Bombay High Court
Messrs. Blue Wave vs The Union Of India Through The ... on 4 April, 2017
Bench: S.C. Dharmadhikari
WP9207.15.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.9494 OF 2015
M/s Siddhi Vinayak Enterprises and anr. ... Petitioners
v/s
The Union of India and others ... Respondents
WITH
WRIT PETITION NO.9207 OF 2015
Virendra Chandrakant Patil ... Petitioner
v/s
The Union of India and others ... Respondents
WITH
WRIT PETITION NO.9208 OF 2015
Jyotendra C. Patil ... Petitioner
v/s
The Union of India and others ... Respondents
WITH
WRIT PETITION NO.9266 OF 2015
Sachin H. Kanojia ... Petitioner
v/s
The Union of India and others ... Respondents
WITH
WRIT PETITION NO.9418 OF 2015
M/s Blue Wave ... Petitioner
v/s
The Union of India and others ... Respondents
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WITH
WRIT PETITION NO.9419 OF 2015
M/s Krish Impex ... Petitioner
v/s
The Union of India and others ... Respondents
------------------------------------------------
M r Prakash Shah with M r Jas Sanghavi i/b PD S Legal for the Petitioners.
M r Pradeep S. Jetly for the Respondents.
---------------------------------------------------
CORAM: S.C. DHARMADHIKARI &
B.P. COLABAWALLA JJ.
Reserved On : 21 November, 2016.
Pronounced On : 04 April, 2017.
JUDGMENT [ PER B. P. COLABAWALLA J. ]:-
1. Rule. Respondents waive service. By consent of parties,
rule made returnable forthwith and heard finally.
2. By these Writ Petitions filed under Article 226 of the
Constitution of India, the Petitioners seek a writ of certiorari calling
for the records of the Petitioners' cases and after going through the
validity and legality thereof, to quash and set aside the final order
dated 27th March, 2015 passed by Respondent No.4 (the
Settlement Commission). In all these Writ Petitions, a common
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order dated 27th March, 2015 has been assailed by the respective
Petitioners by which the Settlement Applications filed by all the
Writ Petitioners were rejected by Respondent No.4 - Settlement
Commission.
3. As far as Writ Petition No.9494 of 2015 is concerned,
the Petitioners were the Applicants before the Settlement
Commission. As far as Petitioners in the other Writ Petitions are
concerned, they were all Co-Applicants. This is how all the Writ
Petitioners before us have assailed this common order dated 27th
March, 2015.
4. For the sake of convenience, we shall refer to the facts
in Writ Petition No.9494 of 2015.
(a) Petitioner No.1 is a proprietary firm registered under
the Indian Partnership Act, 1932 and carrying on
business of trading in imported goods. Petitioner No.2 is
the Proprietor of Petitioner No.1. Respondent No.1 is
the Union of India and Respondent Nos.2 and 3 are the
Officers of Respondent No.1 exercising powers and
discharging duties conferred upon them under the
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provisions of the Customs Act, 1962. Respondent No.4
is the Settlement Commission which is constituted
under the provisions of section 32 of the Central Excise
Act, 1944 and inter alia deals with the settlement of
cases in accordance with the provisions of Chapter XIV-
A of the Customs Act, 1962.
(b) In the ordinary course of business, the Petitioners
imported four consignments of certain electronic
components and in respect of which the Petitioners filed
four Bills of Entry, the particulars of which have been
set out in paragraph 4 of the Petition. According to the
Petitioners, the goods covered by the said Bills of Entry
were duly assessed and allowed to be cleared by the
proper Officer of the Nhava Sheva Customs on payment
of duty.
(c) In view of the purported intelligence allegedly received
by Respondent No.2, investigations were initiated
against the Petitioners alleging that electronic
components (DVD parts) were imported by the
Petitioners (in addition to the four consignments), using
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Importer Exporter Codes ("IEC") obtained in the name
of dummy firms. This led to evasion of duty by indulging
in gross undervaluation and mis-declaration of the
description of the goods so imported, was the allegation.
