2015 (11) TMI 139 - HC - Customs

Validity of order of Settlement Commission rejecting the balance Settlement Applications arising out of the second and third Show Cause Notices - In respect of first Show Cause Notice application was accepted by the commission - Held that - Admittedly the Settlement Applications were filed by the Petitioners in the year 2012-2013. On the date when these Applications were filed under section 127B, section 28AB no longer remained on the statute-book and therefore it was impossible for the Petitioners to comply with the condition as set out in clause (c) of the 1st proviso to section 127B(1) which continued to stipulate that no Settlement Application could be made unless the Applicant had paid the additional amount of customs duty accepted by him along with interest due under section 28AB. It was in these circumstances and as rightly submitted by Mr Shah, that the Petitioners brought to the notice of the Authorities that since section 28AB no longer remained on the statute-book, no interest was paid by them under the said section. Despite this, the Petitioners had undertaken that they would pay interest under section 28AA as and when determined by the Settlement Commission. Admittedly, the Settlement Commission, whilst ordering that the Settlement Applications (arising out of the 2nd and 3rd SCNs) are allowed to be proceeded with, did not impose any condition or direct the Petitioners to pay any interest The Settlement Commission was totally in error in coming to the conclusion that the Petitioners Settlement Applications could not be entertained because an Appeal was pending before the CESTAT. As stated earlier, the Appeal before the CESTAT was not against the 3rd SCN but was against the ex-parte decision of the Authorities to appropriate a sum of ₹ 41,79,324/- towards a time barred claim. Matter restored back to the file of the Settlement Commission for a de novo consideration and in accordance with law. - Appeal disposed of.

Summary

Issues Involved:
1. Challenge to the final orders passed by the Settlement Commission.
2. Non-payment of interest under Section 28AB of the Customs Act.
3. Pending appeal before the CESTAT.

Detailed Analysis:

1. Challenge to the Final Orders Passed by the Settlement Commission:
The Petitioners filed a Writ Petition under Article 226 of the Constitution of India challenging the final orders of the Settlement Commission dated 29th January 2014 and 31st January 2014. They sought a directive for the Settlement Commission to reconsider their Settlement Applications de novo, providing them a reasonable opportunity of hearing. The Petitioners contended that the orders were arbitrary, unjust, erroneous on merits, and violated the principles of natural justice and the constitutional mandate of Article 14.

2. Non-payment of Interest under Section 28AB of the Customs Act:
The Petitioners argued that Section 28AB was deleted from the Customs Act with effect from 8th April 2011 and replaced by Section 28AA. Despite this, Section 127B(1) erroneously continued to reference Section 28AB. The Petitioners did not pay interest under Section 28AB while filing their Settlement Applications, as the section no longer existed. They assured that they would pay the interest liability as determined by the Settlement Commission under Section 28AA. The Settlement Commission initially allowed the Settlement Applications arising from the 2nd and 3rd SCNs to proceed without imposing any condition to deposit interest. However, the Settlement Commission later rejected these applications for non-payment of interest under Section 28AB, which the Petitioners argued was unjust as the section was not in force at the time of their application.

3. Pending Appeal Before the CESTAT:
The Settlement Commission rejected the Settlement Applications arising from the 3rd SCN on the additional ground that an appeal related to the case was pending before the CESTAT. The Petitioners countered this by stating that the appeal was against an ex-parte decision to appropriate a sum towards a time-barred claim, not against the 3rd SCN itself. The ex-parte decision was later recalled, making the appeal infructuous and subsequently withdrawn. Thus, the Petitioners argued there was no pending appeal related to the subject matter of the 3rd SCN.

Court's Findings:

Non-payment of Interest:
The Court noted that Section 28AB was deleted and replaced by Section 28AA with effect from 8th April 2011, but Section 127B(1) continued to reference Section 28AB until it was amended in 2014. The Petitioners could not be expected to comply with a provision that no longer existed. The Court found that the Settlement Commission erred in rejecting the Settlement Applications on the ground of non-payment of interest under Section 28AB. The Petitioners had undertaken to pay interest under Section 28AA as determined by the Settlement Commission, and this was a reasonable course of action.

Pending Appeal:
The Court found that the appeal before the CESTAT was not related to the 3rd SCN but to an ex-parte decision, which was subsequently recalled. Therefore, there was no violation of the provisions of Section 127B(1), which prohibits entertaining Settlement Applications if an appeal is pending before the Appellate Tribunal or any court.

Conclusion:
The Court set aside the impugned orders dated 29th January 2014 and 31st January 2014 and remanded the Settlement Applications back to the Settlement Commission for de novo consideration. The Settlement Commission was directed to give a reasonable opportunity of hearing to all concerned and was at liberty to impose a condition for payment of interest as determined under Section 28AA. The Petitioners were obliged to pay this interest before their Settlement Applications were reconsidered. The rule was made absolute, and the parties were directed to bear their own costs.