2019 (11) TMI 908 - HC - Customs

Imposition of penalty by the Settlement Commission - Rejection of rectification application - error apparent on the face of record or not - misdescription and undervaluation of imported goods - signage materials - evasion of duty - Section 127B of the Customs Act, 1962 - HELD THAT - Observing that, the petitioner had fully and truly disclosed it s liability, and had deposited the same and cooperated with the proceedings, the Settlement Commission held that the petitioner was entitled to have the case settled, under Section 127C(5) of the Customs Act. Accordingly, the case was settled. Imposition of penalty - only contention, seriously advanced by Mr. A.K. Seth, appearing for the petitioner, was that the decision, of the Settlement Commission, to award a penalty to the petitioner, was vitiated, as it had been taken on the basis of an erroneous finding, regarding the petitioner having consciously chosen to spread out the imports through the various Ports, with a view to test his chances of success in evasion of duty at different ports - HELD THAT - The decision, of the Settlement Commission, to award penalty, is not based on any particular finding, but is premised on the overall merits of the case. The Settlement Commission has chosen to pentfurcate the total quantum of penalty, depending on the quantum of imports effected at different ports and, in doing so, we do not see that the Settlement Commission committed any rectifiable error. It cannot be said that the decision, of the Settlement Commission, to impose penalty on the petitioner, suffers from any error apparent on the face of the record. Consequently, the impugned decision, of the Settlement Commission, to reject the petitioner s application for rectification, too, does not suffer from any such infirmity, as would call for interference by this Court, in exercise of its writ jurisdiction. Immunity from penalty can be granted, by the Settlement Commission, either in whole or in part. The Show Cause Notice, dated 24th March, 2017 supra, proposed imposition of penalty, on the petitioner, under Sections 112 and 114AA of the Customs Act. The quantum of penalty, as awarded by the Settlement Commission, is only 10% of the duty evaded by the petitioner, and is, therefore, much less than the penalty which the petitioner might have had to suffer, had the matter proceeded to adjudication. It cannot, therefore, be said that the penalty imposed, by the Settlement Commission, on the petitioner, was unreasonably high - there is no substance in the writ petition filed by the petitioner. It is clarified that applications under Section 127B(5) have to be heard in open Court by the Settlement Commission, and orders, disposing of such applications, are required to be reasoned. Petition dismissed.

Summary

Issues Involved:
1. Imposition of penalty on the petitioner.
2. Rejection of the Rectification Application by the Settlement Commission.
3. Allegation of spreading out imports through various ports to evade customs duty.
4. Quantum of penalty imposed.
5. Procedural aspects of the Settlement Commission's decision-making process.

Issue-wise Detailed Analysis:

1. Imposition of Penalty on the Petitioner:
The petitioner was subjected to a Show Cause Notice (SCN) for evasion of customs duty through misdescription and undervaluation of imported goods. The Settlement Commission imposed a penalty of ?8,54,000/- on the petitioner. The Commission found that the petitioner had willfully misdeclared the value of goods to evade customs duty. The penalty was justified based on the evidence, including the petitioner’s admission of undervaluation and the retrieval of incriminating documents from the petitioner’s premises.

2. Rejection of the Rectification Application by the Settlement Commission:
The petitioner filed a Rectification Application against the penalty imposed, arguing that the Settlement Commission's finding regarding spreading out imports through various ports was erroneous and not mentioned in the SCN. The Settlement Commission rejected this application, stating there was no error apparent in the original order. The Court upheld this decision, noting that the finding was within the Commission's jurisdiction and based on the record.

3. Allegation of Spreading Out Imports Through Various Ports to Evade Customs Duty:
The petitioner contested the finding that it had spread out imports through various ports to test evasion chances. The Court found this contention unconvincing, as the SCN detailed the ports and the number of Bills of Entry filed, indicating that imports were indeed spread out. The Court held that the Settlement Commission's finding was within its jurisdiction and supported by the record.

4. Quantum of Penalty Imposed:
The petitioner argued that the penalty was exorbitant. The Court disagreed, noting that the penalty was only 10% of the evaded duty, significantly less than what could have been imposed through adjudication. The Court found the penalty reasonable and in line with the Settlement Commission's discretion under Section 127H(1) of the Customs Act, which allows for partial immunity from penalty.

5. Procedural Aspects of the Settlement Commission's Decision-Making Process:
The Court noted that the Settlement Commission should not dispose of rectification applications by circulation without a hearing and must provide reasons for its decisions. However, despite procedural shortcomings in the communication of the decision, the Court refrained from interfering, as the decision to impose a penalty was found to be legally and factually sound.

Conclusion:
The writ petition was dismissed, with the Court finding no infirmity in the Settlement Commission's decision to impose a penalty on the petitioner. The Court emphasized the need for the Settlement Commission to hear rectification applications in open court and provide reasoned orders. Pending applications were disposed of accordingly.