During the investigation, Respondent No.2 recorded the
statements of various persons and seized goods covered
by twenty two Bills of Entry.
(d) Thereafter, vide show-cause notice dated 31st October
2013, Respondent No.2, inter alia, called upon the
Petitioners to show cause as to why the differential duty
amounting to Rs.5,66,05,713/- should not be recovered
from the Petitioners under section 28 of the Customs
Act, 1962 together with interest under section 28AA
thereof, in respect of the goods covered by all the 24
consignments claimed to have been imported by the
Petitioners and others. In addition to this, the show-
cause notice further called upon the Petitioners to show
cause why imposition of penalty and also confiscation of
goods, more particularly described in paragraph 7 of the
Petition ought not to be done. The show-cause notice
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further proposed to appropriate Rs.1,50,00,000/-
deposited by the Petitioners herein and by other
importers during the investigation.
(e) According to the Petitioners, with a view to buy peace
and not to litigate with the Department, the Petitioners
filed two separate applications in Form SC (C)-1 for
settlement of the case arising out of the above show-
cause notice dated 31st October, 2013 before the
Settlement Commission. The Petitioners accepted the
differential duty as proposed in the said show-cause
notice dated 31st October 2013. The said Applications
were filed by the Petitioners on 27th May, 2014. The
Petitioners and other importers paid the entire
differential duty without interest prior to and during
the pendency of the Applications, in respect of the goods
imported by them. Similarly other importers also filed
their respective Applications for settlement before the
Settlement Commission in respect of the imports made
by them under their respective IECs admitting the duty
on the imports made by them. Thereafter, the defects
pointed out by the Registry of the Settlement
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Commission were also rectified.
(f) On 1st August 2014, the Settlement Commission
(Respondent No.4) issued notice to the Petitioners and
others informing them that the hearing of the case is
fixed on 28th August, 2014 on the issue of the
admissibility of the Applications. However, on that day,
the matters were adjourned and new date was fixed on
28th October, 2014.
(g) Pending the hearing of the above Settlement
Applications, a Corrigendum / Addendum dated 8th
August, 2014 was issued by Respondent No.2 whereby
the demand made pursuant to the said show-cause
notice dated 31st October 2013, inter alia, was sought to
be revised from Rs.5,66,05,713/- to Rs.13,02,06,668/-.
By the said Corrigendum / Addendum, certain other
amendments to the said show-cause notice dated 31st
October, 2013 were sought to be made. According to the
Petitioners, the said Corrigendum / Addendum was
issued based on the alleged report dated 20th November,
2013 received by Respondent No.2 from the Hong Kong
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Customs through the Consulate General of India
allegedly giving the value of the imported goods
declared at the port of shipment before the Chinese
Customs. The alleged report gave the alleged value of
the 22 consignments, out of the said 24 consignments,
which was the subject matter of the said show-cause
notice dated 31st October, 2013 before the Chinese
Customs by the exporters. The demand was therefore
recomputed based on the value indicated in the alleged
report of the Consulate General of India in Hong Kong.
(h) Be that as it may, on 28th October 2014, after hearing
the Petitioners and Respondent No.2, the Settlement
commission directed the Petitioners to remove the
defects pointed out by the Secretariat of Respondent
No.4 and thereafter the hearing would be fixed subject
to the case being allowed to proceed with. Thereafter,
on 4th March 2015, Respondent No.4 held a second
hearing of the case. After hearing both the sides,
Respondent No.4 granted one week's time to file written
submissions made during the hearing. In its
submissions, it was the contention of Respondent No.2
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that it was upon the Petitioners and others to revise
their Applications accepting the full liability of
Rs.13,02,06,668/- and in that event, the Revenue would
have no objection to the case being settled. On the other
hand, the Petitioners' written submissions were filed
vide their Advocate's letter dated 10th March 2015. In
the written submissions of the Petitioners it was
contended that the importer had in fact paid the entire
duty of Rs.5,70,91,449/- against the total demand of
Rs.5,66,05,713/- after the filing of the Settlement
Applications. The Petitioners were therefore under a
bonafide impression that the Settlement Applications
have been admitted and it would be proceeded with by
the end of November, 2014. The Petitioners submitted
that if they had any indication that the Settlement
Commission was not going to proceed with their
Applications, no duty would have been paid and the
Petitioners would have elected to proceed with the
adjudication proceedings. Therefore, the objection of
the Department regarding maintainability of
Applications before the Settlement Commission was
devoid of any merit, was the submission.
