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TMI Blog2015 (11) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners had undertaken that they would pay interest under section 28AA as and when determined by the Settlement Commission. Admittedly, the Settlement Commission, whilst ordering that the Settlement Applications (arising out of the 2nd and 3rd SCNs) are allowed to be proceeded with, did not impose any condition or direct the Petitioners to pay any interest The Settlement Commission was totally in error in coming to the conclusion that the Petitioners' Settlement Applications could not be entertained because an Appeal was pending before the CESTAT. As stated earlier, the Appeal before the CESTAT was not against the 3rd SCN but was against the ex-parte decision of the Authorities to appropriate a sum of ₹ 41,79,324/- towards a time barred claim. Matter restored back to the file of the Settlement Commission for a de novo consideration and in accordance with law. - Appeal disposed of. - Writ Petition No. 5633 of 2014 - - - Dated:- 9-10-2015 - S. C. Dharmadhikari And B. P. Colabawalla, JJ. For the Petitioners : Mr. Prakash Shah with Mr. Jaydeep C Patel, Mr. Jas Sanghavi i/b Yogesh Rohira For the Respondent : Mr Pradeep S. Jetly, Advocate JUDGMENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.3 is the Commissioner of Customs (Import), New Custom house, Ballard Estate, Mumbai 400 001. Respondent No.4 is the Additional Commissioner of Customs (Import), New Custom House, Ballard Estate, Mumbai 400 001. 5. In October 2010, the Directorate of Revenue Intelligence commenced investigations into the imports of old and used cranes by the proprietorship firm of Petitioner No.1. Pursuant to these investigations, a Show Cause Notice dated 15th October, 2012 (for short, the 1st SCN ), in respect of four such cranes which had been imported by Petitioner No.1 at the Mumbai Port, came to be issued to the Petitioners. In the 1st SCN it was inter alia alleged that the said cranes were undervalued and on that score, proposed to demand differential duty of ₹ 45,70,075/- under section 28 of the Customs Act, 1962 (for short the said Act ) alongwith interest in terms of section 28AB thereof, and to confiscate the offending goods and impose penalty on the Petitioners. 6. On or about 2nd January, 2013 Petitioner No.1 filed a Settlement Application dated 31st December, 2012 under section 127B of the said Act for settlement of the case arising out of the 1st SCN dated 15th Octo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance of the same, the Petitioners paid the balance amount of ₹ 13,78,448/- towards interest in respect of these Settlement Applications. 10. In the meanwhile, another Show Cause Notice dated 7th December, 2012 (for short the 2nd SCN ) was issued to the Petitioners in respect of one crane with accessories, proposing to demand differential duty of ₹ 18,38,658/- under section 28 of the said Act alongwith interest in terms of section 28AB thereof and also proposing confiscatory and penal action under section 111(m) and 112(a) of the said Act. 11. After the issuance of the 2nd SCN, another Show Cause Notice dated 29th / 31st January 2013 (for short, the 3rd SCN ) came to be issued to the Petitioners inter alia proposing to demand differential duty amounting to ₹ 1,62,70,028/- leviable on 17 consignments of used cranes and accessories alongwith interest in terms of section 28AB of the said Act. We must mention here that in the 3rd SCN, an ex-parte decision of the Additional Director General, Directorate of Revenue Intelligence, was also communicated to the Petitioners vide paragraph 25(xii) thereof whereby Respondent No.2 had appropriated a sum of ₹ 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were therefore inter alia called upon to explain in writing as to why the Applications filed by them should be allowed to be proceeded with. 14. In reply thereto, the Petitioners on 3rd September, 2013 replied to the aforesaid notice and gave their detailed explanation inter alia submitting that since section 28AB of the said Act no longer remained on the statute book, no interest under the said section had been paid/deposited before filing the said Applications. It was however submitted that the Petitioners would deposit the interest liability as and when determined by the Settlement Commission under section 28AA. 15. After the aforesaid explanation, by two separate letters both dated 13th September 2013, the Petitioners' Applications in relation to the 2nd and 3rd SCNs (SA(C)559-560/2013 and SA(C)557-558/2013 respectively) were allowed to be proceeded with by the Settlement Commission without imposing any condition to deposit any interest under section 28AA or 28AB of the said Act. 16. Thereafter all the Settlement Applications filed by the Petitioners (arising out of the 1st, 2nd and 3rd SCNs) came up for hearing before the Settlement Commission on 3rd December, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January, 2014 were passed on a totally incorrect interpretation of the law. He submitted that though section 127B, as it stood on the date of filing of the above Settlement Applications (i.e. on 26th August, 2013), inter alia provided that no Settlement Application shall be made unless the Applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28AB