2022 (7) TMI 1075 - HC - Customs

Validity of order of Settlement Commission - Petition by revenue - Gross misdeclaration in the description quantity and value of imported goods - Secondary Defective High Speed Drills/Rods - Respondent approached the Settlement Commission under Section 127 B of the Customs Act 1962 on receiving the SCN - Whether disclosure made by Respondent No.1 was neither full nor true? - HELD THAT - It is settled law that this court is not the court of appeal while exercising its jurisdiction under Article 226 of the Constitution of India against the order of Settlement Commission. The Hon ble Apex Court in SANTOGEN TEXTILE MILLS LTD. VERSUS UNION OF INDIA 2002 (5) TMI 883 - SC ORDER upheld the view expressed by Division Bench of this Court in SANTOGEN TEXTILE MILLS LTD. VERSUS UNION OF INDIA 2002 (3) TMI 59 - HIGH COURT OF JUDICATURE AT BOMBAY that this court would only be permitted to examine legality of the procedure and not validity of the order of Settlement Commission. Even in the case that was before this court (Bombay judgment) in Santogen Textile Mills the court observed that the Hon ble Apex Court in JYOTENDRASINHJI VERSUS SI TRIPATHI AND OTHERS 1993 (4) TMI 1 - SUPREME COURT while considering the scope of writ jurisdiction of the High Court cautioned the writ court and permitted it to examine the legality of the procedure followed not the validity of the order it not being a court of appeal. The court also noted that the Hon ble Apex Court had laid down that the writ court should not be concerned with the decision but with the decision making process. It is true that the finality clause contained in Section 245-I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this court under Article 32 or under Article 136 as the case may be. But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this court is any different than what it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this court under Article 136. A party does not and cannot gain any advantage by approaching this Court directly under Article 136 instead of approaching the High Court under Article 226. This is not a limitation inherent in Article 136; it is a limitation which this court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review - Be that as it may the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest penalties or prosecution where it thinks appropriate. Indeed it would be difficult to predicate the reasons and considerations which induce the commission to make a particular order unless of course the commission itself chooses to give reasons for its order. Even if it gives reasons in a given case the scope of enquiry in the appeal remains the same as indicated above viz. whether it is contrary to any of the provisions of the Act. The appellate power under Article 136 was equated with the power of judicial review where the appeal is directed against the orders of the Settlement Commission - the only ground upon which this Court can interfere in these appeals is that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant. Petition dismissed.

Summary

Issues Involved:
1. Compliance with Section 127 B of the Customs Act, 1962.
2. Full and true disclosure by the respondent.
3. Legality of the Settlement Commission's procedure and order.

Issue-wise Detailed Analysis:

1. Compliance with Section 127 B of the Customs Act, 1962:
The petitioner argued that Section 127 B(1) of the Customs Act mandates that any importer may make an application to the Settlement Commission before adjudication to have the case settled. This application must contain a full and true disclosure of the duty liability, the manner in which such liability was incurred, the additional amount of customs duty accepted to be payable, and other specified particulars. The petitioner contended that the respondent's disclosure was neither full nor true, thereby failing to comply with the mandatory conditions of Section 127 B.

2. Full and True Disclosure by the Respondent:
The petitioner highlighted that the respondent initially accepted a duty liability of Rs.16,03,948/- against a demand of Rs.36,32,032/- as per the show cause notice. This liability was revised multiple times, indicating that the respondent failed to disclose the correct transaction value at which the goods were procured. The petitioner also pointed out that the respondent continued with dishonesty even before the Settlement Commission by making references to other cases, which should not have been made, thus failing to comply with the condition precedent for making an application to the Settlement Commission.

3. Legality of the Settlement Commission's Procedure and Order:
The court noted that it is not a court of appeal while exercising its jurisdiction under Article 226 of the Constitution of India against the order of the Settlement Commission. The court's role is to examine the legality of the procedure followed, not the validity of the order. The court referred to the precedent set in Santogen Textile Mills vs. Union of India, where it was established that the writ court should focus on the decision-making process rather than the decision itself.

The court observed that the Settlement Commission had asked the respondent to make a true disclosure regarding the price actually paid for the goods and reminded the respondent of its obligation to pay the admitted duty liability with interest before the case was taken up for further disposal. However, the final order dated 12th September 2011, which is impugned in this petition, did not reference any failure on the part of the respondent to make full and true disclosure. The minority view in the final order differed only on the valuation of the imported goods and the resultant customs duty payable, not on the respondent's conduct.

The court concluded that the Settlement Commission adopted a proper decision-making process in accordance with the law. The court found no fault with the legality of the procedure or the validity of the order of the Settlement Commission.

Conclusion:
The petition was dismissed with no order as to costs. The bank guarantee submitted by the petitioner pursuant to the order dated 31st July 2012 was to be canceled and returned within six weeks of receiving an application. If the bank guarantee had been encashed, the respondent was directed to refund the encashment amount within six weeks of receiving an application, together with applicable interest, in accordance with the law.