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TMI Blog2006 (4) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry No. 652104, dated 12-7-2004 under EDI system. In this case, M/s. P. B. Far East, Hongkong, originally imported the machinery in Hongkong, purchased directly from M/s. Optical Disc Corporation, the manufacturer in the USA for a consideration of US$ 18,34,330 in March, 1998. The machinery imported was provided as collateral security by M/s. P.B. Far East, and its sister concern, namely, Zenix Electronics Ltd., Hongkong to Sin Hua Bank Ltd., Hongkong Branch, which was lateron taken over by the Bank of China (Hongkong) Ltd. As they defaulted in making payment, the Asst. Managing Division of Bank of China, sought to sell the machine, and gave an opportunity to the P.B. Far East Group to locate a buyer. M/s. Silver Kent Technology, from the Mei Ah Group of Companies, Hongkong, agreed to purchase the machinery for supplying the same to the applicant. The applicant in turn opened an L/C with SBICI Bank, Nariman Point, Mumbai for the payment in favour of the said Mei Ah Group company. However, the said company backed out. At last, M/s. Wonder Victory Limited, Hongkong, purchased the said machinery and directed M/s. P.B. Far East Limited to ship the same directly to the applicant. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their order dated 29-10-2004 directed the applicant to appear before the Commissioner of Customs, Nhava Sheva on 2-11-2004 and the Commissioner was directed to decide the question of provisional release of the seized goods within two weeks. 4. The applicant filed an application under Section 127B of the Customs Act, 1962 (in short the Act) before this Bench on 10-11-2004. The case was heard on 23-11-2004, but the application filed could not be allowed to be proceeded with as the applicant did not fulfil the conditions laid down under Section 127B(1) of the Act. In this respect Final order No. 72/2004-Cus., dated 25/29th November, 2004 passed by the Bench refers. However in this order it was made clear that the said order shall not bar the applicant from knocking at the doors of the Commission once again as and when show cause notice was issued. 5. The present application was filed on 28-12-2004, wherein the applicant admitted an additional duty liability of Rs. 2,60,465/-. The case for admission was heard on 15-2-2005 and the Commission vide Interim Order No. 15/2005-Cus., dated 28-2-2005 (supra), inter alia, held and ordered as follows: "10. The Commission has gone t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the conditions for admission of the case for settlement. Accordingly, we allow the application to be proceeded with under sub-section (1) of Section 127C ibid. The applicant is directed to deposit the revised admitted duty liability of Rs. 38,55,471/- within 30 days of receipt of this order and furnish proof thereof. 11. After the duty deposit, the goods under seizure shall be released by the Revenue. Applicant shall not part with the machine till the final settlement of this application. In the event of the applicant succeeding in obtaining restoration of the suspended EPCG licence, it shall be eligible for appropriate refund of duty to the extent of what it pays now and what the liability would be under the EPCG licence". 6. The next hearing in the matter was held on 18-10-2005 and the Commission after hearing both the parties passed Interim Order No. 38/2005-Cus., dated 24-10-2005. The relevant portions of the said order are extracted below :- "2. The ld. Advocate briefly narrated the facts of the case and submitted that the Hon'ble Bombay High Court vide their order dated 10-3-2005 in Writ Petition No. 1289 of 2005 had set aside the order of the DGFT suspending the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Customs (Import), JNCH, Nhava Sheva, vide letter dated 31-10-2005 furnished his report. The submissions made by the Commissioner in the said letter are summarized below:- (i) The Hon'ble High Court vide their order dated 15-04-2005 had directed the DGFT to issue a Show Cause Notice to the applicant within two weeks and also to adjudicate upon the same within 4 months. This fact came to the notice of the department (Customs) only on 18-10-2005, when informed by the Advocate of the applicant. It appears that the department was not made a respondent in the said matter as no such order or Writ Petition was served upon the department. However from the above facts it appears that the directions given by the Hon'ble High Court had not been followed by the DGFT so far. They had requested the DGFT, Mumbai vide letter dated 25-10-2005 to inform about the course of action decided by them in the said matter. Further the Interim Order No. 38/2005-Cus., dated 18-10-2005 was also communicated to the DGFT, Mumbai vide their letter dated 27-10-2005 with request to inform about the validity of the licence. However no reply had been received from the DGFT. (ii) Efforts were being