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(i) After considering the written submissions filed by
Respondent No.2 as well as the Petitioners, the
Settlement Commission, by its impugned order dated
27th March, 2015 rejected the Applications filed by all
the Writ Petitioners as inadmissible under section 127B
of the Customs Act, 1962. It is in this light that the
Petitioners are before us assailing the impugned order.
5. Mr Prakash Shah, learned counsel appearing on behalf
of the Petitioners, submitted that the impugned order is clearly
untenable and unsustainable in law and is liable to be quashed and
set aside by us. He submitted that Chapter XIV-A of the Customs
Act, 1962 deals with settlement of cases. Section 127B of the Act
allows any importer / exporter or any other person to approach the
Settlement Commission by way of a Settlement Application for
settlement of his case. This, of course has to be done before the
adjudication of the show-cause notice which would be the subject
matter of settlement. The proviso to section 127B(1) stipulates the
conditions of filing the Application before the Settlement
Commission. Thereafter, section 127C talks about the procedure to
be followed on receipt of a Settlement Application under section
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127B of the said Act. Mr Prakash Shah laid great stress on section
127C(1) and argued that once the Settlement Application has been
filed, the Settlement Commission shall, within seven days from the
date of receipt of the said Application, issue a notice to the
Applicant to explain in writing as to why the Application 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 14 days of the notice, by an
order, allow or reject the Application, as the case may be, and the
proceedings before the Settlement Commission shall abate on the
date of rejection. Mr Prakash Shah also laid great stress on the
proviso to section 127C(1) which stipulates where no notice has
been issued or no order has been passed under section 127C(1)
within a period of 14 days as stipulated therein, then the
Application shall be deemed to have been allowed to be proceeded
with.
6. Mr. Shah submitted that in the facts of the present case,
the Settlement Commission completely fell in error in dismissing
the Settlement Applications of the Petitioners as being inadmissible
in view of the fact that by virtue of the provisions of section
127C(1) read with its proviso, the Applications filed by the
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Petitioners were deemed to have been allowed to be proceeded with.
In this light of the matter, Mr Prakash Shah submitted that the
Settlement Commission ought to have heard the Settlement
Applications on merits and not throw out the Petitioners on the
ground that the Settlement Applications are inadmissible. To
fortify this argument, he submitted that in the facts of the present
case, even a report was called for by the Settlement Commission as
contemplated under section 127C(3). He submitted that section
127C(3) itself contemplates that where an application is allowed or
deemed to have been allowed to be proceeded with under sub-
section (1), the Settlement Commission shall, within seven days
from the date of the order under sub-section (1), call for a report
alongwith the relevant records from the Principal Commissioner of
Customs or Commissioner of Customs having jurisdiction, and the
Commissioner shall furnish the report within a period of 30 days of
receipt of communication from the Settlement Commission. He
submitted that if the Application was not allowed or deemed to be
allowed to be proceeded with, there would have been no occasion for
the Settlement Commission to call for a report as contemplated
under section 127C(3).
7. Mr. Shah thereafter brought to our attention to section
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127C(5) which stipulates that after examination of the record and
the report received under sub-section (3) and after giving the
Applicant and Respondent No.2 a hearing as well as examining
such further evidence as may be placed before it or obtained by it,
the Settlement commission may, in accordance with the provisions
of this Act, pass such order as it thinks fit on the matters covered
by the Application and any other matter relating to the case not
covered by the Application but referred to in the report under sub-
section (3) or sub-section (4). He submitted that this order as
contemplated under section 127C(5), is a final order, which is an
order passed on merits and not an order passed under section
127C(1) which is on the admissibility of the Settlement Application.
