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TMI Blog2014 (4) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... Show cause notice - Whether application can be entertained without having to pay duty - Principle of ejusdem generis – Interpretation of Statutes - Clause (c) of the first proviso to Section 127B – Held that:- Clause (c) to the first proviso mandates a pre-condition to approaching the Settlement Commission - The duty "accepted by" the applicant must be paid, before the matter can even be considered by the Settlement Commission - A levy u/s 28-which authorizes a show-cause for duties not levied earlier-includes interest u/s 28AB - Thus, clause (c) requires that the applicant must deposit the duty he accepts to be the liability, along with interest - This means that it is not necessary for the show cause notice to propose a liability amount for it to be 'due' under clause (c) - The Court notices that the self-assessment standard is also prescribed in Section 28(b), as an alternative to the duty ascertained by the Revenue. Relying upon Jagdish Cancer and Research [2001 (8) TMI 113 - SUPREME COURT OF INDIA] - Once served with a show-cause notice u/s 124, the proper officer u/s 28 cannot simultaneously issue a notice – This does not mean that minimum duty is not payable on approachin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere alleged to be contained. The notice further proposed penalty under Sections 112 and 114AA of the Act. 2. The petitioner claims that he is desirous of approaching the Customs and Central Excise Settlement Commission ( Settlement Commission ) under Section 127C of the Act. It is however argued that he is handicapped from doing so on account of clause (c) of the first proviso to Section 127B, which prohibits making of any settlement application unless the applicant has paid the additional amount of customs duty accepted by him along with interest due under Section 28AB of the Act. It is argued that in this case, the show cause notice does not propose any duty liability, and thus, in the absence of any demand having been made at this juncture, the application to the Settlement Commission need not be supported by any payment. While the petitioner admits duty liability for the gold sought to be brought into India, it is argued that the said duty is payable only if redemption of the gold jewelry and coins is allowed by the Settlement Commission. 3. In support of this proposition, learned counsel for the petitioners places reliance on Jagdish Cancer and Research Centre, 2001 (132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of misclassification, under-valuation or inapplicability of exemption notification or otherwise and such application shall be disposed of in the manner hereinafter provided: Provided that no such application shall be made unless,- (a) the applicant has filed a bill of entry, or a shipping bill, in respect of import or export of such goods, as the case may be, and in relation to such bill of entry or shipping bill, a show cause notice has been issued to him by the proper officer; (b) the additional amount of duty accepted by the applicant in his application exceeds three lakh rupees; and (c) the applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28AB:Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court: Provided also that no application under this sub-section shall be made in relation to goods to which section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed: Provided also that no app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l procedure of adjudication of duty liability and other deterrent provisions i.e. levy of penalty and prosecution. The provisions of Chapter-XIVA indicate that immunity given is only in respect of levy of penalty and prosecution and not in respect of duty liability. For the purpose of determination of duty liability, the Commission acts as an adjudicating authority and can determine the duty liability and the applicant is liable to pay such duty within 30 days from the date of receipt of a copy of the Commission's order subject to its power to extend time subject to payment of interest beyond the initial period of 30 days. The Commission can also levy penalty or interest in respect of the amount duty quantified. The provisions of Section 127C indicate that the settlement directed by the Commission will be rendered void if it is subsequently found that such orders had been obtained by fraud or mis -representation of facts by the applicant. 8. The above scheme reveals that while the Commission is empowered to grant immunity from penalty and prosecution, duty liability has to be enforced. The Commission can also levy not only interest but also penalty. Chapter XIVA is exception ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument, holding that there was no mandate to limit the jurisdiction of the Settlement Commission in such a manner. The Court stated as follows: 40. Over and above, again going back to the main section, it is very clear as indicated therein, that the application should contain full and true disclosure of the duty liability which has not been disclosed before the proper officer, the manner in which such a liability has been incurred, the additional amount of customs duty accepted to be payable by him. The above section lays down that all the above details have to be furnished in such an application. Over and above, as referred to hereinabove, as per the provisions of above section, such other particulars as may be specified by the rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification or otherwise of the goods , should also be mentioned by the Applicant in his application. As we have mentioned earlier, the learned Counsel for both sides, viz. for the Customs Department and for the private parties have clearly stated that till date there are no specified rules with regard to such particulars regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to deal with the bonafide case of misclassification or at the most wilful case of misclassification. 42. One cannot minimise the scope of jurisdiction of the Settlement Commission without any express provisions found in the said Chapter, whereas on the contrary, the provisions as indicated hereinabove clearly show that the Settlement Commission has a very wide jurisdiction to entertain all kinds of settlement claim applications with the liberty to reject the same even at the preliminary stage, depending upon the nature and circumstances of the case and the complexity of the case. Therefore, it is not the case that the Settlement Commission is forced to entertain and accept all settlement applications. After the scrutiny, it may or may not entertain the same. It is one thing to say that the Settlement Commission does not have the jurisdiction at all to look at the claim which is not pertaining to the short levy due to misclassification or otherwise, whereas it is another thing to say that the Settlement Commission has jurisdiction to entertain all kinds of applications and it has jurisdiction to reject the same even at the preliminary stage. XXX 45. In any event, having r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. The provisions that confer jurisdiction on the Settlement Commission cannot, in the opinion of the Court, be construed as narrowly as it sought to be urged by the Revenue. If parliamentary intention is to exclude adjudication by Customs Authorities in respect of baggage claim, from the purview of the Commission's jurisdiction, surely such intention would have been more clearly manifested like in the case of 3 proviso of Section 127 (B)(i). 