Bombay High Court
Brahmpal Panchal, Prop. Jagdamba ... vs Union Of India, Through Central ... on 9 October, 2015
Bench: S.C. Dharmadhikari
WP5633.14.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.5633 OF 2014
Bharmpal Panchal and another ... Petitioners
v/s
Union of India and others ... Respondents
Mr. Prakash Shah with Mr. Jaydeep C Patel, Mr. Jas Sanghavi i/b
Yogesh Rohira for Petitioners.
Mr Pradeep S. Jetly, Advocate, for the Respondents.
CORAM: S.C. DHARMADHIKARI &
B.P. COLABAWALLA JJ.
Reserved On : 14th September, 2015
Pronounced On : 9th October, 2015
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 226 of the Constitution
of India challenges the final orders passed by the Settlement
Commission dated 29th January, 2014 and 31st January, 2014
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respectively (Exhs. 'A' and 'B' to the Petition), and to direct the
Settlement Commission to de novo consider the Settlement
Applications of the Petitioners, by affording them a reasonable
opportunity of hearing.
3. The order dated 29th January, 2014 (Exh. 'A' to the
Petition) arises out of Show Cause Notice dated 7th December, 2012
and the order dated 31st January, 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 Notice dated 15th October 2012, the Settlement
Commission allowed the Settlement Applications of the Petitioners
vide its Final Order No.03/FINAL/ORDER/CUS/SK/2014 dated 29th
January, 2014. However, vide the impugned orders (Exhs. 'A' and
'B' to the Petition), the Settlement Commission erroneously rejected
the balance Settlement Applications arising out of the second and
third Show Cause Notices dated 7th December, 2012 and 29th /31st
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January, 2013 respectively. Challenge is laid to these impugned
orders 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 Petitioner No.1. Respondent No.1 is the Union of India.
Respondent No.2 is the Additional Director General, Director of
Revenue, Mumbai Zonal Unit, 13, V.T. Marg, New Marine Lines,
Mumbai. Respondent No.3 is the Commissioner of Customs
(Import), New Custom house, Ballard Estate, Mumbai 400 001.
Respondent No.4 is the Additional Commissioner of Customs
(Import), New Custom House, Ballard Estate, Mumbai 400 001.
5. In October 2010, the Directorate of Revenue Intelligence
commenced investigations into 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
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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 Rs.45,70,075/- under section 28 of the
Customs Act, 1962 (for short the "said Act") alongwith interest in
terms of section 28AB thereof, and to confiscate the offending goods
and impose penalty on the Petitioners.
6. On or about 2nd January, 2013 Petitioner No.1 filed a
Settlement Application dated 31st December, 2012 under section
127B of the said Act for settlement of the case arising out of the 1st
SCN dated 15th October, 2012 by admitting the entire amount of
differential duty of Rs.45,70,075/-. Similarly, Petitioner No.2 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.
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7. Pursuant thereto, on or about 9th January 2013, a
Statutory Notice under section 127C of the said Act was issued to
Petitioner No.1 wherein the above Settlement Application dated
31st December, 2012 was registered as Application No.SA(C)-
06/2013 and the discrepancies noticed therein were pointed out to
Petitioner No.1. In the said notice, it was inter alia pointed out that
Petitioner No.1 has not paid interest on the admitted duty liability
which was a pre-condition for making an application under section
127B, failing which the Application 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 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 deposited before filing the Settlement Applications. It was
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however submitted that they would pay/deposit the interest
liability as and when determined by the Settlement Commission
under section 28AA of the said Act.
9. Accordingly, by its letter dated 21st January, 2013 (in
relation to Petitioner No.1) and 12th September, 2013 (in 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 Rs.13,78,448/- towards interest in respect of these
Settlement Applications.
10. In the meanwhile, another Show Cause Notice dated 7th
December, 2012 (for short the "2nd SCN") was issued to the
Petitioners in respect of one crane with accessories, proposing to
demand differential duty of Rs.18,38,658/- under section 28 of the
said Act alongwith interest in terms of section 28AB thereof and
also proposing confiscatory and penal action under section 111(m)
and 112(a) of the said Act.