of the Act, section 28AB was deleted from the Act with effect from 8th April, 2011 and was substituted by section 28AA. Despite section 28AB being deleted from the Act with effect from 8th April 2011, reference to the said section erroneously continued in section 127B(1). In fact, reference to section 28AB in section 127B(1), was substituted with section 28AA only by the Finance (No.2) Act, 2014 with effect from 6th August, 2014. Since section 28AB was deleted from the Act with effect from 8th April, 2011 and their Settlement Applications were filed only thereafter, the Petitioners were not required to statutorily deposit / pay any amount towards interest under section 28AB before filing their Settlement Applications under section 127B, was the submission. Therefore, the Settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion imposes a condition to pay interest as determined it, the Petitioners would pay/deposit the same before their Settlement Applications are heard de novo by the Settlement Commission. Looking to all this, Mr. Shah submitted that there has been a gross miscarriage of justice which ought to be rectified by us. He, therefore, submitted that both the impugned orders dated 29th January, 2014 and 31st January, 2014 ought to be set aside insofar as they hold that the Settlement Applications stand rejected for non payment of interest. 20. As far as the impugned order dated 31st January, 2014 is concerned, Mr Shah submitted that the Settlement Application Nos. SA(C)557-558/2013 (arising out of the 3rd SCN) were rejected on an additional ground, namely that the Petitioners had suppressed the fact that with reference to the 3rd SCN, an Appeal was pending before the CESTAT. He submitted that this finding of the Settlement Commission was totally contrary to the record before it and bordered on perversity. In this regard, Mr Shah was at pains to point out that in the 3rd SCN, vide paragraph 25(xii) thereof, Respondent No.2 had sought to appropriate a sum of ₹ 41,79,324/- (out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-payment of interest, Mr Jetly contended that section 127B in categorical terms stipulates that no Settlement Application shall be made under the said section unless the Applicant has paid the additional amount of duty accepted by him alongwith interest due under section 28AB of the said Act. Mr Jetly contended that in the facts of the present case, admittedly no interest was paid by the Petitioners before filing the Settlement Applications arising out of the 2nd and 3rd SCNs. In these circumstances, the Settlement Commission was fully justified in rejecting Settlement Application Nos.SA(C)559-560/2013 (arising out of the 2nd SCN) and Nos.SA(C)557-558/2013 (arising out of 3rd SCN). 23. It was the submission of Mr Jetly that merely because section 28AB of the said Act was not on the statute-book on the date when the above mentioned Settlement Applications were filed, makes no difference. He submitted that section 28AB, though deleted w.e.f. 08-04-2011, was substituted by section 28AA which also provides for payment of interest. He submitted that taking into consideration the spirit behind the provisions of section 28AB and section 28AA of the said Act, the Petitioners were boun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deleted from the Act and replaced with section 28AA w.e.f. 08-04-2011. Before its deletion, section 28AB read as under:- 28-AB. Interest on delayed payment of duty in special cases.- (1) Where any duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of section 28, shall, in addition to the duty, be liable to pay interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first day of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 28, till the date of payment of such duty: Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 151-A, and such amount of duty payable is voluntarily paid i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of an order, instruction or direction by the Board under section 151-A; and (b) such amount of duty is voluntarily paid in full, within forty-five days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage of such payment. 28. Despite the fact that section 28AB was deleted and replaced with section 28AA w.e.f. 08-4-2011, no corresponding amendment was carried out in section 127B. In other words, even though section 28AB no longer remained on the statute book, a reference to the said section (28AB) continued in section 127B. 29. On the dates when the Settlement Applications arising out of the 1st, 2nd and 3rd SCNs were filed by the Petitioners (i.e. in 2012 2013), section 127B read as under:- 127-B. Application for settlement of cases. - (1) Any importer, exporter or any other person (hereinafter referred to as the applicant in this chapter) may, in respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled, in such form and in such manner as may be specified by rules, and containing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the expiry of one hundred and eighty days from the date of the seizure. (3) Every application made under sub-section (1) shall be accompanied by such fees as may be specified by rules. (4) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. (emphasis supplied) 30. As can be seen from the above reproduction, section 