2011 (6) TMI 632 - HC - Customs

Whether a jurisdictional condition which is imposed by the proviso to Section 127-B(1) can be obviated by the applicant contending that he has waived the issuance of a notice to show cause Held that - An application cannot be filed unless the applicant has filed a bill of entry or shipping bill in respect of the import or export of goods and in relation to such bill of entry or shipping bill a show cause notice has been issued to him by the proper officer. These conditions have to be cumulatively fulfilled and are mandatory. assumption of the jurisdiction by the Settlement Commission in the present case was contrary to law

Issues Involved:
1. Validity of the Settlement Commission's order.
2. Jurisdictional condition under Section 127B of the Customs Act, 1962.
3. Requirement of a show cause notice.
4. Waiver of the issuance of a show cause notice.
5. Refund of the deposited amount by the Revenue.

Detailed Analysis:

1. Validity of the Settlement Commission's Order:
The Union of India challenged the validity of the order passed by the Settlement Commission on the grounds that a jurisdictional condition for exercising powers under Section 127B of the Customs Act, 1962, was not established. The Settlement Commission had passed a final order on 21 December 2010, based on an application filed by the First Respondent.

2. Jurisdictional Condition under Section 127B of the Customs Act, 1962:
Section 127B(1) of the Customs Act allows any importer/exporter to make an application to the Settlement Commission before adjudication to settle the case. The application must include a full and true disclosure of the duty liability, the manner in which it was incurred, and the additional customs duty accepted to be payable. The fundamental requirement is a full and candid disclosure by the applicant of the liability to pay duty, which was not disclosed before the proper officer.

3. Requirement of a Show Cause Notice:
The proviso to Section 127B(1) stipulates that no application shall be made unless the applicant has filed a Bill of Entry or a shipping bill and a show cause notice has been issued by the proper officer. The Revenue contended that the application was not maintainable as no show cause notice had been issued and the First Respondent had not paid the additional customs duty or admitted any additional liability.

4. Waiver of the Issuance of a Show Cause Notice:
The First Respondent argued that it waived the requirement of a show cause notice and that the letter from the Assessing Officer requiring a personal hearing could be regarded as a notice to show cause. However, the court held that the conditions prescribed by the proviso to sub-section (1) of Section 127 are jurisdictional requirements. In the absence of compliance, there is a threshold bar to making the application under Section 127. The issuance of a show cause notice is a mandatory jurisdictional requirement, and an applicant cannot waive such a condition.

5. Refund of the Deposited Amount by the Revenue:
The Union of India sought an order for the refund of Rs. 3,15,98,637/- deposited by the Revenue in Writ Petition No. 5486/2010. The court noted that since the order of deposit was passed in that writ petition, a separate order for refund of the moneys deposited in Court by the Union of India would be issued while passing an order on the companion writ petition.

Conclusion:
The court concluded that the Settlement Commission's assumption of jurisdiction was contrary to law due to the absence of a show cause notice. The impugned orders dated 25 February 2010 and 21 December 2010 of the Settlement Commission were set aside. The Union of India was granted the liberty to proceed with the assessment proceedings in accordance with the law, and the assessment was directed to be completed within eight weeks. The rule was made absolute with no order as to costs.

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