8. Mr Prakash Shah also drew our attention to the
impugned order itself which states that the impugned order has
been passed under section 127C(5) of the Customs Act 1962. This
being the case, he submitted that the Settlement Applications of the
Petitioners could not have been rejected on the ground that they
were inadmissible and this was a grave error on the part of the
Settlement Commission. He submitted that in the facts of the
present case, admittedly the Applications were filed on 27th May,
2014 and a notice as required under section 127C(1) was issued to
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the Petitioners within a period of seven days from the receipt
thereof. The second notice was issued by the Settlement
Commission on 23rd September, 2014 by which it re-fixed the
hearing on 28th October, 2014. In view of the aforesaid, Mr
Prakash Shah submitted that the Settlement Commission is deemed
to have allowed the Applications to be proceeded with, especially
considering the fact that it also called for the report of the
Commissioner of Customs, Nhava Sheva and thereafter fixed a
hearing on 28th October, 2014. Looking to all these facts and
considering that no order was passed by the Settlement
Commission rejecting the Applications of the Petitioners under sub-
section (1) of section 127C, Mr Prakash Shah submitted that the
Settlement Applications filed by the Petitioners were deemed to
have been allowed to be proceeded with and the Settlement
Commission could not have dismissed the Settlement Applications
of the Petitioners under section 127C(5) as being inadmissible and
that too as late on 27th March, 2015 (i.e. after one year of filing of
the Applications) and after hearing both the sides on all issues
connected with the matter.
9. As far as non-payment of interest is concerned, Mr
Prakash Shah submitted that the Settlement Commission totally
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misdirected itself in law in holding that the Applications filed by the
Petitioners were not admissible on the ground for non-payment of
interest when in fact the Settlement Commission itself, at the
hearing held on 4th March, 2015 had recorded the submissions of
the learned Advocate for Petitioners that interest liability would be
paid within a period of 30 days of the order of Settlement
Commission in that behalf. Mr Prakash Shah submitted and in
some of its orders the Settlement Commission has allowed interest
to be paid within 30 days from passing of the final order in view of
the difficulty faced in calculating the interest.
10. In addition to the aforesaid, Mr Prakash Shah submitted
that assuming without admitting that the Settlement Applications
of the Petitioners were inadmissible, it was incumbent upon the
Settlement Commission to dismiss the Applications of the
Petitioners without recording any finding on merits and without
looking legality or validity of the Corrigendum / Addendum issued.
By giving findings on this Corrigendum, the Petitioners' right to
raise all contentions before the Adjudicating Authority with
reference to the same have been foreclosed by the impugned order,
was the submission. In view of all these facts, Mr Prakash Shah
submitted that the impugned order is liable to be set aside and the
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matter be remanded back to the Settlement Commission for a de
novo hearing and on merits.
11. On the other hand, Mr Jetly, learned counsel appearing
on behalf of the Revenue, sought to support the impugned order. He
submitted that looking to the record before the Court as well as
before the Settlement Commission, it was all along the Petitioners
who were well aware that their Settlement Applications were not
admitted. Mr Jetly drew our attention to the record and
proceedings held on 28th October, 2014 as well as 4th March, 2015
whereunder it was clear that the Petitioners were aware that the
Bench was hearing the matter on the issue of admissibility of the
Settlement Applications. He submitted that looking to the fact that
admittedly the full duty as also required under the Corrigendum
was not paid by the Petitioners, the Settlement Commission was
fully justified in coming to a finding that the Settlement
Applications filed by the Writ Petitioners were not admissible under
section 127B of the Customs Act, 1962 in view of the fact that they
had not complied with the conditions and stipulations stated
therein. Consequently, Mr Jetly submitted that there is no merit in
these Writ Petitions and the same ought to be dismissed with costs.