127B(1) gives an opportunity to a person to approach the Settlement Commission to settle a case relating to him before the same is adjudicated, and have the same settled. For this purpose, the said person has to make an Application before the Settlement Commission in such form and in such manner as specified by the Rules and containing a full and true disclosure of his duty liability which has not been disclosed before the proper Officer, the manner in which such liability is incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by the Rules. Clause (c) of the 1st proviso to subsection (1) of section 127B clearly stipulates that no such Settlement Application shall be made unless the Applicant has paid the additional amount of cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported or exported through post or courier, as the case may be, and in relation to such document or documents, 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 28-AA: 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: (1-A) .. (2) (3) (4) (emphasis supplied) There have also been further amendments to this section in 2015, but the same are not relevant to decide the controversy in this Writ Petition. 31. Be that as it may, on a conjoint reading of the aforesaid statutory provisions, two things become clear. Firstly, section 28AB was deleted from the Act w.e.f. 08-04-2011 and was substituted by section 28AA. Despite the fact that section 28AB was deleted, a reference to the said section continued in clause (c) of the 1st proviso to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said order. In compliance of the same, the Petitioners in fact paid the balance amount of ₹ 13,78,448/- towards interest in respect of the Settlement Applications arising out of the 1st SCN. Whilst ordering that the Settlement Applications arising out of the 2nd and 3rd SCNs are allowed to be proceeded with, no such condition was imposed upon the Petitioners. In these circumstances, the Petitioners cannot be faulted for non payment of interest and we are of the opinion that the Petitioners' Settlement Applications could not have been rejected on that ground. Considering that Mr Shah very fairly stated before us that even today they are wiling to pay the interest due under section 28AA as and when determined by the Settlement Commission, we think that it would just, fair and in the interest of justice if Settlement Application Nos.SA(C)559-560/2013 and SA(C)557-558/2013 (arising out of 2nd and 3rd SCNs) are remanded back to the Settlement Commission for a de novo consideration. It is accordingly so ordered. Before the aforesaid applications are de novo heard by the Settlement Commission, it would be open to the Settlement Commission to impose a condition on the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier ex-parte decision communicated vide the said 3rd SCN. Therefore, even the challenge to the said decision became infructuous and as stated earlier, the said Appeal pending before the CESTAT was subsequently withdrawn. This being the case, we find that in the facts of the present case, the Settlement Commission was totally in error in coming to the conclusion that the Petitioners' Settlement Applications could not be entertained because an Appeal was pending before the CESTAT. As stated earlier, the Appeal before the CESTAT was not against the 3rd SCN but was against the ex-parte decision of the Authorities to appropriate a sum of ₹ 41,79,324/- towards a time barred claim. There was therefore no Appeal that was pending with reference to the subject matter of the 3rd SCN under which the statutory authorities demanded differential duty amounting to ₹ 1,62,70,028/- and which was admitted by the Petitioners in their Settlement Applications. In this view of the matter, we find that the Settlement Commission ought not to have rejected Settlement Application Nos.SA(C)557-558/2013 (arising out of 3rd SCN) on the ground that the Petitioners' Settlement Applications did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leads to a threshold bar to make an Application under section 127B, is what is laid down in the said decision. There is no quarrel with the aforesaid proposition but we fail to see how the same can be applied to the facts of the present case. As narrated earlier, the interest due under section 28AB was not paid by the Petitioners in view of the fact that when they filed their Settlement Applications under section 127B, section 28AB did not remain on the statute-book at all [even though a reference to the same continued in section 127B(1)]. In fact, though not required by law, the Petitioners had fairly given an undertaking that they would deposit interest under section 28AA as and when determined by the Settlement Commission. Whilst ordering that the Petitioners' Settlement Applications (arising out of the 2nd and 3rd SCNs) are allowed to be proceeded with, the Settlement Commission did not impose any condition for payment of interest. In this view of the matter, the Petitioners did not pay any interest. Further, the order of the Settlement Commission allowing the Settlement Applications of the Petitioners to be proceeded with, has not been challenged by the Revenue in any pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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