made to get a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per se in view of the provisions pertaining to exclusive jurisdiction contained in Section 127F(2) of the Act, then the Show Cause Notice may be treated as their report for contesting and re-opening the valuation issue. Upon hearing both the parties the Bench asked the ld. Advocate as to whether the question of true and full disclosure is something which is to be examined only at the time of admission or it can be examined even later up to passing of the final order. The ld. Advocate submitted that there are case laws on the issue, emanating from the Apex Court as well as the Hon'ble Delhi High Court which he would like to bring on record. Furthermore, as some basic questions of law had been posed as to whether the re-opening of the valuation issue is permissible and does not constitute review of the interim orders passed by the Bench and whether the question of making a true and full disclosure is something which can be gone into at any stage up to the issuance of the final order, he would require a week's time to make written submissions. The Bench vide Interim Order No. 3/2006-Cus., dated, 10-1-2006 granted 7 days time to the ld. Advocate for the applicant to furnish his written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now advanced by the Revenue to reopen the issue of valuation, the process would never end. This would neither be in the interests of settlement nor in the interests of achieving finality and quietus to the proceedings before the Commission. (x) The Commission exercises, after allowing the application to be proceeded with, all powers of a Customs officer under Section 127F(2) of the Act. Qua such proceeding, therefore, there can be no justification for any authority, barring the Commission, even issuing any Show Cause Notice, and any Show Cause Notice so issued would be void and unenforceable ab initio. (xi) Once the Commission allowed vide its order dated 28-2-2005 the applicant's application to be proceeded with, there could be no justification for the Revenue to issue any Show Cause Notice, as that would amount to its exercising a parallel jurisdiction on the issue of valuation, which is clearly prohibited by Section 127F(2) of the Act. (xii) Under the Income-tax Act, 1961, the provisions of which are, for all intents and purposes, pari materia to the provisions of the Act, this issue had been settled by the following judgments : (a) Parag Nivesh Pvt. Ltd. v. Dy. CIT, 1999 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull and true disclosure, the application could not have been allowed to be proceeded with. This contention, was however, rejected by the Hon'ble Delhi High Court which, while recognising the ratio of the judgment of the Hon'ble Supreme Court, held that it was not always imperative for the Hon'ble Commission to decide the issue of full and true disclosure at the outset, and that it was open to it to leave the issue to be further considered later. 12. The Commissioner of Customs (Import) JNCH, Nhava Sheva vide his letter dated 4-3-2006 filed a rejoinder and the contentions raised therein are summarised below :- (i) The Interim order dated 28-2-2005 (supra) was passed by the Hon'ble Commission on the basis of initial evidence available before it. Thereafter department issued a Show Cause Notice to the applicant quantifying the duty liability and explaining the evidences/allegations collected by the department. In the earlier hearing dated 28-12-2005 department had submitted that there was no legal objection to the issuance of the Show Cause Notice even after the matter was admitted by the Commission, in view of the Commission's order in the case of M/s. Santogen Textiles. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reiterated at length the submissions made in writing and concluded by contending that not only the Show Cause Notice issued by the department is without jurisdiction it is non est ab initio. The issue of valuation does not survive for consideration. 14. We have gone through the case records and the contentions raised by both the parties in writing as well as those urged during various hearings held in these proceedings. Dealing with the legal issues which came up for discussion during the course of the proceedings, the first issue is whether the department can issue a Show Cause Notice for a case which is before the Commission for settlement and over which the Commission has assumed exclusive jurisdiction in terms of Section 127F(2) of the Customs Act, 1962 [pari materia to Section 32-I (2) of the Central Excise Act, 1944]. The Revenue has contended that there is no legal objection to the issuance of the Show Cause Notice even after the matter is admitted by the Commission for settlement. In support they have cited the case of M/s. Santogen Textiles reported in 2002 (141) E.L.T. 580 wherein the Commission has, inter alia, held that the show cause is a codification of variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made