) TMI 47

..... Settlement Commission decides to impose, but interest has to be based upon the orders issued by the Board. Considering, however, the power conferred on the Commission under Section 127H as it then stood it would have been open to the Commission to remit the whole or in part imposition of penalty, fine and interest. It was, therefore, within the jurisdiction of the Commission to have ordered payment of interest at ten per cent, instead of the interest payable in terms of the Board Order, which would be more than 10% - 2131 OF 2003 - 12-8-2009 - F.I. REBELLO & D.G. KARNIK, JJ. Ms. Kiran Doiphode with Mr. V.M. Doiphone i/b.V.M. Doiphode & Co., for the Petitioners. Mr. P. S. Jetly with Mr. H.V. Mehta and Mr. R. B. Pardeshi for the respondent Nos. 1 to 3. [Judgment per FERDINO I. REBELLO, J.] - The petitioners are aggrieved by the action of the Settlement Commission directing payment of interest. The submission on behalf of the petitioners has been that no show cause notice as required under Section 28 of the Customs Act, 1962 (hereinafter referred to as the Act) was served on the petitioners. The show cause notice dated 16th June, 2000 only demanded duty and not interest. It is .....

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..... amount of Rs.36,34,713/. As the petitioners had already paid Rs.24,07,778/ the petitioners were directed to pay the balance amount of Rs.12,26,935/within 30 days on receipt of the order to the jurisdictional Commissioner and intimate the same to the Commission. The petitioners were also directed to pay simple interest at the rate of 10% on the duty amount namely Rs.15,65,993/i.e. Duty amount settled at Rs.36,34,713/minus duty of Rs.20,68,720/paid at the time of import from the date of clearance of the imported goods till the date of actual payments of that sum and pay the same within thirty days of receipt of the order. The petitioners approached this Court to challenge the levying of interest. An interim stay was granted in so far as recovery of interest is concerned. 5. A reply has been filed on behalf of the respondents by K.A. Shaikh, Assistant Director, DRI, Mumbai Zonal Unit and it is set out as under:6 Section 127H of the Customs Act 1961 confers sufficient power on the Settlement Commission to settle the case by granting immunity from prosecution and penalty for any offence under the Customs Act either wholly or in part from the imposition of any penalty, fine and interest .....

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..... requires that after considering the representation, the amount of duty be determined and the person shall pay the amount so determined. Section 28AB as it then stood would be relevant. Section 28AB(1) is reproduced as under: 28AB (1) Interest on delayed payment of duty in special cases: (1) Where any duty has not been levied or has been shortlevied or erroneously refunded by reason of collusion or any willful misstatement or suppression of facts, the person who is liable to pay the duty as determined under subsection (2) of Section 28, shall in addition to the duty, be liable to pay interest at such rate not below ten per cent and not exceeding thirty per cent per annum, as is for the time being fixed by the Board, from the first day of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in subsection (2) of Section 28, till the date of payment of such duty. 9. We then come to the provisions pertaining to settlement. Case has been defined under Section 127A(b) to mean any proceedings under this Act or any other Act for the levy assessment and collecti .....

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..... ttlement under Section 127B has cooperated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his duty liability to grant to such person, subject to such conditions as it may think fit to impose, immunity from prosecution for any offence under this Act or under the Indian Penal Code or under any other Central Act for the time being in force and also either wholly or in part imposition of penalty, fine or interest . The various amendments need not be referred. Considering that we have to consider the law at the time this application was made. 11. Reading of this provision would, thefore, indicate that an order under Section 127C(7) has to be in accordance with the provisions of the Act and on the matters covered by the application and any other matter relating to the cases not covered by the application, but referred to in report of the Commissioner of Customs or Commissioner (Investigation) under subsection (1) or subsection (6) of Section 127C. Subsection (9) of Section 127C sets out that every order passed under subsection (7) shall provide for the terms of settlement including any demand by way of duty, penalty or interest. It .....

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..... whether Section 28(1)(b) or the proviso would apply. 15. We may now refer to the judgments cited on behalf of the Revenue by learned Counsel. We may firstly refer to the judgment in Pratibha Processors vs. Union of India, 1996 (88) E.L.T. 12 (S.C.). The issue before the Supreme Court was payment of interest in respect of warehousing under Section 61(2) and the bond which is required to be furnished under Section 59(1). In that context the Supreme Court was pleased to observe that interest is compensatory in character and is imposed on the assessee who had withheld the payment of tax as and when it is due and payable. Essentially, it is compensatory and different from penalty - which is penal in character. In Pratibha Syntext Ltd. vs. Union of India, 2003 (157) E.L.T. 141 (Bom.) Section 28AB was not in issue. What was in issue was in the matter of bond to be furnished under Section 59. It is in that context, though the contention on behalf of the petitioner was that the Settlement Commission has no jurisdiction that this Court observed that as a bond had been given under Section 59 it was not necessary to examine those contentions. The issue, therefore, of applicability or nonapplic .....

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..... at such rate as fixed by the Board. The concerned Officer, therefore, in the ordinary course would be bound once the duty is held to be liable on account of collusion, wilful misstatement or suppression of facts to call on the party to pay interest as fixed by the Board at the relevant time. 19. The limited question is whether considering the powers of the Settlement Commission, is it required that fresh notice under Section 28 has to be served on such person on the Assessing Authority coming to the conclusion that such interest is payable on account of failure to pay duty. In our opinion considering the provisions of Section 127F the Settlement Commission has all the powers of an officer under the Act. The Applicant approaches the Settlement Commission for the purpose of settlement of the matter which can exercise the power of the Custom Officer. Once there is power under Section 127F, in our opinion it was open to the Settlement Commission to have directed payment of interest. Ultimately Settlement is of the case . The case involves a demand for duty. Once duty is held to be payable, interest becomes payable by operation of law. Only the question has to be ascertained in terms of .....

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