2004 (1) TMI 81 - HC - Customs

Summary

Issues Involved:
1. Jurisdiction of the Settlement Commission under Section 127B of the Customs Act.
2. Definition and role of the "Proper Officer" under the Customs Act.
3. Validity of demand notices issued by the Joint Director General of Foreign Trade.
4. Liability for customs duty and interest.
5. Maintainability of applications before the Settlement Commission.

Detailed Analysis:

1. Jurisdiction of the Settlement Commission under Section 127B of the Customs Act:
The petitioners challenged the orders of the Settlement Commission rejecting their applications under Section 127B of the Customs Act. The Settlement Commission had rejected the applications on the ground that no show cause notice was issued by a Proper Officer as defined under the Customs Act. The High Court clarified that for an application to be competent under Section 127B, it is not necessary that the proceedings must be under the Customs Act alone. The definition of "case" includes any proceeding under any other Act for the levy, assessment, and collection of customs duty. Therefore, the Settlement Commission has the jurisdiction to entertain the applications if the proceedings pertain to customs duty, even if initiated under a different Act.

2. Definition and Role of the "Proper Officer" under the Customs Act:
The High Court examined the definition of "Proper Officer" under Section 2(34) of the Customs Act, which means an officer of customs assigned those functions by the Board or the Commissioner of Customs. The court held that the term "Proper Officer" must be read in conjunction with the definition of "case" under Section 127A(b), which includes proceedings under any other Act related to customs duty. The court concluded that officers under the Foreign Trade Act could also be considered proper officers for the purposes of levy, assessment, and collection of customs duty.

3. Validity of Demand Notices Issued by the Joint Director General of Foreign Trade:
The petitioners received demand notices from the Joint Director General of Foreign Trade advising them to pay customs duty on unutilized imported materials. The Settlement Commission had rejected these notices as not being issued by a proper officer under the Customs Act. The High Court disagreed, stating that the demand notices were valid as they pertained to customs duty and were issued in accordance with the Foreign Trade Act, which is concerned with the levy, assessment, and collection of customs duty.

4. Liability for Customs Duty and Interest:
The petitioners were liable to pay customs duty amounting to Rs. 65,82,370.39 and interest of Rs. 38,72,582/-. The department had already recovered Rs. 53,94,914/- by encashing the bank guarantees. The High Court directed the petitioners to pay the balance amount of Rs. 11,87,456.39 to the Customs Department within one month. This payment would enable the Settlement Commission to entertain their applications for settlement.

5. Maintainability of Applications Before the Settlement Commission:
The High Court held that the applications before the Settlement Commission were maintainable. The court directed that upon payment of the differential amount, the Settlement Commission should entertain the petitioners' applications on merits. The court clarified that it did not express any opinion on the merits regarding the petitioners' liability to pay interest, fine, or penalty, and the Settlement Commission should decide these issues in accordance with the law.

Conclusion:
The High Court quashed the orders of the Settlement Commission rejecting the applications and directed the Commission to entertain the applications on merits, provided the petitioners pay the differential customs duty amount. The court emphasized that the demand notices issued by the Joint Director General of Foreign Trade and the Deputy Commissioner of Customs pertained to customs duty and should be treated as notices issued by a proper officer under Section 127B of the Customs Act.