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11. After the issuance of the 2nd SCN, another Show Cause
Notice dated 29th / 31st January 2013 (for short, the "3rd SCN")
came to be issued to the Petitioners inter alia proposing to demand
differential duty amounting to Rs.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
ig of Revenue Intelligence, was also
communicated to the Petitioners vide paragraph 25(xii) thereof
whereby Respondent No.2 had appropriated a sum of
Rs.41,79,324/- (out of Rs.50,00,000/- paid by Petitioner No.1
during the course of investigations) towards alleged duty liability
on the cranes imported and assessed more than five years before
the date of the 3rd SCN. Since it was the case of the Petitioners that
this appropriation was towards a time barred claim, this ex-parte
decision to appropriate the said amount of Rs.41,79,324/- was
subjected to a challenge before the statutory authorities. Whilst
this limited challenge was pending, on 24th May, 2013 an
addendum to the 3rd SCN was issued by Respondent No.2 under
which Respondent No.2 recalled its erroneous ex-parte decision
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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 separate Applications under section
127B of the said Act before the Settlement Commission by
admitting the entire amount of differential duty as demanded in the
said 2nd and 3rd SCNs of Rs.18,38,658/- and Rs.1,62,70,028/-
respectively and inter alia submitted that since section 28AB of the
said Act no longer remained on the statute book, no interest under
the said section was paid/deposited before filing the Settlement
Applications. These Applications, on behalf of Petitioner No.1 were
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
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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
registered and certain common discrepancies were noticed and it
was pointed out that the Petitioners had not paid interest on the
admitted duty liability. Payment of admitted duty liability
alongwith applicable interest was a pre-condition for making an
Application under section 127B of the said Act failing which the
Application was liable for rejection. The Petitioners were therefore
inter alia called upon to explain in writing as to why the
Applications filed by them should be allowed to be proceeded with.
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 aforesaid explanation, by two separate letters
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both dated 13th September 2013, the Petitioners' Applications in
relation to the 2nd and 3rd SCNs (SA(C)559-560/2013 and
SA(C)557-558/2013 respectively) were allowed to be proceeded
with by the Settlement Commission without imposing any condition
to deposit any interest under section 28AA or 28AB of the said Act.
16. Thereafter all the Settlement Applications filed by the
Petitioners (arising out of the 1st, 2nd and 3rd SCNs) came up for
hearing 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 Settlement Commission
vide its orders dated 29th January, 2014 and 31st January, 2014
respectively (Exh 'A' and 'B' to the Petition).
17. Whilst rejecting the Settlement Applications of the
Petitioners arising out of the 2nd SCN dated 7th December 2012, the
Settlement Commission by its order dated 29th January, 2014 (Exh
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'A' to the Petition) opined that in view of the fact that the
Petitioners had failed to comply with the express provisions of
section 127B of the Act, the said Settlement Applications were not
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.SA(C)559-560/2013.
Similarly, whilst rejecting the Settlement Application Nos.
SA(C)557-558/2013 arising out of the 3rd SCN dated 29th /31st
January 2013, the Settlement Commission opined that the
Petitioners had failed to fulfill the following two conditions of
section 127B, namely, (i) that no Appeal relating to the case was
pending before the Appellate Tribunal; and (ii) the interest payable
on the admitted duty liability had not been paid. In these
circumstances, even Settlement Application 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
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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 interpretation of the law. He
submitted that though section 127B, as it stood on the date of filing
of the above Settlement Applications (i.e. on 26th August, 2013),
inter alia provided that no Settlement Application shall be made
unless the Applicant has paid the additional amount of customs
duty accepted by him along with interest due under section 28AB of
the Act, section 28AB was deleted from the Act with effect from 8th
April, 2011 and was substituted by section 28AA. Despite section
28AB being deleted 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 towards
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interest under section 28AB before filing their Settlement
Applications under section 127B, was the submission. Therefore,
the Settlement Applications of the Petitioners could not have been
rejected on the ground that no interest was paid/deposited along
with the Settlement Applications as contemplated under section
127B, was the submission of Mr Shah. Mr. Shah submitted that this
was brought to the notice of the Settlement Commission by the
Petitioners by their letter dated 3rd September, 2013 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 Applications on the ground that the
Petitioners had not paid/deposited interest as required under
section 127B of the said Act, was the submission of Mr. Shah.
