2016 (11) TMI 853 - HC - Customs

100% EOU - duty demand on capital goods - validity of order passed by settlement commission - permitted depreciation upto 90% on straight line method - Held that - this Court is of the view that the Settlement Commission has given cogent reasons as to why the case has to be settled on the terms contained in the impugned order. This Court, exercising jurisdiction under Article 226 of The Constitution of India, will not examine the correctness of the impugned order as if acting as an Appellate Authority over the order of the Settlement Commission - there is no allegation made by the petitioner as to the violation of the principles of natural justice, as the petitioner had been afforded full and effective opportunity. As the reasons given by the Settlement Commission are cogent and proper and the petitioner cannot be permitted to accept a portion of the order i.e. with regard to settlement in respect of the claim for duty on capital goods, immunity from payment of interest, restricting payment of penalty to the extent of ₹ 50,000/- alone and immunity from prosecution under the Act and state that they are entitled to challenge only the portion of the order with regard to the duty demanded on raw material. This piecemeal challenge to the order of the Settlement Commission on the grounds raised by the petitioner is not tenable. With regard to the power of the Settlement Commission to be exercised under Section 127F(1) of the Act, the Settlement Commission has gone through the case and exercised its discretion. That apart, the conduct of the petitioner with regard to the raw materials, which were kept in the bonded warehouse, is to be noted and the petitioner had also admitted the shortage. Therefore, the argument of the learned counsel for the petitioner that the Settlement Commission should have exercised their power as an Assessing Officer does not merit acceptance - petition dismissed.

Summary

Issues:
Challenge to order of the Settlement Commission regarding duty demanded on raw material.

Analysis:
The petitioner, a 100% export-oriented unit, challenged an order by the Settlement Commission demanding duty under the Customs Act, 1962, based on a show cause notice. The petitioner admitted duty liability on capital goods but contested liability on raw materials, citing circulars allowing depreciation. Despite interim directions and subsequent modifications for payment, the Settlement Commission settled the case, determining customs duty payable and penalty imposed. The petitioner objected only to duty on raw material.

The petitioner argued that no additional duty liability on raw material was accepted initially or in revised submissions, claiming entitlement to duty abatement under Section 22 of the Act due to damaged goods. The petitioner contended that the Settlement Commission failed to exercise its power under Section 127F(1) to grant abatement, resulting in no admission of additional liability on raw material.

The Settlement Commission considered submissions from both sides, noting the petitioner's failure to inform the Department about production stoppage and discrepancies in stock verification. The Commission found no grounds for remission of duty on raw material, as goods were not lost or destroyed before clearance. The High Court upheld the Settlement Commission's decision, stating it would not act as an appellate authority and rejecting the petitioner's piecemeal challenge to the order.

The Court emphasized that findings of fact by the Commission were not open for review and cited precedents where dissecting the Settlement Commission's order was not permitted. The Commission's exercise of discretion under Section 127F(1) was deemed appropriate, considering the petitioner's conduct regarding raw materials in the bonded warehouse. The Court dismissed the writ petition, finding no grounds for interference and rejecting the petitioner's arguments against the Settlement Commission's decision.