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2022 (3) TMI 204 - HC - CustomsMaintainability of application for settlement of the case - no show cause notice was issued by the respondents against the petitioners - application is premature before issuance of show cause notice or not - affidavit-in-reply filed by the respondents in the earlier writ petition filed by the petitioners opposing the reliefs and pointing out the stage of investigation against the petitioners pursuant to the summons issued by the respondents - show cause notice contemplated in proviso (a) to Section 127B(1), or not - HELD THAT - A perusal of the said application for settlement of the case under Section 127B of the Customs Act, 1962 and under Rule 3 of the Customs (Settlement of Cases) Rules, 2007 indicates that in the said Form No.SC(C)-1 at Serial No.6 where the petitioners were required to submit the details of show cause notice issued to the petitioners, the petitioners referred to affidavit-in-reply-cum-notice from the respondent Commissioner which refers to investigations and seizure by DRI and their submissions placed on record and informing the case of alleged mis-declaration of material particulars intended for clearing mis-declared goods for home consumption in contravention of Rule 11 of Foreign Trade (Regulation) Rules, 1993, Section 46 of the Customs Act, 1962 - In paragraph 6 (c) of the said Form, the petitioners were required to disclose the duty demanded in the show cause notice. The petitioners stated that it was not quantified. In paragraph 10 of the said Form, the petitioners on their own mentioned the amount of duty which is payable according to the petitioners, without there being any quantification by the respondents. In the absence of a notice to show cause a mandatory jurisdictional requirement is not fulfilled. In absence of a notice to show cause, the Settlement Commission cannot assume jurisdiction. An assessee cannot by his own act of waiving the issuance of a notice to show cause confer jurisdiction upon the Settlement Commission - Admittedly in this case, no show cause notice has been issued by the respondents under any of the provisions of the Customs Act, 1962 for adjudication. There is no provision under the Customs Act providing for a deemed written show cause notice which could be considered as show cause notice which is condition precedent for filing an application for settlement under Section 127B(1) of the Customs Act, 1962. Whether affidavit-in-reply filed by the respondents in the earlier writ petition filed by the petitioners opposing the reliefs and pointing out the stage of investigation against the petitioners pursuant to the summons issued by the respondents can be construed as show cause notice contemplated in proviso (a) to Section 127B(1)? - HELD THAT - The averments made in the affidavit-in-reply filed by the respondents for opposing the earlier writ petition filed by the petitioners challenging the Seizure Memorandum or applying for provisional release of seized goods followed by two Bills of Entry cannot amount to a show cause notice contemplated under Section 127B(1) of the Customs Act for invoking the said provision. Be that as it may, even in the said affidavit-in-reply filed by the respondents in Writ Petition No.8751 of 2021, no amount of duty, interest or any other recovery was mentioned by the respondents to be recovered from the petitioners. The Form SC(C)-1 filed by the petitioners itself was not filed in accordance with the said Form prescribed under Rule 3 of Customs (Settlement of Cases) Rules 2007 which was mandatory. Madras High Court in case of VC MOHAN VERSUS COMMISSIONER OF CUSTOMS (AIR) 2007 (10) TMI 83 - HIGH COURT MADRAS has compared the provision of Section 245-D of Income Tax Act, 1961 with Section 127B(1) of the Customs Act, 1962 and has held that in the Income-tax law, application for settlement must be made before the investigation has started or before the statutory authority has collected any material or any notice is issued to the applicant. There must be a voluntary aspect in the disclosure of fact in concealment. In the present case, since the petitioners had not complied with the mandatory requirement, the application for settlement under Section 127B of the Customs Act filed prior to issuance of show cause notice by the respondents, the said application filed by the petitioners was not an application which could be adjudicated upon by the Settlement Commission under Section 127B of the Customs Act, 1962 - the said application filed by the petitioners without complying with the mandatory requirements under Section 127B(1) read with Rules being a defective application, was not maintainable at that stage and was premature. The Settlement Commission thus even otherwise could not have entertained such application based on self made laws of the petitioners by treating the affidavit-in-reply filed by the respondents in earlier writ petition as deemed written show cause notice. The Settlement Commission once again by letter dated 10th February 2022 signed by the Superintendent addressed to the petitioners pointed out the defects that neither there was any show cause notice in the instant case nor the same was pending before any adjudicating authority and thus it did not satisfy the definition of case in terms of section 127A(b) of the Customs Act, 1962. The respondents once again clarified that in view of those defects/deficiencies, it did not satisfy the