2022 (7) TMI 666 - HC - Customs

Principles of Natural Justice - respondents can file application before the Settlement Commission under section 138 of the Customs Act, 1962 or not - interpretation of classification of the goods under the Customs Tariff Act, 1975, by Settlement Commission - vehicle - to be classified under CTH 87.02 or under 87.03? - HELD THAT - Reading of 87.03 clearly states that all vehicles classifiable under heading 87.02 are excluded. The heading Motor-homes under 87.03 refers to Motor-homes having less than 10 seater capacity such as station wagons. 87.02 clearly provides This heading covers all motor vehicles designed for the transport of ten persons or more (including the driver) . If in the show-cause-notice, petitioner admits that seating arrangement was for ten persons including the driver, it would place the subject vehicle clearly within the meaning of 87.02 and 87.02 is expressly excluded in 87.03. There are no reason to interfere with the impugned order - petition dismissed.

Issues Involved:
1. Absence of show-cause notice.
2. Jurisdiction of the Settlement Commission to interpret classification under the Customs Tariff Act, 1975.

Detailed Analysis:

1. Absence of Show-Cause Notice:

The petitioner, Union of India, challenged the order dated 28.07.2008 by the Settlement Commission on the ground that no show-cause notice had been issued, making the application to the Settlement Commission invalid under section 138 of the Customs Act, 1962. However, the court noted that this issue was not raised in the petition. It was established that an oral show-cause notice, permissible under section 124 of the Act, had been issued, and a written notice was subsequently issued on the directions of the Settlement Commission. Thus, the court deemed the issue of the show-cause notice as a non-issue.

2. Jurisdiction of the Settlement Commission to Interpret Classification:

The primary contention was whether the Settlement Commission had the authority to interpret the classification of goods under the Customs Tariff Act, 1975. The petitioner argued that per the fourth proviso of section 127B(1) of the Customs Act, the Settlement Commission could not interpret the classification of goods. However, the court observed that the Settlement Commission's conclusion was based on the petitioner's admission in the show-cause notice, rather than an independent interpretation by the Commission.

Facts and Findings:

Respondent No. 2 imported a motor-home and filed a Bill of Entry describing it as a 12-seater vehicle under CTH 87.02. Upon examination, it was found to be a motor-home equipped with various facilities, and discrepancies were noted in the documents submitted. Respondent No. 2 approached the Settlement Commission seeking settlement on issues including confiscation, immunity from fine and penalty, and classification of the vehicle. The Settlement Commission directed the issuance of a show-cause notice, which was complied with.

The Settlement Commission, in its final order, classified the vehicle under CTH 87.02 based on the finding that the seating arrangement was for 10 persons, including the driver, and imposed a fine for non-submission of the Type Approval Certificate. The petitioner contested this classification, arguing that the vehicle should be classified under CTH 87.03, which pertains to motor-homes designed for habitation.

Legal Provisions and Interpretation:

Section 127B(1) of the Customs Act allows an importer to apply for settlement before adjudication, provided a show-cause notice has been issued, and the additional duty exceeds three lakh rupees. The fourth proviso restricts the Settlement Commission from interpreting the classification of goods under the Customs Tariff Act, 1975.

The court noted that the Settlement Commission's decision was based on the petitioner's admission in the show-cause notice that the vehicle had a seating arrangement for 10 persons, which falls under CTH 87.02. The classification under CTH 87.02 covers motor vehicles designed for the transport of ten or more persons, while CTH 87.03 covers motor vehicles designed for the transport of persons, including motor-homes, but excludes vehicles under CTH 87.02.

Conclusion:

The court concluded that the Settlement Commission did not independently interpret the classification but relied on the petitioner's admission. Therefore, the classification under CTH 87.02 was upheld, and the petition was dismissed with no order as to costs. Additionally, the court directed the cancellation and return of the bank guarantee furnished by respondent No. 2 within two weeks of receiving a request from the petitioner.

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