Delhi High Court
Muskan Exim Inc. vs Commissioner Of Customs (Export) on 18 February, 2019
$~13
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 18th February, 2019.
+ W.P.(C) 1235/2019 & CM Appl. 5593-94/2019
MUSKAN EXIM INC. ..... Petitioner
Through: Mr. A.K. Seth, Mr. Chinmaya Seth
and Mr. Ekansh Mishra, Advs.
versus
COMMISSIONER OF CUSTOMS (EXPORT) ..... Respondents
Through: Mr. Harpreet Singh, Sr. Standing
Counsel.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE PRATEEK JALAN
PRATEEK JALAN, J. (ORAL)
%
1. The petitioner assails an order dated 27.09.2018 passed by the
Additional Commissioner of Customs principally on the ground that the
matter was then pending consideration before the Customs, Central Excise
and Service Tax Settlement Commission [hereinafter referred to as "the
Commission"].
2. The relevant facts, in brief, are that the petitioner was served with a
Show Cause Notice dated 14.12.2017 pursuant to an investigation by the
Directorate of Revenue Intelligence ("DRI"). The DRI had come to the
conclusion that the petitioner had inflated the value of readymade garments
being exported in order to claim inflated amounts by way of drawback. By
a letter dated 07.06.2018, counsel for the petitioner informed the customs
authorities that the petitioner was in the process of filing an application
before the Commission and it was requested that the adjudication be kept in
abeyance. The petitioner's Settlement Application under Section 127B of
the Customs Act, 1962 [hereinafter referred to as „the Act'] was in fact filed
on 21.08.2018. The Commission, by a communication dated 29.08.2018,
acknowledged the receipt of the application and stated that it had decided to
hold the admission hearing in the case on a date to be specified. However,
even before the Commission held any hearing in terms of its
communication as aforesaid, the customs authorities adjudicated the Show
Cause Notice and passed the impugned adjudication order dated
27.09.2018. The said order inter alia directed confiscation of goods
[redeemable on payment of redemption fine of ₹20 lakhs], restricted the
drawback amount claimed and imposed penalty of ₹20 lakhs each on the
petitioner under Sections 114 (iii) and 114AA of the Act.
3. The petitioner contends that the impugned adjudication order is liable
to be set aside on the ground that it was issued during the pendency of its
application before the Settlement Commission.
4. The provisions of the Act dealing with settlement of cases are
contained in Chapter XIVA of the Act. Section 127C provides for the
procedure to be followed by the Commission on receipt of an application
under Section 127B. Section127C (1) is relevant for the present appeal, and
provides as follows:-
"[127C. Procedure on receipt of an application under section
127B.-(1) On receipt of an 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 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."
5. During the pendency of a settlement application before the
Commission, the statute provides that the Commission has exclusive
jurisdiction over the powers and functions of the customs authorities. This
is evident from Section 127F (1) and (2) of the Act:
"127F. Power and procedure of Settlement Commission.- (1)
In addition to the powers conferred on the Settlement
Commission under Chapter V of the Central Excise Act, 1944
(1 of 1944), it shall have all the powers which are vested in an
officer of the customs under this Act or the rules made
thereunder.
(2) Where an application made under section 127B has been
allowed to be proceeded with under section 127C, the
Settlement Commission shall, until an order is passed under
sub-section[(5)] of section 127C, have, subject to the provisions
of sub-section [(4)] of that section, exclusive jurisdiction to
exercise the powers and perform the functions of any officer of
customs or Central Excise Officer, as the case may be, under
this Act or in the Central Excise Act, 1944 (1 of 1944), as the
case may be, in relation to the case."
6. Section 127C(1) provides for two distinct steps to be taken by the
Commission when an application under Section 127B is made to it. First,
the Commission must issue a notice within 7 days requiring the applicant to
explain in writing as to why the application be allowed to be proceeded
with. Second, after the explanation is provided by the applicant, and within
14 days from the date of the initial notice, the Commission is required to
pass an order either allowing the application to be proceeded with or
rejecting it. The proviso to the said sub-section provides for the
consequences of a failure on the part of the Commission to complete either
of these steps within the time permitted. In either case, the application is
deemed to have been allowed to be proceeded with. Thus, the
assessee/applicant is given the benefit of the deeming provision in the event
of any delay on the part of the Commission in fulfilling the requirements of
the section.
7. In the present case, it is clear that the petitioner's application had
been acknowledged by the communication of the Settlement Commission
dated 29.08.2018. Although the said communication contemplated an
admission hearing on a date to be notified, no such hearing took place. In
such circumstances, we are of the view that the proviso to Section 127C (1)
would apply and the petitioner's application must be deemed to have been
allowed to be proceeded with.
8. By virtue of Section 127F (2) of the Act, during the pendency of the
application, the adjudication of the Show Cause Notice by the customs
authorities was clearly premature. The said provision denudes the customs
authorities of their powers in relation to a matter pending before the
Settlement Commission, and vests jurisdiction in respect of those matters in
the Commission itself. The adjudication of Show Cause Notice in respect of
which a settlement application has been made (and allowed to be proceeded
with) is not just contrary to the statutory scheme, but also defeats the very
purpose of the settlement provisions.
9. The effect of Section 127F (2) was considered by this Court in Amit
Sirohi vs. Directorate of Revenue Intelligence, New Delhi (2016) 336 ELT
201 (Del). The Court was concerned with a challenge to a corrigendum to a
Show Cause Notice, issued by DRI after an order under Section 127C(1)
had been passed by the Commission. It was held as follows:-
"10. The question that arises is whether in light of the above
statutory power of the CCESC to exclusively exercise the
jurisdiction of the officer of Customs, the impugned
Corrigendum could have been issued on 12th August, 2014, i.e.,
on a date subsequent to the CCESC deciding to proceed with
the applications filed before it.
11. The submission of Mr. Satish Aggarwala, learned counsel
for the respondent, in response to the above query is that the
order dated 24th April, 2014 passed by the CCESC deciding to
proceed with the application under Section 127C of the Act was
passed without hearing the DRI.
12. As far as this submission is concerned, the Court notices
that there was sufficient opportunity for the DRI, if aggrieved
by the order passed by the CCESC on 24th April, 2014, to have
challenged that order in accordance with law. However,
without adopting that course, it was not open to the DRI to have
proceeded to issue a Corrigendum/Addendum to the SCN dated
20th December, 2013 since in terms of Section 127F(2) of the
Act, the exclusive jurisdiction to deal with the matter vested
with the CCESC.
13. In other words, the DRI had, on the date it issued the
Corrigendum dated 12th August, 2014, no jurisdiction to issue
Corrigendum/Addendum which made a very significant change
to the SCN whereby the classification of the imported goods
was changed and the duty demand correspondingly increased."
10. The petitioner has also raised an additional grievance that it was not
informed of the dates on which the adjudicating authority proposed to
conduct a personal hearing, and has therefore also assailed the impugned
order on the grounds of natural justice. However, in view of our decision
with respect to the first ground raised by the petitioner, it is not necessary to
consider this challenge in the present proceedings.
11. For the reasons aforesaid, the impugned order dated 27.09.2018
passed by the Additional Commissioner of Customs (ICD), Export,
Tughlakabad, New Delhi is hereby quashed. It is open to the parties to
proceed with the petitioner's pending application before the Settlement
Commission in accordance with law.
12. The petition is allowed in the aforesaid terms, but with no order as to
costs.
PRATEEK JALAN, J.
S. RAVINDRA BHAT, J.
FEBRUARY 18, 2019
'pv'
