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TMI Blog2009 (5) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The brief facts of the case are as under :- 2.1 The applicant had arrived at IGI Airport, New Delhi from London by Fl. No. BA-143 on the intervening night of 27th and 28th January, 2008. The Customs officers on duty, on having some doubt that the applicant has not made a true disclosure of the goods brought by him in the Disembarkation Card, had specifically asked him whether he was carrying any dutiable items with him, but the applicant replied that he had not brought any dutiable items with him. Thereafter, the Customs officers proposed to physically examine the baggage of the applicant. The applicant along with his son Shri Vikramaditya Jain (who had arrived by another flight and joined him at the airport) was thereafter diverted to the Customs Room located in the arrival hall for detailed examination of the baggage and the person of the applicant. 2.2 The person as well as the baggage carried by the applicant were examined by the officers of Customs in the presence of two independent witnesses. On examination, some old and new apparels and other items were recovered from his baggage along with two DE-GRISOGONO wrist watches in two velvet pouches. Apart from this, two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,80,000/- (FOB) declared by him. (b) The seized goods collectively valued at Rs. 30,73,838/- (FOB) and Rs. 37,30,103/- (CIF) should not be confiscated under Section 111(d), 111(i), 111(j), 111(l) and 111(m) of the Customs Act, 1962. (c) The customs duty + Cess amounting to Rs. 13,44,702/- should not be determined/demanded (along with interest in terms of Section 28AB) of the Customs Act, 1962 on the seized three wrist watches and should not be recovered from him. (d) The Customs duty + Cess amounting to Rs. 2,72,026/- should not be determined/demanded under the Customs Act, 1962 on the imported goods valued at Rs. 6,21,822/- (FOB) (declared as Rs. 12,000/- by the pax) in respect of which a VAT of GBP 1000.20 was availed and should not be recovered from him. (e) The free allowance of Rs. 25,000/- should not be disallowed to him, and. (f) The black color Porche handbag used for concealing the aforesaid seized goods and velvet pouches should not be confiscated. (g) The penalty should not be imposed upon him under Section 112(a) and (b) of the Customs Act, 1962. 2.9 Incidentally, in the same SCN, Shri Vikramaditya Jain, the son of the applicant, was also called upon to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of admissibility open and the same was communicated to the applicant as well as Revenue vide Commission s letter dated 19-11-08. 6. A copy of the settlement application was also forwarded to the Revenue for their comments on the same. The Revenue vide letter dated 17-12-08, forwarded their comments whereby they opposed the settlement of the application on various grounds. 7. The matter was listed for final hearing on 20-1-2009 but the same was adjourned on the request of the Advocate of the applicant. Thereafter the matter was taken up for final hearing on 3rd March, 2009. The applicant was represented by Shri Piyush Kumar, Advocate assisted by S/Shri Sharad Bhansali and Jitendra Singh, Advocates and Shri S.N. Pandey, Manager. Revenue was represented by Shri V.B. Prabhakar, Asstt. Commissioner, Shri S.K. Sharma, Supdt. and Shri Anil Trivedi, ACO. 8. During the hearing, the ld. Advocate briefly narrated the facts of the case as already recounted in the application and submitted that the applicant has accepted the entire duty demand despite the fact that the quantification of duty was challengeable, and the Bench after considering the legality of the issue, has allowed the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commission? Further, on the issue of non-mention of watches in the disembarkation card, the Bench enquired whether there is any column in the disembarkation card to mention the description of individual goods carried by the passengers in their baggage and if it is not so, then how it can be expected from the applicant to mention watches in the disembarkation card. In reply, the representative of Revenue reiterated the objections made in its written report and stated that only those cases can come before the Commission where a bill of entry or shipping bill has been filed. On the issue of non-mention of the description of goods in the disembarkation card, the representative stated that there is no column for description in the said card. 11. The Bench specifically inquired from the representative of the Revenue whether prosecution has been launched against the applicant in the present case. The representative of the Revenue informed that although the applicant was arrested and thereafter released on bail, no prosecution so far has been launched. 12.1 The ld. Advocate of the applicant in his rejoinder submitted that the objections raised by the Revenue are not sustainable. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of invocation of that Section, the said proviso will not bar the admission of this case. 12.3 The ld. Advocate also placed reliance on various other case laws viz (a) Ishkawajima - Harima Heavy Industries - Mumbai Bench - 2004 (174) E.L.T. 272 (Sett. Comm.). (b) MRO Tek Ltd. - 2007 (219) E.L.T. 786 (Sett. Comm.). (c) Anil Channa (Order No A-448/Cus/06-SC(PB). (d) Anil Parsad (Order No A-347/Cus/05-SC(PB). 