2017 (4) TMI 265 - HC - Customs

Validity and legality of order passed by Settlement Commission - petitioner s case is that the Settlement Commission completely fell in error in dismissing the Settlement Applications of the Petitioners as being inadmissible in view of the fact that by virtue of the provisions of section 127C(1) read with its proviso, the Applications filed by the Petitioners were deemed to have been allowed to be proceeded with. Petitioner laid great stress on the proviso to section 127C(1) which stipulates where no notice has been issued or no order has been passed under section 127C(1) within a period of 14 days as stipulated therein, then the Application shall be deemed to have been allowed to be proceeded with. Held that - an order that is passed u/s 127C(5) is the final order after the Settlement Application is either allowed to be proceeded with or deemed to be allowed to be proceeded with. If that contingency happens, there is no question of passing any final order u/s 127C(5) rejecting the Application on the ground that it is inadmissible u/s 127B. This scheme is clear from an ex-facie reading of the provisions of section 127C - it is not in dispute that the Settlement Applications of the Petitioners were filed on 27th May, 2014. The first notice as contemplated u/s 127C(1), was issued by the Settlement Commission on 10th June, 2014 to remove the defects and to show cause why the Applications of the Petitioners should be allowed to proceed with. After this notice was issued, there was no order passed on the admissibility of the Settlement Applications filed by the Petitioners up and until the passing of the impugned order on 27th March, 2015. This alone was in violation of the statutory provisions as set out in section 127C(1) which contemplates that an order either allowing the Application to be proceeded with or rejecting the same ought to be passed within a period of 14 days from the date of issuance of the notice. If this is not done, then the Settlement Applications are deemed to be allowed to be proceeded with. In any event, if the Settlement Commission was to reject the Settlement Applications of the Petitioners on the ground that they are not admissible, there was absolutely no need to pass a detailed order on merits of the case and that too taking into account the Corrigendum/Addendum that was issued by the Revenue to the show cause notice even after the Settlement Applications were filed by the Petitioners. Therefore, looking to the totality of the facts of the present case, there is no hesitation in holding that the impugned order passed by the Settlement Commission dated 27th March, 2015 cannot be sustained. Impugned order of Settlement Commission is quashed and is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Validity and legality of the Settlement Commission's order dated 27th March 2015.
2. Admissibility of the Settlement Applications under Section 127B of the Customs Act, 1962.
3. Compliance with procedural requirements under Section 127C of the Customs Act, 1962.
4. Payment of interest as a condition for the Settlement Applications.

Detailed Analysis:

1. Validity and Legality of the Settlement Commission's Order:
The Petitioners challenged the final order dated 27th March 2015 passed by the Settlement Commission, which rejected their Settlement Applications as inadmissible. The primary argument was that the Settlement Commission erred in law by dismissing the applications without proper consideration of the procedural requirements and the merits of the case.

2. Admissibility of the Settlement Applications under Section 127B:
The Petitioners contended that their applications complied with Section 127B of the Customs Act, 1962, which allows importers/exporters to approach the Settlement Commission before adjudication of the show-cause notice. They argued that their applications should be deemed admissible as they met the conditions stipulated under Section 127B, including the acceptance of additional duty liability and payment of the same.

3. Compliance with Procedural Requirements under Section 127C:
The Petitioners emphasized that Section 127C(1) mandates the Settlement Commission to issue a notice within seven days of receiving an application and to decide on its admissibility within 14 days. They argued that since no such order was passed within the stipulated time, their applications should be deemed to have been allowed to proceed. The Settlement Commission's failure to follow this procedure was a significant point of contention.

The Court noted that the Settlement Commission had indeed issued a notice on 10th June 2014 but did not pass any order on the admissibility of the applications until the final order on 27th March 2015. This delay violated the statutory provisions of Section 127C(1), leading to the conclusion that the applications were deemed to have been allowed to proceed.

4. Payment of Interest as a Condition:
The Petitioners argued that the Settlement Commission misdirected itself by holding the applications inadmissible due to non-payment of interest. They contended that they had agreed to pay the interest within 30 days of the Settlement Commission's order, as recorded during the hearing on 4th March 2015. The Court acknowledged that the Settlement Commission could impose a condition for the payment of interest under Section 28AA of the Act before considering the applications de novo.

Conclusion:
The Court quashed and set aside the impugned order dated 27th March 2015, restoring the Settlement Applications to the file of the Settlement Commission for a de novo consideration. The Settlement Commission was directed to give a reasonable opportunity of hearing to all concerned, including the Petitioners. The Court clarified that the Settlement Commission could impose a condition for the payment of interest, which the Petitioners must comply with before their applications are reconsidered. If the Petitioners fail to pay the interest as determined, the impugned order would stand revived, and the applications would be rejected. The parties were directed to bear their own costs.