2016 (11) TMI 855 - HC - Customs

Validity of order passed by Settlement Commission - the Bill of Entry filed before the issuance of the SCN - violation of condition as set out in 1st Proviso to section 127B(1) of the Customs Act, 1962 - Held that - admittedly the second Bill of Entry was filed before the Petitioner made its Settlement Application before Respondent No.4. In fact, it is the case of the Petitioner that they were not permitted to file this Bill of Entry before the issuance of SCN and were allowed to file the same only after the SCN was issued. This has not been controverted by the Revenue. In these facts, we find that the Settlement Commission was in error in coming to the conclusion that the Settlement Application filed by the Petitioner was not admissible as it had failed to fulfill Condition (iii) set out above viz. that the Petitioner had not filed a Bill of Entry as stipulated in clause (a) of the 1st Proviso to section 127B(1) of the Customs Act, 1962. Principles of natural justice - Held that - the impugned order is not sustainable on the grounds of breach of the principles of natural justice. On perusal of the record, we find that the Settlement Commission has referred to certain reports dated 1st March 2016, which were admittedly never supplied to the Petitioner. This fact is undisputed by the Revenue. This being the case, the impugned order cannot be sustained on this ground also and has to be quashed and set aside. Petition allowed - matter remanded back.

Summary

Issues Involved:
1. Admissibility of the Settlement Application under section 127B of the Customs Act, 1962.
2. Compliance with the condition of filing a Bill of Entry before the issuance of the Show Cause Notice (SCN).
3. Alleged breach of principles of natural justice.

Detailed Analysis:

1. Admissibility of the Settlement Application:
The Petitioner challenged the common order dated 14th March 2016, passed by the Settlement Commission, which rejected the Settlement Application filed by the Petitioner. The Commission examined three conditions for admissibility:
- Whether the application was in respect of a 'case' as defined in section 127A(b) of the Customs Act.
- Whether the applicant paid the additional admitted duty liability with interest as required by section 127B(c).
- Whether the condition of filing a Bill of Entry before the issuance of the SCN was fulfilled.

The Commission held in favor of the Petitioner for conditions (i) and (ii) but rejected the application based on non-compliance with condition (iii).

2. Compliance with the Condition of Filing a Bill of Entry:
The Settlement Commission found that the Petitioner did not comply with the requirement of filing a Bill of Entry before the issuance of the SCN. The Petitioner had imported four containers, with two separate Bills of Entry filed. One Bill of Entry was filed before the SCN, while the other was filed after the SCN issuance. The Commission concluded that the Petitioner did not meet the condition stipulated in section 127B(a) of the Customs Act.

The Petitioner argued that the Department examined and seized the goods before the filing of the Bill of Entry for the remaining three containers. The Petitioner was allowed to file the Bill of Entry only after the SCN was issued. The Petitioner contended that there is no mandate in section 127B requiring the Bill of Entry to be filed before the issuance of the SCN. The Court agreed with the Petitioner, stating that the Bill of Entry was filed before the Settlement Application and that the Settlement Commission's interpretation was contrary to the spirit of Chapter XIV-A of the Customs Act.

3. Alleged Breach of Principles of Natural Justice:
The Petitioner claimed that the impugned order was passed in violation of natural justice principles, as the Settlement Commission referred to a report dated 1st March 2016, which was not provided to the Petitioner. The Court found that the Petitioner was not given a fair opportunity to respond to this report, constituting a breach of natural justice. This alone rendered the impugned order unsustainable.

Conclusion:
The Court quashed and set aside the impugned order dated 14th March 2016, restoring the Settlement Application for de novo consideration by the Settlement Commission. The Court emphasized that the Bill of Entry filed before the Settlement Application sufficed and that the Settlement Commission misinterpreted the statutory provisions. Additionally, the breach of natural justice principles further invalidated the Commission's order. The Court allowed the Writ Petition, making the rule absolute without any order as to costs.