2016 (9) TMI 674 - HC - Customs

Validity of order of Settlement Commission rejection of settlement application - Section 127B of the Customs Act export of ferro silicon goods of Indian origin DEPB license obtained by the petitioner to avail benefit of free import of goods some of the license sold for valuable consideration later found that goods were of Bhutanese origin and are not entitled to DEPB benefit demand of duty and imposition of penalty on petitioner for wrong availment of DEPB license duty discharged by petitioner and approach to settlement commission for waiver of penalty rejection of application by settlement commission on the ground that the petitioner has discharged the entire liability himself, on behalf of the importers also to who he sold DEPB license Held that - the ground on which the Settlement Commission rejected the application for settlement under Section 127B of the Customs Act, is not sustainable at law. The department is concerned with the recovery of the import duty which was not paid by the concerned importers on the strength of the DEPB licenses. Since it is now admitted that the petitioner was not entitled to the benefit of the DEPB licenses all that the department should look forward to is recovery of the amount of ₹ 3,12,60,465/-. Who pays the money should not matter to the department. One cannot lose sight of the fact that the importers purchased the DEPB license from the petitioner for valuable consideration. Hence it is only fair that the petitioner pays the entire import duty rejection of application by settlement commission not correct. Matter remanded to settlement commission for fresh adjudication without going to the merits of the case writ application disposed off decided in favor of petitioner.

Issues:
1. Export of goods of Bhutanese origin declared as Indian origin.
2. Issuance of DEPB licenses based on false declaration.
3. Show cause notice for payment of import duty.
4. Settlement Commission's order challenged by the petitioner.
5. Dispute over the liability for import duty.
6. Court's decision on the Settlement Commission's rejection of the settlement application.

Analysis:
1. The petitioner exported ferro silicon declaring it as of Indian origin, but it was found to be of Bhutanese origin by the Directorate of Revenue Intelligence (DRI) during an investigation. The petitioner obtained 54 DEPB licenses based on this false declaration, allowing duty-free imports.

2. A show cause notice was issued by the DRI, demanding import duty payment of ?3,20,46,327 for the licenses. The petitioner deposited ?1,50,00,000 before the notice and approached the Settlement Commission under Section 127B of the Customs Act for settlement.

3. The Settlement Commission's order mentioned a revised duty liability of ?3,12,60,465, with the petitioner admitting liability but seeking penalty waiver and immunity from prosecution. The Commission held the petitioner liable for a portion of the duty, suggesting recovery from parties who purchased the licenses.

4. The Court found the Commission's rejection of the settlement application unsustainable, stating the department's concern was duty recovery, not who pays. It emphasized the fairness of the petitioner bearing the entire duty amount due to the consideration received for the licenses.

5. The Court remanded the matter to the Settlement Commission for reconsideration, highlighting that the decision on penalty liability rested with the Commission after providing the petitioner with a hearing opportunity. The Commission was directed to expedite the process within four months.

6. The Court disposed of the writ application, instructing the provision of a certified copy of the order to the parties upon request, subject to formalities.

This detailed analysis covers the issues, facts, legal proceedings, and the Court's decision regarding the settlement application and liability for import duty in the case.

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