condition for an application under section 127B(1) of the Customs Act, 1962 - the petitioners however did not cure the said defects as pointed out by the respondents again in the said letter dated 10th February 2022 but raised similar issues which were raised earlier in respond to the communication dated 2nd February 2022 vide their advocate s letter dated 14th February 2022. In these circumstances, the Settlement Commission issued a letter/order dated 6th February 2022 signed by the Commissioner and after referring the earlier correspondence exchanged between the parties informed the petitioners that application filed by the petitioners for settlement was defective or premature as no show cause notice was issued in the instant case as envisaged under proviso (a) to Section 127B(1) of the Customs Act or no show cause notice was pending before the adjudicating authority. The said application did not satisfy the definition of case in terms of section 127A(b) of the Customs Act, 1962. The said application thus could not be treated as an application under Section 127B(1) of the Customs Act, 1962 and was rightly returned in original to the petitioners. The petitioners were informed that the letter/order was issued with the approval of the Commissioner, Customs Central Excise and Service Tax Settlement Commission, Additional Bench, Mumbai. The petitioners on their own could not have assessed the duty payable on the goods which are the subject matter of two Bills of Entry and could not have paid the duty on its own to contend that the said application was maintainable. If the arguments of the learned senior counsel for the petitioners are accepted, any assessee would file an application for settlement by considering even the correspondence exchanged between the parties or affidavit-in-reply filed by the Revenue in another proceedings as show cause notice and based on such show cause notice, would compute the duty and other levy as may be leviable according to the self-assessment of the petitioners so as to claim immunity from prosecution and penalty. The writ petition is totally devoid of merit. Writ petition is dismissed.
Issues Involved:
1. Maintainability of the application for settlement under Section 127B of the Customs Act, 1962 without issuance of a show cause notice. 2. Whether an affidavit-in-reply filed by the respondents can be considered as a deemed show cause notice. 3. Compliance with the mandatory requirements under Section 127B(1) and related rules for filing an application for settlement. 4. Jurisdiction and powers of the Settlement Commission in returning the application. Issue-wise Detailed Analysis: 1. Maintainability of the Application for Settlement: The court examined whether the application for settlement filed by the petitioners under Section 127B of the Customs Act, 1962 is maintainable without the issuance of a show cause notice. It was concluded that the application was premature and not maintainable because no show cause notice had been issued by the respondents. The court emphasized that Section 127B(1) requires a show cause notice to be issued for an application to be valid, and in this case, no such notice was issued, making the application defective and premature. 2. Deemed Show Cause Notice: The petitioners argued that the affidavit-in-reply filed by the respondents in an earlier writ petition should be considered a deemed show cause notice. The court rejected this argument, stating that there is no provision under the Customs Act that allows an affidavit-in-reply to be treated as a show cause notice. The court held that the affidavit-in-reply cannot be construed as a show cause notice contemplated under Section 127B(1) of the Customs Act. 3. Compliance with Mandatory Requirements: The court analyzed whether the petitioners complied with the mandatory requirements under Section 127B(1) and related rules for filing an application for settlement. It was found that the petitioners did not meet the eligibility criteria as they had not received a show cause notice. The application form SC(C)-1 requires details of the show cause notice, which the petitioners could not provide. The court concluded that the application was not filed in accordance with the prescribed form and manner, making it non-compliant with the statutory requirements. 4. Jurisdiction and Powers of the Settlement Commission: The court reviewed the jurisdiction and powers of the Settlement Commission in returning the application. It was clarified that the Settlement Commission, upon identifying defects in the application, acted within its rights to return the application. The court noted that the communications and orders issued by the Superintendent or Commissioner were done with the approval of the Chairman of the Settlement Commission, ensuring procedural correctness. The court dismissed the petitioners' argument that the application was returned by unauthorized personnel. Conclusion: The court dismissed the writ petition, ruling that the application for settlement was premature and not maintainable due to the absence of a show cause notice. The court affirmed that the affidavit-in-reply cannot be considered a deemed show cause notice and upheld the Settlement Commission's decision to return the defective application. The court also clarified that the petitioners could file a proper application for settlement in the future after complying with all mandatory requirements.
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