Bombay High Court
M/S. Shree Ganesh Enterprises vs Union Of India Through Secretary ... on 21 November, 2016
Bench: S.C. Dharmadhikari
WP10422.16.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10422 OF 2016
M/s Auto Creaters ... Petitioner
v/s
Union of India and others ... Respondents
Mr Sujay Kantawala with Mr Brijesh Pathak for the Petitioner.
Mr M. Dwivedi with Mr Sham V. Walve for Respondent No.2.
CORAM
ig : S.C. DHARMADHIKARI &
B.P. COLABAWALLA JJ.
Reserved On : 24th October, 2016
Pronounced On : 21st November, 2016
JUDGMENT [ PER B. P. COLABAWALLA J. ] :-
1. Rule. Respondents waive service. By consent of parties,
rule made returnable forthwith and heard finally.
2. By this Writ Petition under Article 226 of the
Constitution of India, the Petitioner has challenged the common
order dated 14th March, 2016 (for short "the impugned order")
[Exh. "J" to the Petition] passed by the Settlement Commission,
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Additional Bench, Customs and Central Excise, Mumbai
(Respondent No.4 herein) by which it rejected the Settlement
Application filed by the Petitioner. To decide the admissibility of
the said Settlement Application, Respondent No.4 examined the
following three conditions:-
(i) Whether the Application was in respect of a 'case'
within the meaning assigned in the clause (b) of
section 127A of the Customs Act, 1962?
(ii) Whether the Applicant has paid the additional
admitted duty liability along with the interest as
required by clause (c) of the first proviso to
section 127B of the Customs Act, 1962?
(iii) Whether the condition of filing of a Bill of Entry as
stipulated in clause (a) of the first proviso to
section 127B of the Customs Act, 1962 is fulfilled?
3. As far as conditions (i) & (ii) are concerned, the
Settlement Commission held in favour of the Petitioner. However,
as far as condition (iii) is concerned, the Settlement Commission
inter alia held that the same was not complied with by the
Petitioner in view of the fact that the requisite Bill of Entry had not
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been filed before the issuance of the Show Cause Notice. According
to the Settlement Commission, the Petitioner had imported four
containers for which two separate bills of entry were filed. One Bill
of Entry (and which related to one container) was filed before the
issuance of the Show Cause Notice whereas the other Bill of Entry
(for balance three containers) did not find mention in the Show
Cause Notice (for short "the SCN") as it was filed after the issuance
of the same. On the basis of this finding, the Settlement
Commission inter alia held that the Petitioner did not comply with
condition (iii) mentioned above and rejected the Settlement
Application filed by the Petitioner. It is this very finding that is
challenged in this Writ Petition. We must at once note that the
Revenue has not challenged any findings or conclusions reached by
Respondent No.4 in the impugned order and therefore, as far as
they are concerned, the findings / conclusions arrived at in the
impugned order have become final.
4. The brief facts giving rise to the present controversy are
as under:-
(a) The Petitioner is a proprietary concern of one Shri
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Satpal Singh, Mumbai. Respondent No.1 is the Union of
India. Respondent No.2 is the Commissioner of
Customs, Nashik and Respondent No.3 is the
Commissioner of Customs (Import), Nhava Sheva, Uran,
Raigad 400 707. Respondent No.4 is the Settlement
Commission, Additional Bench, Customs and Central
Excise, Mumbai, who has passed the impugned order.
All the above authorities viz. Respondent Nos.2 to 4
exercised powers and functions under the provisions of
the Customs Act, 1962 (for short "the Act") and its
allied statutes.
(b) It is the case of the Petitioner that in the normal course
of business it imported Air Freshners and Choco-Pie
Biscuits. Accordingly, in the month of December 2014,
one Mr Zeeshan Khan approached the Petitioner for
import of items being regularly imported by him and
offered compensation for the same. Accordingly, an
agreement was also entered into between the Petitioner
and the said Mr Zeeshan Khan. It appears that during
the course of import, some error occurred and extra
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items were dispatched in the consignment. On
examination of the Bill of Entry No.8158086 dated 31st
January 2015, the Department found Air Fresheners,
Perfumes, Body Spray and other items such as
cigarettes, cylinders of refrigerant-22 gas, fabrics etc.
This Bill of Entry was with reference to one container
and there is no dispute that this Bill of Entry
(No.8158086) has been filed long before the issuance of
the SCN.
(c) As far as the balance three containers are concerned, it
is the case of the Petitioner that the Department
examined the goods much before the filing of the Bill of
Entry and seized the goods. The Petitioner, after
repeated efforts, was permitted to file a Bill of Entry for
these three containers viz. Bill of Entry No.2128700
dated 4th August, 2015.
(d) In the meanwhile, the Petitioner received a SCN dated
29th July, 2015 proposing to confiscate the goods
covered by both the Bills of Entry. The SCN proposed to
invoke penal charges under sections 112 and 114AA of
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the Act against the Petitioner. Faced with this SCN, the
Petitioner, in order to settle the case with the Revenue,
filed a Settlement Application (Exh. "A" to the Petition)
before Respondent No.4 on 7th October, 2015 seeking
settlement of their case under Chapter XIV-A of the Act
and also prayed for immunity from fine, penalty and
prosecution.
