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2014 (4) TMI 907 - HC - CustomsJurisdiction of Settlement Commission - Customs duty Mis-declaration - Smuggling and Confiscation of Gold & Coins in India - Scope of Section 127B of the Customs Act, 1962 u/s 124 - Penalty u/s 112 and 114AA of Act Whether Section 127B bars the jurisdiction of the Settlement Commission for cases of mis-declaration - Held That - Relying upon Union of India vs. Hoganas India Ltd & Ors 2005 (7) TMI 14 - HIGH COURT OF JUDICATURE (BOMBAY) A restrictive interpretation cannot be given to Section 127B - The words or otherwise which appear u/s 127B after the words short levy on account of misclassification would mean similar acts like misclassification - Principle of ejusdem generis would apply - There was no mandate to limit the jurisdiction of the Settlement Commission in such a manner - Providing an unduly narrow interpretation to Section 127B to nip its jurisdiction at the bud does not cohere with the text or context of the provision - Applications concerning mis-declaration are admissible u/s 127B. Pre-deposit - For approaching the Settlement Commission Show cause notice - Whether application can be entertained without having to pay duty - Principle of ejusdem generis Interpretation of Statutes - Clause (c) of the first proviso to Section 127B Held that - Clause (c) to the first proviso mandates a pre-condition to approaching the Settlement Commission - The duty accepted by the applicant must be paid, before the matter can even be considered by the Settlement Commission - A levy u/s 28-which authorizes a show-cause for duties not levied earlier-includes interest u/s 28AB - Thus, clause (c) requires that the applicant must deposit the duty he accepts to be the liability, along with interest - This means that it is not necessary for the show cause notice to propose a liability amount for it to be due under clause (c) - The Court notices that the self-assessment standard is also prescribed in Section 28(b), as an alternative to the duty ascertained by the Revenue. Relying upon Jagdish Cancer and Research 2001 (8) TMI 113 - SUPREME COURT OF INDIA - Once served with a show-cause notice u/s 124, the proper officer u/s 28 cannot simultaneously issue a notice This does not mean that minimum duty is not payable on approaching the Settlement Commission u/s 127B - The customs duty, either the amount required by a Section 28(b), or the amount self-assessed u/s 124 notice, must be paid under clause (c) - The minimum condition of pre-depositing before the Settlement Commission remains intact - Even in cases where there is a notice u/s 124, which does not propose a customs duty, the applicant must self-assess the liability and pay such amount as a pre-condition. Opportunity to approach the Settlement Commission is a sort of concession given by the government to errant assessees to enable them to come clean - This opportunity is hedged in by certain conditions, one of which is that the assessee shall pay the additional amount of customs duty accepted by him along with interest due u/s 28AB - An assessee is permitted to approach the Settlement Commission subject to inviolable conditions, the proper and complete compliance with which cannot be compromised or condoned in any manner - Even on this score the petitioner has to fail - This Court clarifies this judgment leaves open the parties contentions on other grounds, including the applicability of Section 123 by way of the third proviso to Section 127B, which may be considered by the Settlement Commission, if advanced by the parties Decided against assessee.
Issues Involved
1. Jurisdiction of the Settlement Commission under Section 127B of the Customs Act. 2. Requirement of payment of customs duty and interest as a pre-condition to approaching the Settlement Commission. Detailed Analysis Jurisdiction of the Settlement Commission under Section 127B of the Customs Act The primary issue is whether Section 127B of the Customs Act bars the jurisdiction of the Settlement Commission for cases of mis-declaration. The court emphasized that the Settlement Commission's jurisdiction is confined to the provisions of Section 127B, which extends to cases involving "short levy on account of misclassification, under-valuation or inapplicability of exemption notification or otherwise." The court noted that Chapter XIVA of the Act facilitates the settlement of cases involving misclassification to expedite dispute resolution without the traditional appellate process. The immunity provided under Chapter XIVA is limited to penalties and prosecution, not duty liability, which the Commission can determine and enforce. The court discussed various judicial interpretations regarding the scope of Section 127B. The Madras and Karnataka High Courts had previously held that Chapter XIVA does not extend to cases of mis-declaration, while the Bombay High Court and a previous decision of the Delhi High Court adopted a broader interpretation. The Bombay High Court in Union of India vs. Hoganas India Ltd & Ors held that the Settlement Commission has broad jurisdiction to entertain all kinds of settlement applications, provided they meet the mandatory requirements of filing a bill of entry/shipping bill and issuance of a show cause notice. The Delhi High Court concurred with the broader interpretation, stating that the Settlement Commission's mandate includes considering violations and ensuring quicker recovery of revenue. The court rejected the argument that the Settlement Commission's jurisdiction should be limited to cases of misclassification, emphasizing that such a narrow interpretation would undermine the provision's purpose and create arbitrary distinctions. Requirement of Payment of Customs Duty and Interest as a Pre-condition to Approaching the Settlement Commission The second issue concerns whether the petitioner is required to deposit any amount as a pre-condition to approaching the Settlement Commission, even when no demand has been raised. Clause (c) of the first proviso to Section 127B mandates that the applicant must pay the additional amount of customs duty accepted by him along with interest due under Section 28AB before approaching the Settlement Commission. The petitioner argued that since the show cause notice did not propose any duty liability, no amount was due, and thus, the pre-condition did not apply. The court found this argument unpersuasive, stating that the duty "accepted by" the applicant must be paid as a pre-condition to approaching the Settlement Commission. The court emphasized that the Settlement Commission is a safe haven for applicants at risk of punishment under the Customs Act, and while it can grant immunity from prosecution, it cannot condone the liability amount or interest. The applicant must pay the duty he accepts to be the liability, along with interest, as a reciprocal statutory good faith measure. The court further clarified that the reference to "interest due under Section 28AB" is disjunctive from the phrase "paid the additional amount of customs duty accepted by him." This means that the applicant must deposit the duty he or she thinks is payable, even if the show cause notice does not contain a specific figure. The court rejected the petitioner's interpretation that clause (c) applies only when a notice has been issued under Section 28, stating that such an interpretation would create an unmerited distinction between different categories of applicants. The court also noted that the opportunity to approach the Settlement Commission is a concession given by the government to errant assessees to enable them to come clean, subject to certain conditions, including the payment of the additional amount of customs duty accepted by the applicant along with interest. If the petitioner cannot comply with this condition due to statutory disability, it indicates that such a case was not intended to be covered by Section 127B. Conclusion The court concluded that the Settlement Commission's jurisdiction under Section 127B extends to cases of mis-declaration and that applicants must deposit the additional amount of customs duty accepted by them along with interest as a pre-condition to approaching the Settlement Commission. The petition was dismissed without any order as to costs.
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