TMI Blog2003 (7) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice came to be issued by the Customs authorities to the petitioners. It was alleged in the show cause notice that the investigation carried out in the case of the petitioners, has revealed that the petitioners resorted to manipulate the weight of the fabric as well PFY contained in the shipping bills and the petitioners failed to produce any documentary evidence of register to show proper utilisation of the exempt material cleared under Notification No. 204/92. By the said show cause notice the petitioners were called upon to show cause, why an amount of Rs. 1,11,25,570/- should not be demanded and recovered from them under proviso to Section 28(1) of the Customs Act ('the said Act' for short) coupled with the declaration given at the time of clearance in terms of Notification No. 204/92 and why penal action should not be taken against them under the provisions of the said Act. 4.On 31-3-2000, the show cause notice following principles of natural justice, came to be adjudicated upon against the petitioners. The said order dated 31-3-2000 was served upon the petitioners on 29-4-2000. Even before the said order was served, the petitioners had filed an application before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion by consent of both parties. The Submissions : 8.Shri V.S. Nankani, learned Counsel for the petitioners submits that there is no provisions in the notification of which breach has been alleged for demanding interest nor such permission exists in the Customs Act. The provisions of Section 28A of the said Act are also not applicable since the petitioners had deposited the entire amount much before the order dated 31-3-2000 passed by the respondent No. 4. In his submission, even the provisions of Section 28AB of the said Act are also not applicable as the same was brought on the statute w.e.f. 28-9-1998, whereas the imports are for the period prior to 28-9-1998 as such rightly interest was not demanded in the show cause notice dated 7-5-1997 under Section 28AB of the said Act. 9.The learned Counsel for the petitioners further submitted that the payment of interest being penal in nature, its imposition must be backed by the statute. Right of the Customs to demand must be authorised by law. He sought to place reliance on the Supreme Court judgment in India Carbon Ltd. Another v. State of Assam - 1997 (6) SCC 479 and J.K. Synthetics Ltd. v. Commercial Taxes Officer - (1994) 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain such applications in view of Section 127B(1) of the Customs Act and, therefore, the question of granting waiver of interest in such cases by the Settlement Commission also does not arise. Copy of opinion dated 29-7-2002 is enclosed for ready reference. In view of opinion of appropriate action should be taken to safeguard revenue interest. Suitable standing order may also be issued3. for information/action of customs field formations under your charge. Receipt of this circular may kindly be4. acknowledged." 12.Learned Counsel appearing for the petitioners based on the above circular urged that in terms of Section 127B(1) of the Customs Act, Settlement Commission is empowered to entertain application for settling disputes only in those matters where party has made true and correct disclosure of duty liability before the proper officer. In cases involving default in export obligation under Advance Licence/EPCG schemes, Section 127B(1) of the Customs Act is not applicable. As such, impugned order levying interest is without jurisdiction and without authority of law and to that extent, it being under challenge, the same is liable to be quashed and set aside and matter be left ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses an issue with respect to the chargeability of interest in the peculiar facts and circumstances of the case at hand. The petitioners are not challenging the entire impugned order which is in three parts. First part of the order settles the customs duty liability; second part of the order grants immunity to the petitioners from the penalty and prosecution under the Customs Act and I.P.C. and third part of order directs recovery and adjustment of interest @ 10% p.a. on the customs duty found payable. What is being challenged in the petition is last part of the order which directs levy of interest, recovery and adjustment thereof. The challenge to the order is that the same is without jurisdiction and without authority of law in view of the circular of the Board dated 20th August, 2002, which clarifies that the Settlement Commission has no jurisdiction to deal with disputes arising out of breach of the export obligations under Advance Licence/EPCG Schemes. 15.In our opinion, there is no merit in this contention. Admittedly, the goods imported by the petitioners were allowed to be cleared without payment of duty in view of Exemption Notification No. 204/92. At the time of clearanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the customs authorities were entitled to recover the duty with interest. Merely, because the Commission erroneously or otherwise had not levied interest in his order, it cannot be said that the Customs authorities had no jurisdiction to recover interest. If the petitioners were satisfied with the order of the Commissioner of Customs, there was no need for them to approach the Settlement Commission. Once the petitioners have voluntarily chosen the jurisdiction of the entire issue by the Settlement Commission afresh, in the light of the disclosure made by them it was open to the Settlement Commission to direct the petitioners to pay the customs duty with interest. Although the Settlement Commission has levied interest at a percentage, much less than what was agreed to pay by the petitioners in their bond and legal undertaking, the same being not an issue in this petition, we are not expressing any opinion in that behalf. Therefore, we have no hesitation in holding that once the petitioners committed breach of the terms of the exemption Notification No. 204/92, the Customs authorities were entitled to enforce the declaration with bond and legal undertaking given by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay not be possible to take action under Section 111(o) of the Customs Act with respect to the breach of conditions of licence relating to use of goods after they were cleared from custom charge". While dealing with the aforesaid issue, based on communication from the Central Board of Excise and Customs, the Apex Court held as under : "The communication of the Central Board of Excise and Customs, dated 13th May, 1969, licence to the breach of the condition of a licence and suggests that it may not be possible to take action under Section 111(o) in respect thereof. It is true that the terms of the said notification were made part of the appellant's licences and, in that sense, a breach of the terms of the said Exemption Notification is also a breach of the terms of the licence, entitling the licensing authority to investigate. But, the breach is not only of the terms of the licence; it is also a breach of the condition in the Exemption Notification upon which the appellants obtained exemption from payment of customs duty and, therefore, the terms of Section 111(o) enable the Customs authorities to investigate." (Emphasis supplied) Reading of the above extracted para makes it cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficult to agree with the submission made by the learned Counsel for the petitioners, that neither the Customs authorities nor the Settlement Commission shall have jurisdiction to deal with case in hand. Consequently, order of the Settlement Commission cannot be said to be without jurisdiction. The circular issued by the Board has no bearing on the facts of this case. Apart from this, the instructions or circular issued by the Board is running counter to the law laid down by the Apex Court in the case of Sheshant Sea Food Pvt. Ltd. cited supra. If the Board's circular runs counter to the law laid down by the Supreme Court or the High Court, in that event, it will certainly be binding on the authorities under the Act but it will not be open to the Courts to direct that such a circular should be given effect to and not the view expressed in the decisions of the Supreme Court or High Courts, as held by the Apex Court in the case of M/s. Hindustan Aeronautics Ltd., Bangalore v. Commissioner of Income tax, Karnataka-I, Bangalore - 2000 (119) E.L.T. 513 (S.C.) = JT 2000 (7) S.C. 82, as such we hold that the Board's circular is not applicable to the facts of the case in hand. 22.In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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