2008 (7) TMI 407 - HC - Customs

Non-grant of immunity from interest to the petitioner while passing the order under Section 127C of the Customs Act, 1962 - Held that - A perusal of the impugned order shows that the Settlement Commission has not denied the immunity from interest on the ground of jurisdiction, but the same has been denied in the facts and circumstances of the case while observing that in case of contractual liability where the bond was executed to pay the duty with interest, the immunity cannot be granted. In our view, the Settlement Commission has denied the said benefit while exercising its discretion. In such a situation, where the petitioner itself sought the settlement of the dispute by making an application under Section 127C of the Act and submitted to the jurisdiction of the Settlement Commission, then in that circumstances, once the matter has been settled by the Settlement Commission, who also granted immunity from penalty and prosecution, but declined to grant immunity from payment of interest on the duty from its due date, such an order, in our view, should not be interfered in exercise of the writ jurisdiction under Articles 226/227 of the Constitution of India. Appeal dismissed.

Summary

Issues:
Petitioner seeks quashing of order for non-grant of interest immunity by Settlement Commission under Customs Act, 1962.

Analysis:
The petitioner filed a writ petition challenging the Settlement Commission's order under the Customs Act, seeking immunity from interest on duty liability. The Settlement Commission had settled the duty liability at Rs. 13,47,839/- and ordered the petitioner to pay interest at 15% from the date of import of the first consignment till payment, while granting immunity from penalty and prosecution. The petitioner contended that the Settlement Commission had jurisdiction to grant immunity from interest, citing judgments from Calcutta and Madras High Courts and referring to Section 127H of the Act.

The respondents argued that the Settlement Commission had the discretion to grant immunity from interest wholly or partly, and in this case, the petitioner voluntarily chose Settlement Commission adjudication. They emphasized that the petitioner had executed a bond agreeing to pay interest on duty and that the Settlement Commission's decision should not be interfered with. The respondents relied on a Bombay High Court judgment to support their stance.

The High Court, after considering arguments from both sides, found no merit in the petition. It noted that the petitioner invoked Settlement Commission jurisdiction by applying for dispute settlement regarding capital goods import under an Export Promotion Capital Goods license. The petitioner failed to meet export obligations and sought immunity from penalty and interest. The Settlement Commission settled the matter at Rs. 13,47,839/-, holding the petitioner liable to pay with 15% interest from import date. Immunity from penalty and prosecution was granted, subject to payment of all dues, including interest. The court observed that the Settlement Commission's denial of interest immunity was based on the contractual obligation arising from the bond executed by the petitioner. The court concluded that the Settlement Commission's decision was a discretionary one and should not be interfered with under writ jurisdiction.

The court highlighted that since the petitioner breached the bond by not fulfilling export obligations, customs authorities were entitled to enforce the bond and recover duty with interest. The court referenced a Madras High Court judgment to explain that while the Settlement Commission has the power to waive interest in contractual obligations, it is not obligated to grant interest immunity. Ultimately, the court dismissed the petition, upholding the Settlement Commission's decision to deny interest immunity based on the petitioner's breach of contractual obligations and the exercise of discretionary powers by the Settlement Commission.