12.4 Finally, the ld. Advocate referred to the order passed by Mumbai Bench of the Settlement Commission, in the matter of Shri Manish Kalvadiya, wherein the application of the applicant who had statedly imported diamonds in his baggage, was initially rejected by the Bench on the ground that the case falls outside the powers of the Settlement Commission to entertain the same under Sections 127B and 127C of the Customs Act, 1962. Being aggrieved with the said rejection, the applicant had preferred a Writ Petition No. 2430 of 2004 in the Hon ble Bombay High Court. The Bombay High Court vide order dated 21-7-05 [2006 (201) E.L.T. 529 (Bom.)] had set aside the order of the Commission and remanded the matter back to the Commission for decision in accordance with law. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) has been substituted vide Section 101 of Finance Act, 2007 with effect from 1-6-2007. Hence any reliance placed on any decision of the Settlement Commission and High Courts will not be relevant for interpreting the provisions of present Section 127B(1) which came into effect from 1-6-2007. III. The Settlement Commission has jurisdiction in cases that involve short levy on account of misclassification, undervaluation or inapplicability of exemption notification. In the present case, no short levy, misclassification, undervaluation or inapplicability of exemption notification is involved. This is a case where dutiable goods and their value was not declared by the passenger (importer). In this regard, upon arrival, a passenger is put to notice by way of Disembarkation Card (Arrival Card) that Green Channel is for passengers who have brought goods within free allowance limits and non-dutiable goods. In this regard, Para 1 of the Information Regarding Customs printed on the Disembarkation Card (DC or Arrival Card) is reproduced below :- 1. Indian Customs requires you to declare goods in excess of the free allowance, prohibited or restricted goods and commercial goods at Red C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has occurred due to misclassification or otherwise of the goods. Under Section 127B, an importer can make an application provided (i) he has disclosed his duty liability which he has not disclosed before the proper officer, (ii) he accepts his liability to pay additional amount of duty, and (iii) he admits short levy of duty on account of misclassification, undervaluation or inapplicability of exemption notification of the goods. The present case is one of smuggling as evidenced by the detailed Show Cause Notice. Therefore, there is no question of any disclosure of duty liability which has not been disclosed before the proper officer. In facts of the present case, there is no question of payment of additional duty since the applicant had not paid any duty. For the same reason, it cannot even be treated as short levy. Therefore, the present case squarely falls out side the jurisdiction of the Settlement Commission. VI. The provision of Section 127B read with 127A(b) of the Act could not be invoked in the case of outright smuggling. Had this been the intention, the legislature could have included in Section 127B, all cases falling in Section 111 that deal with smuggling. They need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined in accordance with law. IX. The Settlement Commission is not meant to be a forum chosen at the option of the applicant for getting immunity from penalty, interest and prosecution despite indulging in smuggling. This would lead to a person not honestly declaring the contents and value of his baggage by reporting to the Red Channel under Section 77 of the Customs Act, 1962 and instead walking through green channel, and thereafter, approaching the Settlement Commission and claiming immunity from all penal liabilities once caught, which, it is respectfully submitted, is against the scheme and object of the Settlement Commission. X. The fact of an SLP being filed against the order of Bombay High Court and the issue to be decided is a question of law. It would be in the interest of justice that the instant case for admission is decided subsequent to the decision of the SLP by the Apex Court. 15. The Bench has considered the written as well as oral submissions made by both the sides. After considering the rival submissions, the following issues emerge for consideration by the Bench : (i) Whether baggage cases are cases in terms of Section 127A(b) of the Act and fall within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was pending for adjudication before the adjudicating authority, namely the Additional Commissioner of Customs. On a perusal of the SCN supra, it is seen that as a matter of fact, the applicant has inter alia been asked to show cause why certain amount along with interest under Section 28AB should not be determined/demanded from the applicant under the Customs Act, 1962, besides asking him to explain why the value of the fourth watch model Grande $10 should not be re-determined and proposing confiscation of the seized goods. On a plain reading of the SCN, it is observed that it invokes both demand of additional duty and re-determination of the value of allegedly undervalued goods. The demand of duty in the SCN clearly brings the present case in the ambit of it being a case of short levy on account of undervaluation. To analyse whether it is a case of under valuation or a case of declaring only some goods in the DC, the Bench considered that theoretically an argument can be made that if a passenger declares the value of his baggage as X, instead of the correct value of 10X, he has declared only those goods which correspond to the value X and has not made any