11. As is evident, this Court has expressed a view similar to that of the Bombay High Court. Both the open-ended text of Section 127B, and purpose for its inclusion in the Act, i.e. to create incentives for assessee to disclose revenue which has escaped tax, supports a broad jurisdiction of the Settlement Commission. This however does not mean that those who violate evade tax may escape penalty, or the rigours of adjudication which occur in the normal course, but rather, their fate is to be determined, in accordance with law, by the Settlement Commission, which considers this violation in coming to its decision, whilst also ensuring quicker recovery of revenue. Equally, drawing arbitrary lines between 'outright smuggling' (as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91 SC 3631. Those two decisions of the Supreme Court, however, deal with the authority of the Settlement Commission under Section 245D of the Income Tax Act, 1961. The passage of Express Newspapers (supra) relied on by the Single Judge of the Madras High Court is as follows: 19. The idea underlying the said words (in the main limb of Sub-section (1A)) is self-evident. The disclosure under Section 245-C must be of an income not disclosed before the assessing officer. If the assessing officer (or the Income Tax authority) has already discovered it and has either gathered the material to establish the particulars of such income or fraud fully or is at a stage of investigation/enquiries where the material gathered by him is likely to establish the particulars of such income or fraud, the assessee cannot be allowed to defeat or forestall, as the case may be, the entire exercise of the Income Tax authorities just by approaching the Commission. In such a case, it cannot be said that he is acting voluntarily or in good faith. He should not be allowed to take advantage of the comparatively easy course of settlement. He must be allowed to face the normal channels of assessment/appeal etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be said that only those applications are permitted wherein the Revenue has no knowledge or notice of the concealment. Quite to the contrary, those are precisely the sort of cases that may be admitted under Section 127B. The rationale behind Section 245D of the Income Tax Act, i.e. voluntary disclosure, which animated the decisions in Kuldeep Industrial Corporation (supra) and Express Newspapers (supra) does not apply to the Customs Act. Those decisions, therefore, do not regulate this field. This view was also taken by the Bombay High Court in Hoganas (supra): Over and above, there is a clear distinction in the Income Tax Law and the Customs Act. In the sense, in the Income Tax Law any application must be made before the investigation has started or before the authority has collected any material or any notice is issued to the applicant. In the Income Tax Law there is a voluntary aspect in the disclosure.On the contrary, in the Customs Act, the provision makes it mandatory that the Applicant can file an application only after show cause notice is issued, which show cause notice as we have pointed out hereinabove, would pertain even to confiscation. i.e. to say the person who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but may not condone the liability amount or interest. Those must be paid nonetheless, as an applicant approaching the Settlement Commission cannot receive better treatment than those who do not. That limited obligation falls on all articles imported into Indian territory. Thus, in order to approach the Settlement Commission, and avail of the beneficial regime of limited immunity, the applicant must-as a reciprocal statutory good faith measure-pay the liability duty (i.e. at least the minimum tax effect possible from the wide range of measures that may be exercised under the Customs Act.) The argument advanced by the petitioner in this case seeks to excuse the applicant to pay this minimum amount, but still avail the beneficial regime of Chapter XIVA. This cannot be the case. Neither does the text support such an argument. Sub-clause (c) bars an application till the applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28AB. The applicant must therefore, first, pay the duty accepted by him , along with the interest due under Section 28AB. Section 28AB simply says that in case any duty has not been levied or paid or has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such goods. Thus, Jagdish Cancer and Research (supra) held that the same goods cannot be the subject of two notices under the same enactment imposing tax on the same event. However, the content of a Section 28 notice-which imposes duty liability-is replicated in clause (2) of the Section 125. The duty to pay customs liability is a minimum obligation both Sections 28 and 125 uniformly accept. In this case, the notice for confiscation has been issued under Section 124 (and does not refer to Section 28). But this does not mean that a minimum duty liability-which arises is either circumstance-is not payable to the Settlement Commission. Instead of the duty assessed by way of a notice under Section 28, along with interest under Section 28AB, the applicant must pay the duty as admitted by him, since such amount is anyway payable even under the Section 124/125 regime. To hold to the contrary would create an unmerited distinction between goods on which duty was not levied earlier under Section 28 and goods which were confiscated because of that reason under Section 124, insofar as neither condones payment of the duty demand. 18. There is no disagreement with the position that once se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee shall pay the additional amount of customs duty accepted by him along with interest due under Section 28AB. What the petitioner contends is that the interest under Section 28AB does not become due once a show-cause notice is served under Section 124 and, therefore, the petitioner should be allowed to approach the settlement commission without satisfying the condition. The legislative intention, however, appears to us to be otherwise. If one of the many conditions prescribed by the first proviso to Section 127B cannot be complied with, albeit because of statutory disability-even assuming the petitioner is right in its contention that there is a statutory disability in calculating the interest due under Section 28AB-the result would be that such a case was not intended to be covered by the section; it is not open to the petitioner to argue that because of the statutory disability (whatever that may be) one of those conditions cannot be complied with but yet the petitioner should be permitted to approach the Settlement Commission. As already pointed out, an assessee is permitted to approach the Settlement Commission subject to inviolable conditions, the proper and com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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