2013 (8) TMI 472 - HC - Customs

Scope of Judicial Review Review of the decision of the Settlement Commission - power to grant immunity from prosecution - held that - There is limited scope of judicial review - Despite such narrow confines of judicial review of the decision of the Settlement Commission, it is undeniable that the jurisdiction under Article 226 of the Constitution is not totally ousted. - it was undeniable that the jurisdiction under Article 226 of the Constitution was not totally ousted - In a given situation if the Settlement Commission had taken into consideration irrelevant facts and such consideration had gone into its decision-making process resulting into grave injustice and prejudice to the party then within the narrow confines of the judicial review, interference would still be open. Opportunity to Produce Materials - The Settlement Commission gave full opportunity to both sides to produce materials on record - The Tribunal upon completion of the hearing noted that this was not the first case where the company was involved in the breach of the provisions of the Customs Act - On earlier occasion, the company was visited with a penalty imposed by the Settlement Commission for irregularity in imports - There was no irregularity in the Commission s order in imposing penalties on the company and the two Directors - the provisions of Chapter XIVA nowhere provided that the Commission cannot increase the penalty from what was originally imposed when a party might file an application for settlement - the Commission had a special power to waive prosecution under certain circumstances - the Commission while exercising such powers, granted total immunity from prosecution to the company as well as to the two Directors - With the narrow scope of judicial review available in a writ petition - there was no reason to interfere. The Commission took into consideration irrelevant and extraneous materials - The conclusion of the Commission that assesses were habitual offenders was not based on any material on record - the decision of the Commission in this respect was required to be reconsidered - the court was not concerned with the ultimate decision but the decision-making process - the process was vitiated on account of irrelevant considerations having weighed with the Commission Order of the Commission partly allowed - Proceedings were remanded to the Settlement Commission for fresh consideration.

Issues Involved:
1. Legality and validity of orders passed by the Settlement Commission under the Customs Act, 1962.
2. Non-fulfillment of export obligations under the DEEC scheme.
3. Imposition of penalties and confiscation of goods.
4. Scope of judicial review of the Settlement Commission's decisions.

Issue-wise Detailed Analysis:

1. Legality and Validity of Orders Passed by the Settlement Commission:
The petitions challenge the legality and validity of orders passed by the Settlement Commission on applications made by two companies under the Customs Act, 1962. The companies, Saurashtra Cement Ltd. and Gujarat Sidhee Cement Ltd., failed to fulfill their export obligations under the DEEC scheme, leading to the issuance of show-cause notices and subsequent penalties by the Customs Department. The Settlement Commission confirmed the customs duty demand but reduced the interest rate from 24% to 15% and imposed separate penalties on the companies and their directors.

2. Non-fulfillment of Export Obligations under the DEEC Scheme:
Both companies imported raw materials (steam coal and MR bricks) without payment of duty under the DEEC scheme, with the condition to export a specified quantity of clinker within 18 months. Saurashtra Cement partially fulfilled its export obligation, exporting 71,347 MTs of clinker against a commitment of 100,000 MTs, while Gujarat Sidhee Cement failed to export any clinker against its obligations. The companies cited unanticipated developments in the international market as reasons for their failure to meet export obligations.

3. Imposition of Penalties and Confiscation of Goods:
The Customs Department issued show-cause notices alleging that the companies misused the DEEC scheme by failing to fulfill export obligations and utilizing imported raw materials for local market sales. The Commissioner of Customs imposed penalties and confirmed the demand of customs duty. The Settlement Commission, upon applications for settlement, imposed penalties of Rs. 7,00,000 each on Saurashtra Cement and its directors, and Rs. 12,50,000 each on Gujarat Sidhee Cement and its directors, citing repeated offenses and habitual non-compliance.

4. Scope of Judicial Review of the Settlement Commission's Decisions:
The High Court examined the scope of judicial review against the Settlement Commission's decisions, noting that such review is limited to checking if the Commission's order is contrary to any provisions of the Act, or if it suffers from procedural unfairness, arbitrariness, or is based on irrelevant considerations. The court emphasized that the Settlement Commission has wide powers to settle revenue claims and grant immunity from prosecution, and its decisions are generally given finality.

Separate Judgments:
- Saurashtra Cement Ltd.: The High Court found no irregularity in the Settlement Commission's order imposing penalties on Saurashtra Cement and its directors, noting that the Commission had considered the company's past defaults and granted immunity from prosecution. The petition by Saurashtra Cement was dismissed.
- Gujarat Sidhee Cement Ltd.: The High Court found that the Settlement Commission took into account irrelevant and extraneous materials, such as the past defaults of Saurashtra Cement, while imposing penalties on Gujarat Sidhee Cement. The court held that the conclusion of habitual offenses was not based on any material on record and remanded the proceedings for fresh consideration. The petition by Gujarat Sidhee Cement was partially allowed.

Conclusion:
The High Court dismissed the petition by Saurashtra Cement Ltd. and partially allowed the petition by Gujarat Sidhee Cement Ltd., remanding the case to the Settlement Commission for fresh consideration. The court reiterated the limited scope of judicial review of the Settlement Commission's decisions, emphasizing procedural fairness and adherence to statutory provisions.

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