declaration in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with such levy, assessment or collection, which may be pending before the proper officer or Central Government, can only be regarded as a case coming within the purview of Section 127B since the present case is one of prima facie smuggling, there is no question of levy, assessment and collection of customs duty and as such the dispute will not come within the purview of Section 127-B, which contention was found in favor of the Department by the learned single Judge. We are not able to countenance this contention also for the reason that as per second limb of Section 125 of the Customs Act, if the goods confiscated are not prohibited goods, an option has to be given to the importer to pay, in lieu of confiscation, such fine i.e., the redemption fine. In such case, the importer has to pay duty and charges payable in respect of such goods. In order to arrive at the duty and charges payable under Section 125, an assessment has to be made, the duty has to be levied and collection has to be made for the purpose of giving effect to the second limb of Section 125. For the aforesaid reasons, the contention that the dispute in the present case does not involve levy, assessment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation of goods as baggage is only one of the modes of importation and as such if a bill of entry is allowed to be filed in baggage cases, even this requirement can be met with. But in the baggage cases, as a matter of facilitation, passengers are required to fill in only a DC. Under Section 46 of the Customs Act, 1962, a bill of entry can be filed at any time after delivery of import manifest or import report, as the case may be. It is not the case of the Revenue that the applicant was required to file a bill of entry on his arrival and as he has not done so, he cannot file a bill of entry now. The filing of a bill of entry is a procedural requirement under the law, for assessment and clearance of goods. In the case of import of regular merchandise through seaports or air cargo complex, etc., importer is required to file a bill of entry. Goods can also be imported through other means, such as through post, courier service or as baggage. It is difficult to appreciate that such imports through post, courier service or baggage should be denied settlement of disputes merely because they have chosen a particular mode for importation of goods and have filed some other document instea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Karnataka. The High Court of Karnataka in its order reported at 2006 (195) E.L.T. 261 held that smugglers, habitual offenders and unscrupulous elements cannot be offered protection under the settlement scheme. It covers only cases where there is no deliberate/intended desire on the part of the importer to evade/avoid payment of duty. With due respect, this Bench observes that in this order of the ld. Single Judge of the Hon ble Karnataka High Court, the focus of discussion is not on the aspect of non-filing of a bill of entry in baggage cases but it is more concerned with the distinction between misdeclaration and misclassification. In paras 20-22 of the order, the Hon ble Court has made the following observations : 20. Chapter XIVA of the Act being an exception to the normal procedure contemplated under the Act and occurring in a fiscal statute, has to be necessarily construed strictly. The scope of the provisions cannot be unduly enlarged if the intendment of the Legislature to provide for settlement in cases of short levy or non-levy on account of misclassification or misdeclaration also, as there is a vast and considerable distinction between cases of misclassific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself has described the respondent as a smuggler and thought it fit to levy penalty of Rs. 25,000/- that act itself should have cautioned the Settlement Commission not to entertain the application in the light of the third proviso to Section 127B of the Act and the Settlement Commission should have rejected the application relegating the respondent to workout his remedy in accordance with the normal course provided under the Act. 22. As I am of the view that the Settlement Commission lacks jurisdiction to entertain the application of the nature filed by the respondent before it, particularly application under Section 127B of the Act, the impugned order cannot be sustained. It is not necessary to go into the merits of the impugned order. Accordingly this writ petition is allowed and the order dated 26-9-2001 in Application No. SA (C) 10-2001, passed by the Customs and Central Excise Settlement Commission, Chennai is quashed by issuing a writ of certiorari Rule issued and made absolute. No order as to costs. 