2005 (12) TMI 42 - HC - Customs

U/S 127H(2) settlement commission can withdraw immunity given by it only if there is evidence to show that person whose case was settled is not making payment malafidely Assessee declared a sick-unit so plea to extend time & payment of interest in installments is accepted Interest set @ 6%.

Summary

Issues:
Challenge to withdrawal of immunities granted by Settlement Commission under Customs Act, 1962 due to failure to pay interest within specified time and request for extension of time and payment in installments.

Analysis:
The petitioner challenged the Misc. Order dated 16th May, 2005 by the Settlement Commission withdrawing immunities granted under Section 127H of the Customs Act, 1962 due to failure to pay interest within the specified time. The Settlement Commission had granted immunity against penalty and fine but required payment of interest at 10% p.a. totaling Rs.23,51,523. The petitioner, citing financial difficulties, requested extensions for payment. The Commission initially extended the deadline to 31st March, 2005, but later rejected further extension requests and withdrew the immunity. The petitioner subsequently paid the outstanding interest of Rs.23,56,651 by 10th December, 2005. The Court found that the Commission lacked the power to withdraw immunity if the specified sum was not paid within the specified time, especially when the petitioner was willing to pay in installments due to financial constraints.

The Court emphasized that the Commission should consider each case's unique circumstances before withdrawing immunity under Section 127H(2) of the Act. While acknowledging the need to prevent undue advantage, the Commission must ensure a fair hearing and assess the party's financial position. In this case, the Commission did not hear the petitioner before withdrawing immunity, despite the petitioner's weak financial position and pending case before the BIFR. The petitioner's willingness to pay interest on delayed payments and proposal for installment payments demonstrated good faith. The Court decided that a 6% p.a. interest rate on delayed payments would be fair, considering prevailing market conditions and the bank rate.

The Court directed the petitioner to pay Rs.1,00,000 for delayed interest payments by 13th January, 2006, quashing the impugned order and allowing the petition. The final order by the Settlement Commission would remain in effect upon payment. The Court also ordered the petitioner to pay Rs.1,000 as costs to the respondents.