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12. We have heard the learned counsel for the parties at
length and perused the papers and proceedings in these Writ
Petitions. We have also given our anxious consideration to the
impugned order. Before we deal with the present controversy, it
would be necessary to note certain provisions of the Customs Act,
1962 and more particularly Chapter XIV-A which deals with the
settlement of cases. This Chapter contains sections 127A to 127N
and was inserted w.e.f. 1st August 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 was 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 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 inserted in the Customs Act, 1962 under
which the Settlement commission (the 4th Respondent) exercises
power for settlement of cases.
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13. Having set out in brief the purpose for which Chapter
XIV-A was inserted in the Customs Act, 1962, we shall turn our
attention to some of the statutory provisions. The first provision
that we would like to reproduce is section 127B. On the date when
the Settlement Applications were filed by the Petitioners (i.e. on
27th May, 2014), 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, 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
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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
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."
14. As the said section itself ex-facie reads, it gives an
opportunity to a person to approach the Settlement Commission to
settle a case relating to him before the same is adjudicated so that
the same can be settled. For this purpose, the said person has to
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make an Application before the Settlement Commission in such
form and in such manner as may be 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 has been incurred, the additional amount of customs
duty accepted to be payable by him and such other particulars as
may be specified by the Rules. Thereafter, section 127B(1)
stipulates that no such Settlement Application shall be made unless
the conditions mentioned therein are complied with. We must at
once mention here that section 28-AB was deleted from the
Customs Act, 1962 and replaced with section 28-AA w.e.f. 8th April,
2011. Despite this, no corresponding amendment was carried out in
section 127B (as reproduced above). Section 127B was amended
much thereafter by Finance (No.2) Act, 2014 w.e.f. 6th August,
2014. Hence, even though section 28-AB was deleted from the
statute books w.e.f. 8th April, 2011, a reference to the same still
continued in section 127B till 6th August, 2014, when section 127B
was amended. The reason why we are mentioning this is because
when the Settlement Applications were filed by the Petitioners (i.e.
on 27th May, 2014), reference to section 28-AB continued in section
127B even though the said section was deleted w.e.f. 8th April, 2011
and section 28-AA was substituted in its place.
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15. Thereafter comes section 127C which prescribes the
procedure to be followed on receipt of a Settlement Application
under section 127B. Section 127C, in so far as the same is relevant
for our purpose, reads thus:-
127-C. Procedure on receipt of an application under
Section 127-B.--(1) On receipt of an application under Section
127-B, the Settlement Commission shall, within seven days from
the date of receipt of the application, issue a notice to the
applicant to explain in writing 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 or no order
has been passed within the aforesaid period by the
Settlement Commission, the application shall be deemed to
have been allowed to be proceeded with.
(2) A copy of every order under sub-section (1) shall be sent to the
applicant and to the Commissioner of Customs having jurisdiction.
(3) Where an application is allowed or deemed to have been
allowed to be proceeded with under sub-section (1), the
Settlement Commission shall, within seven days from the date of
order under sub-section (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.
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(4) Where a report of the Commissioner called for under sub-
section (3) has been furnished within the period specified in that
sub-section, the Settlement Commission may, after examination of
such report, if it is of the opinion that any further enquiry or
investigation in the matter is necessary, direct, for reasons to be
recorded in writing, the Commissioner (Investigation) within fifteen
days of the receipt of the report, to make or cause to be made
such further enquiry or investigation and furnish a report within a
period of ninety days of the receipt of the communication from the
Settlement Commission, on the matters covered by the application
and any other matter relating to the case :
Provided that where the Commissioner (Investigation) does
not furnish the report within the aforesaid period, the
Settlement Commission shall proceed to pass an order
under sub-section (5) without such report.
(5) After examination of the records and the report of the
Commissioner of Customs received under sub-section (3), and the
report, if any, of the Commissioner (Investigation) of the
Settlement Commission under sub-section (4), and after giving an
opportunity to the applicant and to the Commissioner of Customs
having jurisdiction to be heard, either in person or through a
representative duly authorised in this behalf, and after examining
such further evidence as may be placed before it or obtained by it,
the Settlement Commission may, in accordance with the provisions
of this Act, pass such order as it thinks fit on the matters covered
by the application and any other matter relating to the case not
covered by the application, but referred to in the report of the
Commissioner of Customs and Commissioner (Investigation) under
sub-section (3) or sub-section (4).