under Section 245C has been allowed to be proceeded with under Section 245D, the Commission shall until an order is passed under sub-section (4) of Section 245D, subject to the provisions of sub-section (3) of that section have exclusive jurisdiction to exercise the powers and perform the functions of the income-tax authority under the Act in relation to the case. In essence, the Commission assumes jurisdiction to deal with the matter after it decides to proceed with the application and continues to have the jurisdiction till it makes an order under Section 245D. Section 245D(4) is the charging section and sub-section (6) prescribes the modalities to be adopted to give effect to the order. It has to be noted that the language used in Section 245D is "order" and not "assessment". The order is not described as the original assessment or regular assessment or re-assessment. In that sense, the Commission exercises a plenary jurisdiction." (underlined for emphasis) 17. We have examined the aforesaid cited orders on the issue. In the case of Santogen Textile Mills Ltd., referred by the Revenue we find that the facts are different from the case before us. While in the refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for correct determination of the full and true duty liability of the applicant. In other words the Show Cause Notice issued after the Commission assumes jurisdiction over a case per se as a statutory notice would be non est. This view also finds support from the fact that the Revenue is required to furnish their report on the contents of the annexure and the statements and other documents accompanying such annexure filed by an applicant along with settlement application wherein the applicant discloses the manner in which it has incurred the admitted duty liability. The Revenue while furnishing the said report are at full liberty to furnish all material and evidence gathered by them during the investigations carried out in the case to controvert the claim of the applicant on the duty liability. 18. The next issue for consideration is whether the valuation aspect which was held to have been already decided by the Commission vide Interim Order No. 15/2005-Cus., dated 28-2-2005 could be reconsidered in the light of the Show Cause Notice issued by the Revenue vide F. No. SC/Misc/106/2004/SIIB(I) JNCH, dated 24-3-2005. The ld. Advocate in his arguments vehemently opposed examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded with. The decision rendered by the Hon'ble Delhi High Court in the case of UOI v. True Woods Pvt. Ltd., in Writ Petition (C) 21055/2005 [2006 (199) E.L.T. 388 (Del.)] cited by the ld. Advocate clearly answers the issue in affirmative. Para 10 of the Hon'ble High Court order is extracted below :- "The above does not, in our view, lend any assistance to the petitioner. If the majority decision had examined the question of full and true disclosure of the liability, the petitioner could on the basis of the above observations, argue that the challenge to the finding cannot be deferred till the final order is passed by the Commission without the principle of estoppel intervening to prevent such a challenge. That however is not the position here. The Commission has, in the present case, left the issue regarding disclosure of the true and complete facts upon which implies that the Revenue shall be free to urge all through the proceedings and even at the final stage that no case for settlement was made out as the applicants had not made a full and true disclosure of their liability. It is only after the Commission takes a final view on that aspect and passes a final order that the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case had not been used and were still in their original packing. Therefore, the original transaction value of 1998 has to be taken and depreciation allowed thereon for valuation purpose. On this the ld. Advocate for the applicant submitted that for electronic goods the value decreases rapidly and to take the transaction value of 1998 for the goods sold in 2004 is absurd. The transaction value as adopted by the applicant at US $, 2,01,240 is the correct value. 25. We heard both sides on this issue. We find that on the question of valuation the Revenue has reiterated the arguments which were made at the time of the admission hearing of the case. It was on these very arguments that the Commission had passed the Interim Order dated 28-2-2005 (supra). The Revenue has stated that the material and evidence contained in the Show Cause Notice may be treated as their report by the Commission. We have perused the contents of the Show Cause Notice and do not find any evidence or material which would lead us to any doubt or for that matter to hold that the transaction value given by the applicant is manipulated or forged. In fact there is no evidence to discredit the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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