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2005 (7) TMI 113 - HC - CustomsJurisdiction Of Settlement Commission - application u/s 127B of the Customs Act, 1962 - short levy on account of misclassification or otherwise - export products - benefits under the DEEC Scheme - evade huge payment of duty by practicing a systematic fraud over a number of years by manipulation of records - Confiscation - full and true disclosure of duty liability - HELD THAT - The Settlement Commission has power even to attach the properties of the Applicant to secure the interest of the Revenue during the pendency of the proceedings before him, which power even the adjudicating authority does not have. As rightly pointed out by the learned Counsel appearing for the private parties, the Settlement Commission has power to grant immunity with regard to all kinds of prosecution under the Customs Act and any other law including the Indian Penal Code, which obviously would necessitate the Applicant being involved in a serious fraud wherein he is likely to be prosecuted under the Indian Penal Code or any other penal law. If that be so, one cannot say that the Settlement Commission has jurisdiction only to deal with the bonafide case of misclassification or at the most wilful case of misclassification. One cannot minimise the scope of jurisdiction of the Settlement Commission without any express provisions found in the said Chapter, whereas on the contrary, the provisions as indicated herein above clearly show that the Settlement Commission has a very wide jurisdiction to entertain all kinds of settlement claim applications with the liberty to reject the same even at the preliminary stage, depending upon the nature and circumstances of the case and the complexity of the case. Therefore it is not the case that the Settlement Commission is forced to entertain and accept all settlement applications. After the scrutiny, it may or may not entertain the same. It is one thing to say that the Settlement Commission does not have the jurisdiction at all to look at the claim which is not pertaining to the short levy due to misclassification or otherwise, whereas it is another thing to say that the Settlement Commission has jurisdiction to entertain all kinds of applications and it has jurisdiction to reject the same even at the preliminary stage. The entire approach with regard to such legislation is to unearth frauds and dishonesty so as to collect the revenue for the Government. By this process in fact the duty which was illegally not paid by various parties would ultimately come to the Revenue and if one were to restrict the interpretation to mean only the bonafide cases, then there would be no scope of unearthing the revenue for the Government. As we are very clear in our mind that the earlier part of Section 127-B lays down the jurisdiction and the later part only deals with the rules whereby certain details are to be provided. Hence, the entire argument with regard to the short levy due to misclassification or otherwise is purely a procedural one, in the sense, as long as rules are not even provided, there is no need to decide the same. In any event, having regard to the entire structure Chapter XIV-A we are very clear in our mind that the Settlement Commission has jurisdiction to entertain all kinds of applications for settlement, provided they satisfy the mandatory requirements of filing the Bill of Entry/Snipping Bill and issuance of a show cause notice in relation to such a Bill of Entry/Shipping Bill and by making a full and true disclosure of a duty liability which was not disclosed earlier before the proper officer and the manner in which such liability has been incurred and the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification or otherwise of goods. These are the essential requirements for making an application under Section 127-B of the Customs Act, which are also clear from the wording of the very section as well as from the particulars to be given in the Form prescribed by the Department, as we have indicated herein above. In the Income Tax Law there is a voluntary aspect in the disclosure. On the countrary, in the Customs Act, the provision makes it mandatory that the Applicant can file an application only after show cause notice is issued, which show cause notice as we have pointed out hereinabove, would pertain even to confiscation. i.e. to say the person who has committed fraud or smuggling or deliberate misdeclaration would only receive such show cause notice and such a show cause notice is essential ingredient before making an application. If that be so, there can never be any case of voluntary aspect in the case of application for settlement before the Settlement Commission under the Customs Act. The learned Single judge of the Madras High Court did not examine or consider the above aspects. Thus, we respectfully do not agree with the judgment of the learned Single Judge of the Madras High Court. Thus, in all the petitions filed by the Government viz. Writ Petitions 115/2004, 1636/2004, 9995/2004, 507/2004 2379/2004 the Rule stand discharged. As far as petitions filed by the private parties are concerned, viz. Writ Petition Nos. 4381/2005, 671/2005, 2430/2004, 1051/2005 2/2004 the Rule is accordingly made absolute in terms of the above.