(e)
On receipt of the Settlement Application, Respondent
No.4 issued a notice dated 14th October, 2015 under
section 127C(1) of the Act inter alia conveying to the
Petitioner that its Application was found deficient on
the grounds mentioned in paragraph 2 of the said
notice. Accordingly, the Petitioner was directed to
explain in writing as to why its Application should be
allowed to be proceeded with as envisaged under section
127C(1) of the Act.
(f) The Petitioner filed a detailed reply to the aforesaid
notice vide its Advocate's letter dated 19th October,
2015 and furnished detailed clarifications to
Respondent No.4. Thereafter, Respondent No.4, by its
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letter dated 27th October, 2015, informed the Petitioner
that the issue of admissibility of its Application would be
decided after hearing the Petitioner. The Revenue
thereafter filed its report dated 12th January, 2016 with
Respondent No.4 and the hearing on the admissibility of
the Application of the Petitioner was conducted by
Respondent No.4 on 27th January, 2016. After the
conclusion of this hearing, the Revenue also filed its
affidavit / written submissions on 5th February, 2016.
In answer to this, the Petitioner, by their letters dated
5th February, 2016 and 25th February, 2016 made
certain representations to Respondent No.4, especially
in relation to the written submissions filed by the
Revenue. It is in these circumstances that the
Petitioner was shocked to receive the impugned order
dated 14th March, 2016. According to the Petitioner,
Respondent No.4 has not given a fair and just treatment
to the Petitioner's Application which amounts to a gross
abuse of the powers conferred under the Act. According
to the Petitioner the impugned order is also passed in
violation of the principles of natural justice and fair play
and are violative of the Petitioner's fundamental rights
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enshrined under Articles 14 and 19(1)(g) of the
Constitution of India. It is the case of the Petitioner that
whilst passing the impugned order, Respondent No.4
has made a reference to a certain report filed by the
Investigating Agency dated 1st March, 2016, a copy of
which has never been supplied to the Petitioner. This
alone, according to the Petitioner, is an incurable breach
of the principles of natural justice and which would
make the impugned order vulnerable to challenge in
writ jurisdiction. It is in these circumstances that the
Petitioner is before us assailing the legality and validity
of the impugned order dated 14th March, 2016 passed
by Respondent No.4.
5. In this factual backdrop, Mr Kantawala, learned counsel
appearing on behalf of the Petitioner, submitted that the impugned
order passed by Respondent No.4 did not take into consideration all
the aspects of the case and therefore, the impugned order is
arbitrary and liable to be set aside. Mr Kantawala submitted that
the record clearly reflects that the Petitioner had consistently made
efforts for filing the Bill of Entry No.2128700 but the Department
had examined the goods much prior to its filing and had also seized
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the goods. Admittedly, the Petitioner was not allowed to file this
Bill of Entry until after the issuance of SCN. However, as soon as
the SCN was issued, the Department allowed the Petitioner to file
the Bill of Entry. According to Mr Kantawala, the Settlement
Commission has proceeded on a completely incorrect footing that
the filing of the Bill of Entry should precede the issuance of the SCN.
He submitted that there is no such mandate in section 127B of the
Act for the Settlement Commission to come to the aforesaid finding.
This is more so in the facts of the present case, since the SCN
reveals that the containers were searched and seized much prior to
filing of the Bill of Entry and which was admittedly filed subsequent
to the issuance of the SCN. Even though this Bill of Entry
(No.2128700) is not mentioned in the SCN, Mr. Kantawala
submitted that the SCN itself reveals that the goods covered under
the said Bill of Entry (No.2128700) were also the subject matter of
this very SCN and which was sought to be settled by the Petitioner
by filing a Settlement Application before Respondent No.4. Looking
to these facts, Mr Kantawala submitted that the impugned order is
contrary to the spirit of settlement and more particularly set out in
Chapter XIV-A of the Act. Mr Kantawala submitted that the
impugned order is likely to send completely wrong signals to
citizens aspiring to have their cases settled under the provisions of
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the Customs Act, 1962.
6. In the alternative, Mr Kantawala submitted that even
otherwise the impugned order is unsustainable in view of the fact
that it had been passed in breach of the principles of natural justice.
Mr Kantawala was at pains to point out that after the hearing was
concluded before the Respondent No.4, it had taken note of certain
reports dated 1st March, 2016 filed by the Investigating Agency.
These reports admittedly were never furnished to the Petitioner.
Furthermore, Respondent No.4 has not even taken into
consideration the representations made by the Petitioner vide its
letters dated 5th February, 2016 and 25th February, 2016
respectively, but instead has relied upon the aforesaid reports.