23. To the Bench it appears that in this case the Writ Petition of Revenue was admitted mainly on the ground that it was a case of misdeclaration and not of misclassificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to the notice of the learned single Judge. Further, there is a clear distinction in the Income-tax Act provisions and provisions contained in the Customs Act. In the Income-tax law, application for settlement must be made before the investigation has started or before the statutory authority has collected any material or any notice is issued to the applicant. Further there must be a voluntary aspect in the disclosure of fact in concealment. On the contrary, in the provisions of the Customs Act, it is mandatory that the applicant could file an application only after show cause notice is issued, which show cause notice would pertain even for confiscation of goods on the ground of fraud or smuggling or deliberate mis-declaration. Such show cause notice is condition precedent before making an application. Having regard to the above statutory ingredient, there could never be any case of filing of an application under Section 127-B before initiation of any action by the Department or of voluntary aspect under the Customs Act. 21. Section 127-C of the Act provides for the procedure to be followed by the Settlement Commission and power has been vested with the Settlement Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August, 2004 had accepted the said argument and dismissed the applications as not maintainable. However, on a Writ Petition bearing No. 2430 of 2004 filed by Manish Kalvadiya, this Court by its Judgment and order dated 21st July, 2005 set aside the order of the Settlement Commission dated 16th August, 2004 and held that the application was maintainable. It is the case of the Revenue that the Special Leave Petition filed against the decision of this Court dated 21st July, 2005 is pending before the Apex Court. Therefore, when this Court has already ruled that the application filed by Manish Kalvadiya is maintainable, it is not open to the revenue to contend that the Settlement Commission was in error in entertaining the application filed by Manish Kalvadiya. Accordingly, the first argument of Mr. Jetly is liable to be rejected. 10. As regards the second argument of Mr. Jetly, on perusal of the show cause notice, it is seen that there were two issues (one) relating to confiscation of 5877 carats of cut and polished diamonds seized from Manish Kalvadiya and (two) confiscation of 34147.66 carats of cut and polished diamonds seized from the office premises of M/s. I.P. Patel Co. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of Section 123 of the Act to goods that are claimed as baggage within the Customs area is, therefore, questionable. This issue has been dealt at length by Settlement Commission s Special Bench Order in the matter of Idris Y. Porbundarwala [2005 (180) E.L.T. 356 (Sett. Comm.)] in Para 28 whereas the Bench observed : From the aforesaid discussions and the cases cited and discussed above, we conclude that invocability of the provisions of Section 123 is an essential ingredient to determine the applicability of the said section to the seized goods so as to decide whether the mischief of the third proviso to sub-section (1) of Section 127B of the Act would come into play. The issues referred to Special Bench for decision can be answered as below :- (a) Whether applications, per se, are barred in relation to goods which are listed under sub-section (2) of Section 123 or are notified under the said sub-section? Answer : The applications per se are not barred in relation to goods which are listed or notified under sub-section (2) of Section 123 of the Act. (b) Whether applications are barred in respect of the above cited goods, only when the said goods are seized on reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve any bearing on the cases relating to baggage under Section 77 of the Act. In the main part of Section 127B(1) the words .....misclassification or otherwise have been substituted by the words .......misclassification, undervaluation or inapplicability of exemption notification..... and the words ..but excluding the goods not included in the entry made under this Act have been added. Besides, the first proviso, which has heavily been relied upon by the Revenue to argue that filing of a bill of entry is a condition precedent remains as it is. It existed even before the amendments made on 1-6-2007. If anything, these changes have made it explicitly clear that cases of misdeclaration of value after 1-6-2007 squarely fall within the scope of Section 127B of the Customs Act, 1962. The Division Bench orders of the Hon ble Bombay High Court and the Hon ble Madras High Court have squarely covered the issues involved in the present case and the ratio of these judgments are fully applicable in this present case. 31. In regard to the fourth issue, the Bench observes that the Court Order dt. 1-2-08 on grant of bail mentions the applicant s willingness to pay the Customs duty as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 127C(5) in the following terms and conditions :- Customs Duty :- Customs Duty is settled at Rs. 16,16,728/-. The applicant has claimed to have deposited Rs. 22,50,000/- with the Court of ACMM, New Delhi towards duty as well as penalty. Subject to the verification by Revenue of the actual amount deposited by the applicant, Bench orders appropriation of an amount of Rs. 16,16,728/- from the above mentioned deposit towards settled amount of duty on completion of the required formalities for lodgement of the said amount in appropriate Customs head(s) of account. The applicant will complete all the required formalities with the Court and have the said amount transferred to the appropriate head(s) of the Customs Department for adjustment of amount of duty, interest, fine and penalty settled/imposed under this Order. Revenue is directed to assist the applicant in this transfer. Interest :- The amount of interest is settled at Rs. 2,658/-, which has been admitted by the applicant. This amount has not been disputed by the Revenue during the hearing or in their written comments. However, Revenue is at liberty to re-calculate the interest liability of the applicant and commun ..... 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