Issues Involved:
1. Jurisdiction of the Settlement Commission under Chapter XIV-A of the Customs Act, 1962. 2. Interpretation of Section 127B of the Customs Act. 3. Applicability of the principle of ejusdem generis to the words "or otherwise" in Section 127B. 4. Whether cases involving fraud, misdeclaration, or smuggling can be entertained by the Settlement Commission. 5. Comparison between provisions of the Customs Act and the Income Tax Act regarding the Settlement Commission. Detailed Analysis: 1. Jurisdiction of the Settlement Commission under Chapter XIV-A of the Customs Act, 1962: The central issue in all ten petitions revolves around the jurisdiction of the Settlement Commission established under Chapter XIV-A of the Customs Act, 1962. The Union of India, representing the Customs Department, contends that the Settlement Commission has limited jurisdiction, restricted to cases of short levy due to misclassification or similar issues. Conversely, private parties argue that the Settlement Commission's jurisdiction is broader and should not be narrowly construed. 2. Interpretation of Section 127B of the Customs Act: Section 127B allows any importer, exporter, or other person to make an application to the Settlement Commission at any stage of a case, provided certain conditions are met, including the filing of a Bill of Entry or Shipping Bill and the issuance of a show cause notice. The Customs Department argues that the term "case" under Section 127A(b) refers specifically to short levy due to misclassification or similar issues. However, the private parties argue that the words "or otherwise" in Section 127B should be interpreted broadly, allowing the Settlement Commission to entertain a wider range of cases, including those involving fraud or misdeclaration. 3. Applicability of the Principle of Ejusdem Generis: The Customs Department contends that the words "or otherwise" in Section 127B should be interpreted using the principle of ejusdem generis, meaning they should be limited to cases similar to misclassification. They cite several judgments to support this interpretation. However, private parties argue that the principle of ejusdem generis does not apply here because the term "misclassification" does not constitute a genus. They argue for a broader interpretation of "or otherwise," citing judgments that support a wider scope of the Settlement Commission's jurisdiction. 4. Whether Cases Involving Fraud, Misdeclaration, or Smuggling Can Be Entertained by the Settlement Commission: The Customs Department argues that cases involving fraud, misdeclaration, or smuggling should not be entertained by the Settlement Commission, as these do not constitute short levy due to misclassification. They cite various Supreme Court judgments to support their position. However, private parties argue that the Settlement Commission should have jurisdiction over such cases, as the very purpose of the Settlement Commission is to unearth frauds and recover dues for the government. They emphasize that the Settlement Commission has wide powers, including the ability to reject applications at a preliminary stage if deemed necessary. 5. Comparison Between Provisions of the Customs Act and the Income Tax Act Regarding the Settlement Commission: The Customs Department relies on judgments related to the Settlement Commission under the Income Tax Act to argue for a limited jurisdiction. However, private parties point out that there are significant differences between the Customs Act and the Income Tax Act. For instance, under the Customs Act, an application to the Settlement Commission can only be made after a show cause notice is issued, whereas the Income Tax Act allows for voluntary disclosure before any investigation begins. This fundamental difference means that the scope and purpose of the Settlement Commission under the Customs Act are broader. Conclusion: The High Court concluded that the Settlement Commission under Chapter XIV-A of the Customs Act has broad jurisdiction to entertain applications for settlement, provided the mandatory conditions of filing a Bill of Entry or Shipping Bill and the issuance of a show cause notice are met. The words "or otherwise" in Section 127B should be interpreted broadly, not narrowly as suggested by the principle of ejusdem generis. The Settlement Commission has the discretion to reject applications at a preliminary stage based on the nature and complexity of the case. The Court disagreed with the judgment of the Madras High Court, which had restricted the jurisdiction of the Settlement Commission to cases of bona fide misclassification. The petitions filed by the government were dismissed, and those filed by the private parties were allowed.
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