This, according to Mr Kantawala, has resulted in the gross
miscarriage of justice inasmuch as the impugned order has been
passed in clear breach of the principles of natural justice and is
therefore liable to be quashed and set aside. In conclusion, Mr
Kantawala submitted that for all the reasons set out earlier the
impugned order is unsustainable and ought to be interfered with by
us in our extraordinary, equitable and discretionary jurisdiction
under Article 226 of the Constitution of India.
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7. On the other hand, Mr Dwivedi, learned counsel
appearing on behalf of the Revenue, whole heartedly supported the
impugned order. He submitted that it is an admitted fact that as far
as Bill of Entry No.2128700 is concerned, the same was not filed
before the issuance of the SCN and therefore Respondent No.4
correctly refused to entertain the Settlement Application filed by
the Petitioner. Mr Dwivedi submitted that as per the mandate of
section 127B, no Application can be entertained by Respondent
No.4 unless 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. In view of the aforesaid statutory
provision, Mr Dwivedi submitted that the impugned order cannot
be faulted and Respondent No.4 has correctly rejected the
Settlement Application of the Petitioner. Consequently, he
submitted that there is no merit in this Writ Petition and the same
ought to be dismissed with costs.
8. We have heard the learned counsel for the parties at
length and have perused the papers and proceedings in Writ
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Petition including the annexures thereto including the impugned
order dated 14th March, 2016. We have also given our anxious
consideration to the relevant statutory provisions. 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, 1962. 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).
ig 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
providing a chance to a tax-evader who wants to turn over 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.
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9. Having set out in brief the objects for which Chapter
XIV-A was inserted in the Customs Act, 1962, we shall turn our
attention to some of the statutory provisions of the Act. On the date
when the Settlement Application arising out of the SCN dated 29th
July, 2015 was filed by the Petitioner (i.e. on or about 7th October,
2015), section 127B read as under :-
"127-B. Application for settlem ent 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 lakhs rupees; and
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(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.
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 the
goods under the Customs Tariff Act 1975 (51 of 1975);
[***]1
[***]2
(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)
10. As can be seen from the above reproduction, section
1 Sub-S (1-A) omitted by Act 20 of 2015, S.86. Prior to its omission, Sub-S (1-A) read as under - "(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 gas
bit beeb nade befire tge saud date, the applicant shall within a period of thirty days from the 1st dayof
June 2007, pay the accepted duty liability failing which his application shall be liable to be rejected."
2 Sub-S (2) omitted by Act 25 of 2014, S.84(iii)(w.e.f. 1-10-2014). Prior to its omission, Sub-S (2)
read as under - "(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."
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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
may be specified by the Rules. Clause (a) of the 1st proviso to sub-
section (1) of section 127B clearly stipulates that no Settlement
Application shall be made unless 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.
11. In the facts of the present case, it is an admitted fact
that the Bill of Entry No.8158086 was filed before the issuance of
the SCN. It is also an admitted fact that Bill of Entry No.2128700
was also filed by the Petitioner, though after the issuance of the
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SCN, but before the Settlement Application was filed by the
Petitioner before Respondent No.4. It is also not in dispute that
these two Bills of Entries were filed in relation to four containers
which are the subject matter of the SCN dated 29th July, 2015 and
which was sought to be settled by filing the aforementioned
Settlement Application. On reading the clause (a) of the 1st Proviso
to sub-section (1) of section 127B, we cannot agree with the
submission of Mr Dwivedi that the Bill of Entry has to be filed before
the issuance of the SCN. If we were to accept the submission of Mr.
Dwivedi, it would go against the very spirit for which Chapter XIV-A
was brought into force under the Customs Act, 1962. In the facts of
the present case, admittedly the second Bill of Entry (No.2128700)
was filed before the Petitioner made its Settlement Application
before Respondent No.4. In fact, it is the case of the Petitioner that
they were not permitted to file this Bill of Entry (No.2128700)
before the issuance of SCN and were allowed to file the same only
after the SCN was issued. This has not been controverted by the
Revenue. In these facts, we find that the Settlement Commission
was in error in coming to the conclusion that the Settlement
Application filed by the Petitioner was not admissible as it had
failed to fulfill Condition (iii) set out above viz. that the Petitioner
had not filed a Bill of Entry as stipulated in clause (a) of the 1st
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Proviso to section 127B(1) of the Customs Act, 1962.
12. Even otherwise, we find that the impugned order is not
sustainable on the grounds of breach of the principles of natural
justice. On perusal of the record, we find that the Settlement
Commission has referred to certain reports dated 1st March 2016,
which were admittedly never supplied to the Petitioner. This fact is
undisputed by the Revenue. This being the case, the impugned
order cannot be sustained on this ground also and has to be
quashed and set aside.
13. For all the aforesaid reasons, the Writ Petition succeeds
and is allowed in terms of prayer clause (b). Rule is made absolute
in the aforesaid terms. The Settlement Application filed by the
Petitioner is restored to the file of Respondent No.4 for a de novo
consideration in terms of what we have held in this judgment.
However, in the facts and circumstances of the case, there shall be
no order as to costs.
(B. P. COLABAWALLA, J.) (S. C. DHARMADHIKARI J.)
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