(6) .............
(7) .............
(8) .............
(9) .............
(10) ..........."
16. Section 127C(1) clearly stipulates that on receipt of an
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Application under section 127B, the Settlement Commission shall,
within seven days from the date of receipt of the Application, issue
a notice to the Applicant to explain in writing as to why the
Application 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, as the case may be,
and the proceedings before the Settlement Commission shall abate
on the date of rejection. The proviso stipulates that where no notice
has been issued or no order has been passed within the aforesaid
period by the Settlement Commission, the Application shall be
deemed to have been allowed to be proceeded with. Thereafter,
sub-section (3) of section 127C clearly states that where an
Application is allowed or deemed to have been allowed to be
proceeded with under sub-section (1), the Settlement Commission
shall, within 7 days from the date of the order under sub-section
(1), call for a report alongwith the relevant records from the
Principal Commissioner of Customs or Commissioner of Customs
having jurisdiction, and the Commissioner shall furnish the report
within a period of 30 days of the receipt of communication from the
Settlement Commission. What sub-section (3) of section 127C
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contemplates is for a report to be called once the Application is
allowed to be proceeded with or deemed to be allowed to be
proceeded with. There would be no occasion for the Settlement
Commission to call for a report if the Settlement Application has not
been allowed to be proceeded with. Thereafter, section 127C(4) of
the Act contemplates a situation where the Settlement Commission,
after examining the report filed under section 127C(3), is of the
opinion that any further inquiry or investigation in the matter is
necessary, direct the Commissioner (Investigation), within 15 days
of the receipt of the report, to make or cause to be made such
further inquiry or investigation and furnish a report within a period
of 90 days of the receipt of the communication from the Settlement
Commission. After this entire procedure is over, sub-section (5) of
section 127C stipulates that after examination of the records and
the report received either under sub-section (3) and /or sub-section
(4) and after giving an opportunity to the Applicant and the
Revenue, the Settlement Commission may pass such order as it
thinks fit on the matters covered by the Application and any other
matter relating to the case not covered by the Application but
referred to in the report of the Principal Commissioner of Customs
or Commissioner of Customs and Commissioner (Investigation)
under sub-section (3) and/or sub-section (4).
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17. Looking at the entire scheme of section 127C, what
becomes clear is that it contemplates two orders being passed. The
first order is passed under section 127C(1). Whilst passing this
order, the Settlement Commission simplicitor examines whether
the Settlement Application should be allowed to be proceeded with.
If not, then the Settlement Commission rejects the Application on
the ground that it is not compliant with the mandatory provisions
of section 127B. If no order is passed as contemplated under
section 127C(1) within a period of 14 days, as stipulated in the said
section, then the Application shall be deemed to have been allowed
to be proceeded with. This order under section 127C(1) is an
order that is passed at the threshold and the Settlement
Commission is not required to discuss the merits of the case at all.
Once the threshold bar is crossed, it is only thereafter that the
Settlement Commission shall proceed to call for a report as
contemplated under section 127C(3) and / or section 127C(4).
After perusing those reports, if any, the Settlement Commission
then passes a final order as contemplated under section 127C(5).
What is important to note is that an order that is passed under
section 127C(5) is the final order after the Settlement Application
is either allowed to be proceeded with or deemed to be allowed to be
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proceeded with. If that contingency happens, there is no question
of passing any final order under section 127C(5) rejecting the
Application on the ground that it is inadmissible under section
127B. This scheme is clear from an ex-facie reading of the
provisions of section 127C.
18. Coming to the facts of the present case, it is not in
dispute that the Settlement Applications of the Petitioners were
filed on 27th May, 2014. The first notice as contemplated under
section 127C(1), was issued by the Settlement Commission on 10th
June, 2014 to remove the defects and to show cause why the
Applications of the Petitioners should be allowed to proceed with.