19. Mr. Shah additionally submitted that though not
required by law, the Petitioners themselves had given an
undertaking that they would pay interest under section 28AA as
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and when determined by the Settlement Commission. He submitted
that with reference to the Settlement Applications arising out of the
1st SCN, the exact same undertaking was given and the Settlement
Commission in that case directed the Petitioners to pay/deposit a
sum of Rs.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 impose any condition on the Petitioners to
pay/deposit any interest (as was done with reference to the
Settlement Applications arising out of the 1st SCN), and therefore,
the Petitioners did not pay/deposit any interest. Mr Shah
submitted that if the Settlement Commission had imposed any
condition for payment of interest (as was done with reference to the
Settlement Applications arising out of the 1st SCN), the Petitioners
would have paid/deposited the same. In fact, Mr. Shah very fairly
submitted that 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,
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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 that the
Settlement Applications stand rejected for non payment of interest.
20. As far as the impugned order dated 31st January, 2014
is concerned, Mr Shah submitted that the Settlement Application
Nos. SA(C)557-558/2013 (arising out of the 3rd SCN) were rejected
on an additional ground, namely that the Petitioners had
suppressed the fact that with reference to the 3rd SCN, an Appeal
was pending before the CESTAT. He submitted that this finding of
the Settlement Commission was totally contrary to 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
Rs.41,79,324/- (out of Rs.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 subjected to a challenge before CESTAT. He
submitted that a bare perusal of the Appeal would establish that the
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3rd SCN was not the subject matter of the Appeal at all. He pointed
out that in the said Appeal, it was specifically averred as follows:-
"The
Appellant
once
again
clarified
that
no
part
of
any
proposal
in
the
Show
Cause
Notice
pending
adjudication
is
subject
matter
of
the
instant
Appeal,
which
is
restricted
only
to
findings
and
decision
as
contained
in
para
25(xii),
extracted
hereinabove."
21. 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 Settlement Application shall be entertained by the
Settlement Commission in cases which are pending in the Appellate
Tribunal. It was only after the addendum dated 24th May, 2013 was
issued, that the Petitioners (on 26th August, 2013) filed these
Settlement Applications under section 127B of the said Act for
settlement of the case arising out of the 2nd and 3rd SCN (as
amended). In this factual background, the learned counsel
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submitted that the Settlement Commission was totally in error
whilst dismissing 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, learned counsel appearing
on behalf of the Respondents, sought to support the impugned
orders on all counts. On the issue of non-payment of interest, Mr
Jetly contended that section 127B in categorical terms stipulates
that no Settlement Application shall be made under the said section
unless the Applicant has paid the additional amount of duty
accepted by him alongwith interest due under section 28AB of the
said Act. Mr Jetly contended that in the facts of the present case,
admittedly no interest was 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
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(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,
makes no difference. He submitted that section 28AB, though
deleted w.e.f. 08-04-2011, was substituted by section 28AA which
also provides for payment of interest. He submitted that taking into
consideration the spirit behind the provisions of section 28AB and
section 28AA of the said Act, the Petitioners were bound to pay
interest on the additional amount of duty accepted by them in the
aforesaid Settlement Applications. Not having done so, the
Petitioners had not complied with the mandatory 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);
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(c) Union of India v/s Valecha Engineering Ltd.,
reported in 2010 (249) E.L.T. 167 (Bom)
(Para 12).
