2016 (9) TMI 880 - HC - Customs

Rejection of settlement applications - proper disclosures not made amounting to non-cooperation - duty and interest under clause (c) to the 1st proviso to section 127B(1) - settlement of cases under Chapter XIV-A - Held that - The settlement machinery was meant for providing a chance to a tax-evader who wants to turn over a new leaf as recommended by the Direct Taxes Inquiry Committee. The majority view of the Settlement Commission was in grave error in coming to the conclusion that the Settlement Applications filed by the Petitioners were liable for rejection on the ground of non co-operation in the proceedings and non payment of any admitted duty and interest as required under Section 127B. The Petitioners had explained that they had not made any additional payment of duty because in the past they had deposited the amount of duty which was far in excess of what was demanded in the SCN. This explanation was accepted by the Settlement Commission, and it was only thereafter that the case was allowed to be proceeded with - It was not correct on the part of the of the Settlement Commission (the majority view) to reject the Settlement Applications of the Petitioners on the ground of non payment of any admitted duty and interest as required under Section 127B. Classification of goods - reclassification of the fitments to the Pontoon, alongwith the Pontoon - grounds of rejection - Held that - In view of the fact that the Settlement Commission itself had allowed the Settlement Applications of the Petitioners to be proceeded with under section 127C would only mean that at the threshold itself, the Commission was satisfied that the Settlement Applications filed by the Petitioners was not made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975. This apart, it was also the case of the Petitioners that they are not disputing any classification as proposed by the Revenue in the SCN. - the Settlement Applications filed by the Petitioners could not have been rejected on this ground, as well. Matter remanded to the Settlement Commission to decide the Settlement Applications filed by the Petitioners on merits and in accordance with law and uninfluenced by any views of the majority or minority - petition disposed off - decided in favor of petitioner.

Summary

Issues Involved:

1. Validity of the Settlement Commission's majority view rejecting the Settlement Applications.
2. Compliance with Section 127B of the Customs Act, 1962 regarding payment of additional duty and interest.
3. Interpretation of the classification of goods under the Customs Tariff Act, 1975.

Detailed Analysis:

1. Validity of the Settlement Commission's Majority View:

The Petitioners challenged the majority view of the Settlement Commission which rejected their Settlement Applications and sent the matter back for adjudication. The majority view held that the Petitioners had not made proper disclosures or cooperated with the Commission by admitting any additional duty and interest as required under Section 127B, and were only requesting reclassification of the fitments along with the Pontoon. The High Court found this conclusion to be erroneous, noting that the Petitioners had already paid an amount far exceeding the duty demanded in the SCN, which was accepted by the Settlement Commission, allowing the Applications to be proceeded with initially.

2. Compliance with Section 127B of the Customs Act, 1962:

Section 127B mandates that no Settlement Application shall be entertained unless the Applicant has paid the additional amount of customs duty accepted by him along with interest. The Petitioners argued that they had already paid an amount of ?1,15,41,741, which was far more than the duty demanded in the SCN of ?43,80,845. This explanation was accepted by the Settlement Commission, and the Applications were allowed to be proceeded with. The High Court held that the majority view's conclusion of non-compliance with Section 127B was incorrect and contrary to the record, as the Petitioners had indeed paid the required duty and interest.

3. Interpretation of the Classification of Goods:

The majority view also held that the Settlement Applications were essentially a request for reclassification of the fitments along with the Pontoon, which is barred under the fourth proviso to Section 127B(1). The High Court found this finding to be incorrect, noting that the Petitioners had categorically stated that their Applications were not for the interpretation of the classification of goods. Additionally, the records showed that the Petitioners had accepted the classification proposed by the Revenue in the SCN. Thus, the Applications could not be rejected on the ground of seeking reclassification.

Conclusion:

The High Court quashed the impugned order dated 31st October, 2014, and remanded the matter back to the Settlement Commission to decide the Settlement Applications on merits and in accordance with law, uninfluenced by the earlier views of the majority or minority. The Court emphasized that the Petitioners had complied with the mandatory requirements of Section 127B and were not seeking an interpretation of the classification of goods.