After this notice was issued, there was no order passed on the
admissibility of the Settlement Applications filed by the Petitioners
up and until the passing of the impugned order on 27th March,
2015. This alone was in violation of the statutory provisions as set
out in section 127C(1) which contemplates that an order either
allowing the Application to be proceeded with or rejecting the same
ought to be passed within a period of 14 days from the date of
issuance of the notice. If this is not done, then the Settlement
Applications are deemed to be allowed to be proceeded with. We
would therefore be justified in setting aside the impugned order on
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this ground alone, as the impugned order rejects the Settlement
Applications of the Petitioners on the ground that they are
inadmissible under section 127B.
19. However, the matter does not stop here. As the record
would indicate that thereafter the Settlement Commission also
called for a report as contemplated under section 127C(3). The
question of calling for a report only arises once the Settlement
Application is allowed to be proceeded with. This is clear from the
opening words of section 127C(3) which state "Where an application is
allowed or deemed to have been allowed to be proceeded with under sub-section (1), the
Settlement Commission shall, within seven days from the date of order under sub-
section (1), call for a report....." . If the Settlement Commission was of the
opinion that the Settlement Application filed by the Petitioners
ought not to be proceeded with, there was no question of calling for
any report as contemplated under section 127C(3). The fact that
the report was called for by the Settlement Commission under the
provisions of section 127C(3) would itself show that the Settlement
Applications of the Petitioners were deemed to be allowed to be
proceeded with. It was then not open to the Settlement Commission
to reject the Settlement Applications on the ground that they are
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not admissible. If it wanted to dismiss or reject the Applications of
the Petitioners, they ought to have done it on merits. However, the
operative part of the impugned order states that the Settlement
Applications filed by the Petitioners are all rejected as inadmissible
under section 127B of the Customs Act, 1962. This to our mind,
could not have been the procedure adopted by the Settlement
Commission. Another factor that one needs to take note of is that
the impugned order itself records that it is an order passed under
section 127C(5). As set out earlier by us, an order passed under
section 127C(5) is the final order passed on the Settlement
Applications. We fail to see how the Settlement Commission on one
hand records that this is an order passed under section 127C(5)
and then rejects the Settlement Applications as being inadmissible
under section 127B. This would then really be an order passed
under section 127C(1).
20. In light of all this, we are unable to agree with the
submissions made on behalf of the Revenue by Mr Jetly. Even
assuming for the sake of argument that the hearings that took place
before the Settlement Commission on 28th October, 2014 and 4th
March 2015, the Petitioners understood them to mean that the
Settlement Commission was hearing the matter only on the issue of
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admissibility would make no difference. The statutory provisions of
the Act are quite clear and have to be followed. They cannot be
circumvented merely because the Petitioners purportedly
understood something different. Furthermore, in any event, if the
Settlement Commission was to reject the Settlement Applications of
the Petitioners on the ground that they are not admissible, there
was absolutely no need to pass a detailed order on merits of the case
and that too taking into account the Corrigendum / Addendum that
was issued by the Revenue to the show cause notice even after the
Settlement Applications were filed by the Petitioners. Therefore,
looking to the totality of the facts of the present case, we have no
hesitation in holding that the impugned order passed by the
Settlement Commission dated 27th March, 2015 cannot be
sustained.
21. In view of the foregoing discussion, the impugned order
dated 27th March, 2015 passed by the Settlement Commission is
quashed and set aside. The Settlement Applications are restored
back to the file of the Settlement Commission for a de novo
consideration in accordance with law. The Settlement Commission
shall give a reasonable opportunity of hearing to all concerned
including the Petitioners. We, however, clarify that before hearing
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the Petitioners de novo, 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. If the payment of interest ordered by the Settlement
Commission is not complied with by the Petitioners, then the
Settlement Applications of the Petitioners shall not be de novo
considered as ordered earlier and the impugned order dated 27th
March, 2015 shall stand revived and consequently, the Settlement
Applications filed by the Petitioners shall stand rejected. Rule is
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.)
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