24. With the help of learned counsel, we have perused the
papers and proceedings in the Writ Petition including the impugned
orders dated 29th January, 2014 and 31st January, 2014
respectively. To understand the controversy raised in the present
Writ Petition, it would be necessary to make note of the relevant
provisions of the Customs Act.
25. Chapter XIV-A of the Customs Act, 1962 deals with
settlement of cases. This Chapter contains sections 127A to 127N
and was inserted w.e.f. 01-08-1998 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 un-
intending defaulter from making a clear breast of his affairs and
unnecessarily strain the investigation resources of the
Government. The settlement machinery was thus meant for
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providing a chance to a tax-evader who wants to turn 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 inserted in
the Customs Act, 1962 under which the Settlement Commission is
constituted.
26. Having set out in brief the object for which Chapter XIV-
A was inserted in the Customs Act, 1962, we shall now turn our
attention to some of the 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 person who is
liable to pay the duty as determined under sub-section (2), or has
paid the duty under sub-section (2B), 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-six per cent per
annum, as is for the time being fixed by the Central Government,
by notification in the Official Gazette, 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 sub-section
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(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 from the date of issue of such
order, instruction or direction, as the case may be, no
interest shall be payable and in other cases the interest
shall be payable on the whole of the amount, including the
amount already paid.
(2) The provisions of sub-section (1) shall not apply to cases where
the duty or interest had become payable or ought to have been
paid before the date on which the Finance Bill, 2001 receives the
assent of the President.
Explanation 1.--Where the duty determined to be payable is
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 08-04-2011, section 28AB was deleted
and replaced with section 28AA, which reads thus:-
"28-AA. Interest on delayed payment of duty.--(1)
Notwithstanding anything contained in any judgment, decree,
order or direction of any court, Appellate Tribunal or any
authority or in any other provision of this Act or the rules made
thereunder, the person, who is liable to pay duty in accordance
with the provisions of section 28, shall, in addition to such duty, be
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liable to pay interest, if any, at the rate fixed under 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 from the date of such
erroneous refund, as the case may be, up to the date of payment of
such duty.
(3) Notwithstanding anything contained in sub-section (1), no
interest shall be payable where,--
(a) ig the duty becomes payable consequent to the issue of
an order, instruction or direction by the Board under
section 151-A; and
(b) such amount of duty is voluntarily paid in full, within
forty-five days from the date of issue of such order,
instruction or direction, without reserving any right
to appeal 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. in
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2012 & 2013), section 127B read as under:-
"127-B. Application for settlement 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, 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, under-
valuation or inapplicability of exemption notification or otherwise
and such application shall be disposed of in the manner
hereinafter provided:
Provided that no such application shall be made unless,--
(a) the applicant has filed a bill of entry, 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 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 this sub-section
shall be made for the interpretation of the classification of
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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 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 (1) shall not be allowed
to be withdrawn by the applicant."
(emphasis supplied)
30. 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 such manner as specified by the
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 is incurred, the additional amount of customs
duty accepted to be payable by him and such other particulars as
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may be specified by the Rules. Clause (c) of the 1st proviso to sub-
section (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 under section 28AB. What is important to note is that
despite section 28AB being deleted and replaced with section 28AA
w.e.f. 08-04-2011, clause (c) of the 1st proviso to section 127B(1)
even thereafter continued to state that no Settlement Application
could be made unless "the applicant has paid the additional
amount of customs duty accepted by him along with interest due
under section 28AB". In other words, even though section 28AB
was deleted and replaced with section 28AA, no corresponding
amendment 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 with the existing provision on
interest on delayed payment of duty. Section 127B after its
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amendment in 2014, and in so far as it is relevant for our purposes
reads as under :-
"127-B. Application for settlement 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, 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, under-
valuation or inapplicability of exemption notification or otherwise
and such application shall be disposed of in the manner
hereinafter provided:
Provided that no such application shall be made unless,--
(a) the applicant has filed a bill of entry, or a shipping bill, or a
bill of export, or made a baggage declaration, or a label or
declaration accompanying the goods imported or exported
through post or courier, as the case may be, and in relation
to such document or documents, 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-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) ..............
