2016 (5) TMI 299 - HC - Customs

Settlement Commission - Jurisdiction of settlement Commission to entertain the application - 3rd proviso to sub-section (1) of Section 127B - Import of 50 kg of gold bars - Seizure of 25 kg, sent outside SEZ area without documentation and proper authority - Petitioners pending proceedings applied to Settlement Commission but it passed the order holding that it had no jurisdiction to entertain the petitioners application - Petitioner contended that only if the conditions envisaged in sub-section (1) of Section 123 of the Act are fulfilled, in terms of 3rd proviso to Section 127B of the Act, the jurisdiction of the Settlement Commission would be ousted and not otherwise. Held that - 3rd proviso to sub-section (1) of Section 127B incorporates by reference the applicability clause of Section 123. Incorporation by reference is a well known legislative technique to avoid repetition of the same set of words in different sections of the same statute or some times even in different statutes. In essence, therefore, 3rd proviso to sub-section (1) of Section 127B incorporates the applicability clause of Section 123 for the ouster of the jurisdiction of the Settlement commission. It has nothing to do with the eventuality of shifting of burden of proof. It is perhaps because of this reason that the Settlement Commission in the Special Bench judgment in case of Idris Y.Porbunderwala (supra) used the expression invocability of the provisions of Section 123 . There is nothing in the 3rd proviso to subsection (1) to Section 127B which would indicate that it envisaged satisfaction of the conditions for invoking sub-section (1) of Section 123 before the jurisdiction of the Settlement Commission can be ousted. It only refers to the goods to which Section 123 applies. Applicability of Section 123 to the goods and the invocability of the principle of shifting of burden of proof are two independent and distinct issues. Applicability of Ratio of decision of different High Courts - Being a central statute bearing tax implications, we would, even otherwise, be slow in taking different view from two reasoned judgments of other High Courts. Even if, therefore, another view was possible, for the sake of consistency, we would have respectfully followed the view of other High Courts. In the decision of Supreme Court in the case of J.K.Bardolia Mills Vs. M.L.Khunger, Deputy Collector 1994 (7) TMI 90 - SUPREME COURT OF INDIA , relied upon by the petitioner, question of 3rd proviso to sub-section (1) of Section 127B was nowhere under consideration. Even the observations of the Supreme Court, are significant, when it is stated that conditions to be satisfied for application of the provisions of Section 123 of the Act are (a) the goods must be one to which Section 123 applies. Thus, clearly even in these observations, distinction between applicability of the provisions of Section 123 and the goods to which Section 123 applies have been recognized. Therefore, the Settlement Commission has correctly applied 3rd proviso to sub-section (1) of Section 127B of the Act. - Decided against the petitioner

Summary

Issues Involved:
1. Jurisdiction of the Settlement Commission under Section 127B of the Customs Act, 1962.
2. Applicability of Section 123 of the Customs Act, 1962.
3. Interpretation of the third proviso to sub-section (1) of Section 127B.
4. Confiscation and penalties under the Customs Act.
5. Legal precedents and their relevance to the current case.

Detailed Analysis:

1. Jurisdiction of the Settlement Commission under Section 127B of the Customs Act, 1962:
The primary issue revolves around whether the Settlement Commission has jurisdiction to entertain applications for settlement in cases involving goods to which Section 123 of the Customs Act applies. The petitioners argued that the Settlement Commission should have jurisdiction unless the conditions in sub-section (1) of Section 123 are fulfilled. However, the court noted that the third proviso to sub-section (1) of Section 127B clearly states that no application shall be made in relation to goods to which Section 123 applies, thereby ousting the jurisdiction of the Settlement Commission in such cases.

2. Applicability of Section 123 of the Customs Act, 1962:
Section 123 pertains to the burden of proof in cases where certain goods are seized under the belief that they are smuggled. Sub-section (2) specifies the class of goods, including gold, to which this section applies. The court emphasized that the third proviso to sub-section (1) of Section 127B incorporates the applicability clause of Section 123, meaning that if the goods fall under the class specified in sub-section (2) of Section 123, the Settlement Commission cannot entertain an application for settlement.

3. Interpretation of the third proviso to sub-section (1) of Section 127B:
The court clarified that the third proviso to sub-section (1) of Section 127B refers to the goods to which Section 123 applies, not the conditions for invoking Section 123. This means that the mere classification of goods under Section 123 is sufficient to oust the jurisdiction of the Settlement Commission, without needing to satisfy the conditions for shifting the burden of proof under sub-section (1) of Section 123.

4. Confiscation and penalties under the Customs Act:
The petitions involved cases where goods (gold and polyester fabrics) were seized and show cause notices were issued for confiscation and penalties under the Customs Act. The court noted that in both cases, the goods in question fell under the class specified in sub-section (2) of Section 123, thereby triggering the third proviso to sub-section (1) of Section 127B and ousting the jurisdiction of the Settlement Commission.

5. Legal precedents and their relevance to the current case:
The court referred to the decisions of the Delhi High Court in Ram Niwas Verma and the Karnataka High Court in C.S. India, which had taken a similar view on the interpretation of the third proviso to sub-section (1) of Section 127B. The court agreed with these precedents, emphasizing the need for consistency in the interpretation of central statutes. The court also distinguished the Supreme Court's decision in J.K. Bardolia Mills, noting that it did not address the third proviso to sub-section (1) of Section 127B.

Conclusion:
The court concluded that the Settlement Commission correctly applied the third proviso to sub-section (1) of Section 127B of the Customs Act in both cases, thereby dismissing the petitions. The judgment reinforces the interpretation that the jurisdiction of the Settlement Commission is ousted in cases involving goods to which Section 123 applies, regardless of whether the conditions for invoking Section 123 are met.