2006 (1) TMI 134 - HC - Customs

Settlement Commission - Jurisdiction to to entertain the application u/s 127B - misdeclaration Or misclassification - Scope of the provisions unduly enlarged - HELD THAT - The provision cannot be interpreted to enlarge the scope unduly particularly to provide protection under this Chapter even to cases of smugglers and habitual offenders. If it is to be so interpreted, even as submitted by the learned Standing Counsel appearing for the petitioner, the provisions of Chapter X1VA can be utilized by such unscrupulous elements than any bona fide persons claiming benefit under such provisions. In this regard, I respectfully agree with the view taken by the Madras High Court that Chapter XIVA cannot be extended to cases of misdeclaration also. If it was a misdeclaration and not a case of misclassification, the very provisions of Section 127B are not attracted and the Settlement Commission could not have entertained the application. One another affirming provision is the third proviso, which seeks to expressly exclude from the purview of the Settlement Commission applications in respect of goods to which Section 123 applies, in the sense, the goods which are notified for the purpose of raising initial presumption on the possessor that the goods are smuggled goods unless the person in possession of the same is in a position to establish the proper import of the goods into the country. While the Settlement Commission itself has described the respondent as a smuggler and thought it fit to levy penalty of Rs. 25,000/-. that act itself should have cautioned the Settlement Commission not to entertain the application in the light of the third proviso to Section 127B of the Act and the Settlement Commission should have rejected the application relegating the respondent to workout his remedy in accordance with the normal course provided under the Act. As I am of the view that the Settlement Commission lacks jurisdiction to entertain the application of the nature filed by the respondent before it, particularly application under Section 127B of the Act, the impugned order cannot be sustained. It is not necessary to go into the merits of the impugned order. Accordingly this writ petition is allowed and the order passed by the Customs and Central Excise Settlement Commission, Chennai is quashed by issuing a writ of certiorari Rule issued and made absolute.

Summary

Issues Involved:
1. Jurisdiction of the Settlement Commission.
2. Misdeclaration vs. Misclassification of goods.
3. Applicability of Section 123 of the Customs Act.
4. Immunity from prosecution and penalty.

Detailed Analysis:

Jurisdiction of the Settlement Commission:
The primary issue in the writ petition is the jurisdiction of the Settlement Commission to entertain the application filed by the respondent. The Commissioner of Customs, Bangalore, challenged the legality of the Settlement Commission's order, arguing that the commission lacked jurisdiction to settle the case. The petitioner contended that the respondent had indulged in smuggling activities and thus the Settlement Commission should not have entertained the application under Section 127B of the Customs Act. The court found that the Settlement Commission lacked jurisdiction to entertain the application, particularly under Section 127B, because the case involved smuggling and misdeclaration, not merely misclassification.

Misdeclaration vs. Misclassification of Goods:
The petitioner argued that the jurisdiction of the Settlement Commission is limited to cases involving short levy due to misclassification and not due to misdeclaration. The court distinguished between misclassification and misdeclaration, stating that misclassification involves incorrect classification of goods for duty purposes, whereas misdeclaration involves deliberate suppression or distortion of facts to evade duty. The court agreed with the petitioner that the Settlement Commission's jurisdiction does not extend to cases involving deliberate misdeclaration, as in the present case.

Applicability of Section 123 of the Customs Act:
The petitioner contended that the goods in question were notified under Section 123 of the Customs Act, which raises a presumption that the goods are smuggled unless proven otherwise by the possessor. The third proviso to Section 127B explicitly excludes applications related to goods to which Section 123 applies. The court noted that the Settlement Commission itself described the respondent as a smuggler and imposed a penalty, which should have cautioned the commission against entertaining the application. The court concluded that the Settlement Commission should have rejected the application based on the third proviso to Section 127B.

Immunity from Prosecution and Penalty:
The Settlement Commission granted immunity from prosecution to the respondent but imposed a penalty of Rs. 25,000 for smuggling activities. The petitioner argued that the commission should not have granted immunity given the nature of the respondent's actions. The court observed that Chapter XIVA of the Customs Act, which deals with the Settlement Commission, provides immunity from penalty and prosecution but not from duty liability. The court emphasized that the provisions of Chapter XIVA should be construed strictly and not be extended to protect habitual offenders and smugglers. The court agreed with the petitioner that the Settlement Commission's order was flawed and lacked jurisdiction.

Conclusion:
The court allowed the writ petition, quashing the Settlement Commission's order dated 26-9-2001. The court ruled that the Settlement Commission lacked jurisdiction to entertain the application under Section 127B of the Customs Act, particularly in cases involving smuggling and misdeclaration. The court directed the authorities to adjudicate the show cause notice issued to the respondent and allowed the respondent to appear before the adjudicating authority for further proceedings.