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(2) ............
(3) ............
(4) ... ... ... ..."
(emphasis supplied)
There have also been further amendments to this
section in 2015, but the same are not relevant to decide the
controversy in this Writ Petition.
31.
Be that as it may, on a conjoint reading of the aforesaid
statutory provisions, two things become clear. Firstly, section
28AB was deleted from the Act w.e.f. 08-04-2011 and was
substituted by section 28AA. Despite the fact that section 28AB
was deleted, 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,
section 28AB no longer remained on the statute-book and therefore
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it was impossible for the Petitioners to comply with the condition as
set out in clause (c) of the 1st proviso to section 127B(1) which
continued to stipulate that no Settlement Application could be made
unless the Applicant had paid the additional amount of customs
duty accepted by him along with interest due under section 28AB.
It was in these circumstances and as rightly submitted by Mr Shah,
that the Petitioners brought to the notice 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 to pay any interest. In these
circumstances, we are clearly of the view that the Settlement
Commission was in error in rejecting these Settlement Applications
of the Petitioners on the ground that the Petitioners had failed to
pay the interest due under section 28AB as stipulated under section
127B. If section 28AB did not remain on the statute-book at all,
there was no question of asking the Petitioners to pay interest
under the aforesaid provision. This is more so in the peculiar facts
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of the present 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. In
compliance of the same, the Petitioners in fact paid the balance
amount of Rs.13,78,448/- towards interest in respect of the
Settlement Applications arising out of the 1st SCN. Whilst ordering
that the Settlement Applications arising out of the 2nd and 3rd SCNs
are allowed to be proceeded with, no such condition was imposed
upon the Petitioners. In these circumstances, the Petitioners
cannot be faulted for non payment of interest and we are of the
opinion that the Petitioners' Settlement 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
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back to the Settlement Commission for a de novo consideration. It
is accordingly so ordered. Before the aforesaid applications are de
novo heard by the Settlement Commission, it would be open to the
Settlement Commission to impose a condition on the Petitioners for
payment of interest determined by it under section 28AA of the Act.
33. Having dealt with the issue of non payment of interest,
we shall now turn our attention to the additional ground on which
Settlement Application Nos. SA(C)557-558/2013 (arising out of the
3rd SCN) were rejected. In the impugned order dated 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 aforesaid conclusion
because admittedly the subject matter of the 3rd SCN was subjected
to an Appeal before the CESTAT. According to Mr Jetly, the 2nd
proviso to section 127B(1) clearly stipulates that no Settlement
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Application shall be entertained by the Settlement Commission in
cases which are pending in the Appellate Tribunal or any Court.
This being a mandatory provision and admittedly since the Appeal
of the Petitioners was pending before the CESTAT, the Settlement
Commission was fully justified 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 para 25(xii) thereof whereby
Respondent No.2 had appropriated a sum of Rs.41,79,324/- (out of
Rs.50,00,000/- paid by Petitioner No.1 during the course of
investigations) towards the alleged duty liability 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
subjected to a challenge before the CESTAT. Whilst this limited
challenge was pending, on 24th May, 2013, an addendum to the 3rd
SCN was issued by Respondent No.2 under which Respondent No.2
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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 entertained
because an Appeal was pending before the CESTAT. As stated
earlier, the Appeal before the CESTAT was not against the 3rd SCN
but was against the ex-parte decision of the Authorities to
appropriate a sum of Rs.41,79,324/- towards a time barred claim.
There was therefore no Appeal that was pending with reference to
the subject matter of the 3rd SCN under which the statutory
authorities demanded differential duty amounting to
Rs.1,62,70,028/- and which was admitted by the Petitioners 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).
