2016 (12) TMI 76 - HC - Customs

Sale of garment in domestic market - benefit of Customs Notification 21/2002-Cus dated 01.03.2002 - violation of actual user condition of the notification - Held that - there is no allegation of smuggling though one of the items which was imported by the petitioner under the classification of garment accessories in eight consignments was Zip fasteners. As admitted, the goods were not seized by the DRI nor there is any allegation against the petitioner that they smuggled those goods. The allegation itself is with regard to wrong availment of benefit of the exemption Notification. That apart, the eight consignments have all been together classified as garment accessories said to have contained various items. Thus it would be virtually impossible for the assessing group to separate various items and to cull out only Zip fasteners and treat them under a separate category as it is the goods mentioned under Section 123 of the Customs Act, 1962 - As submitted by the DRI, the petitioner had admitted the entire allegation much prior to the issuance of the show cause notice and in fact, that was precisely the stand taken before the Settlement Commission. Thus, for the above reason and taking note of the pragmatic stand taken by the petitioner, this Court is of the considered view that the matter requires to be considered so as to bring about a finality to the entire litigation - appeal allowed by way of remand.

Summary

Issues:
Impugned order of the Customs and Central Excise Settlement Commission; Admissibility of settlement application; Interpretation of Section 127B(1) of the Customs Act, 1962; Allegations of wrong availment of exemption Notification; Mis-use of import certificates; Bar under Section 127B for admission of petition; Allegations of smuggling; Classification of goods under Section 123 of the Customs Act, 1962; Remand to the Settlement Commission for fresh consideration.

Analysis:
The judgment by the Madras High Court pertains to a writ petition challenging an order passed by the Customs and Central Excise Settlement Commission. The petitioner, importers of garment accessories, availed the benefit of a Customs Notification for duty exemption but were alleged to have diverted the goods for sale in the domestic market. The total duty evaded was calculated at ?23,19,372. The petitioner cooperated with the Directorate of Revenue Intelligence (DRI) and admitted the mis-use and wrong availment of benefits before the show cause notice was issued.

Upon receiving the show cause notice, the petitioner approached the Settlement Commission to settle the case based on the admitted duty liability. The DRI contended that the Settlement Commission should not interfere when goods specified under Section 123 of the Customs Act are involved, citing a Delhi High Court decision. The Settlement Commission, influenced by the Delhi High Court ruling, held that the matter should be referred to the adjudicating authority as per the Customs Act.

The Court, after prima facie satisfaction, granted a stay on a part of the impugned order. During the hearing, it was highlighted that the case did not involve smuggling but rather the wrong availment of exemption benefits. The DRI's stand was that the bar under Section 127B for admission to the Settlement Commission related to goods specified under Section 123, which did not apply in this case as the goods were not seized or smuggled.

The Court acknowledged the absence of smuggling allegations and the practical difficulty in separating the imported items for classification under Section 123. Considering the petitioner's early admission of the allegations and their pragmatic approach, the Court remanded the matter to the Settlement Commission for fresh consideration on the immunities claimed by the petitioner. The writ petition was allowed, the impugned order set aside, and no costs were imposed, bringing finality to the litigation.