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36. Having come to the conclusion that the Settlement
Commission was in error in rejecting the Settlement Applications of
the Petitioners arising out of the 2nd and 3rd SCNs, we shall now deal
with the judgments cited by Mr Jetly. The first judgment cited by
Mr Jetly was in the case of Uttam Chand Sawal Chand Jain
(supra). The question raised in that case was whether the
Customs and Excise Settlement Commission was justified in
rejecting the Petitioners' application for settlement under the
Customs Act, 1962 merely on the ground that the Petitioners had
not filed a Baggage Declaration Form. In the facts of that case, the
Settlement Commission 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 dis-
entitling the Petitioners from making an application for settlement
before the Settlement Commission under section 127B(1) of the
Act. In the facts of that case, this Court found as a matter of fact
that no Baggage Declaration Form was filed by the Petitioners
before the Settlement Commission and therefore this Court held
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that the Settlement Commission was justified in not entertaining
the application for settlement filed by the Petitioners therein. We
fail to see how this judgment can be of any assistance to the
revenue in the facts of the present case. The statutory provision
under consideration in the said case 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 conditions prescribed
by the 1st proviso to section 127B(1) are mandatory in nature and
have to be cumulatively fulfilled. Absence of compliance of these
conditions, leads to a threshold bar to make an Application under
section 127B, is what is laid down in the said decision. There is no
quarrel with the aforesaid proposition but we fail to see how the
same can be applied to the facts of the present case. As narrated
earlier, the interest due under section 28AB was not paid by the
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Petitioners in 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 SCNs) are
allowed to be proceeded with, the Settlement Commission did not
impose any condition for payment of interest. In this view of the
matter, the Petitioners did not pay any interest. Further, the order
of the Settlement Commission allowing the Settlement Applications
of the Petitioners to be proceeded with, has not been challenged by
the Revenue in any proceedings. In this view of the matter, we fail
to see how the aforesaid judgment can be of any assistance to the
Revenue.
38. The last judgment 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.
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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 specifically
given details of the admitted duty liability, the interest thereon and
the payment made. In the prayer clause of the Settlement
Application, the Respondent prayed for immunity from prosecution
for any offence under the Customs Act, 1962, imposition of any
penalty and grant of immunity from imposition of any fine. There
was no relief sought for refund of interest paid, or for waiver of
interest. The Settlement Commission, after considering the
contention that there was no power to waive interest, 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 interest. In the facts of that case,
this Court found that interest was payable under the Act, and
therefore there was no question of the Settlement Commission
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exercising jurisdiction, directing refund of interest. This judgment,
according to us, is wholly inapplicable to the facts of the present
case as the issue decided therein is totally different from the one
that arises before us. Be that as it may, it would be important to
note that this Court, after relying upon a decision of the Supreme
Court in the case of India Carbon Limited and Others v/s The
State of Assam [(1997) 6 SCC 479], held that interest, penalty or
fine is only payable if there is a substantive provision in the Act for
payment of the same. In the absence of any statutory provisions, an
authority would be acting without jurisdiction in demanding the
payment of interest where otherwise no interest is payable.
39. In view of our discussion earlier, the impugned orders
dated 29th January 2014 and 31st January 2014 (Exhs.'A' and 'B' to
the Petition) are hereby set aside and the Petitioners' Settlement
Application Nos.SA(C)559-560/2013 and SA(C)557-558/2013 are
restored back to the file of the Settlement Commission for a de novo
consideration and in accordance with law. Before passing orders on
the aforesaid Settlement Applications, the Settlement Commission
shall give a reasonable opportunity of hearing to all concerned,
including the Petitioners. Before hearing the Petitioners de novo,
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the Settlement Commission shall be at liberty to impose a condition
for payment of interest as determined by it under section 28AA of
the Act, which the Petitioners shall be obliged to pay before its
Settlement Applications are de novo considered. Rule is
accordingly made absolute in the aforesaid terms. However, in the
facts and circumstances of the case, we leave the parties to bear
their own costs.
(B.P. COLABAWALLA, J.) (S.C.DHARMADHIKARI J.)**
**
CERTIFICATE:
Certified to be a true and correct copy of the original signed Judgement/Order.
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