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TMI Blog2017 (4) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... passing any final order u/s 127C(5) rejecting the Application on the ground that it is inadmissible u/s 127B. This scheme is clear from an ex-facie reading of the provisions of section 127C - it is not in dispute that the Settlement Applications of the Petitioners were filed on 27th May, 2014. The first notice as contemplated u/s 127C(1), was issued by the Settlement Commission on 10th June, 2014 to remove the defects and to show cause why the Applications of the Petitioners should be allowed to proceed with. After this notice was issued, there was no order passed on the admissibility of the Settlement Applications filed by the Petitioners up and until the passing of the impugned order on 27th March, 2015. This alone was in violation of the statutory provisions as set out in section 127C(1) which contemplates that an order either allowing the Application to be proceeded with or rejecting the same ought to be passed within a period of 14 days from the date of issuance of the notice. If this is not done, then the Settlement Applications are deemed to be allowed to be proceeded with. In any event, if the Settlement Commission was to reject the Settlement Applications of the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner No.1. Respondent No.1 is the Union of India and Respondent Nos.2 and 3 are the Officers of Respondent No.1 exercising powers and discharging duties conferred upon them under the provisions of the Customs Act, 1962. Respondent No.4 is the Settlement Commission which is constituted under the provisions of section 32 of the Central Excise Act, 1944 and inter alia deals with the settlement of cases in accordance with the provisions of Chapter XIVA of the Customs Act, 1962. (b) In the ordinary course of business, the Petitioners imported four consignments of certain electronic components and in respect of which the Petitioners filed four Bills of Entry, the particulars of which have been set out in paragraph 4 of the Petition. According to the Petitioners, the goods covered by the said Bills of Entry were duly assessed and allowed to be cleared by the proper Officer of the Nhava Sheva Customs on payment of duty. (c) In view of the purported intelligence allegedly received by Respondent No.2, investigations were initiated against the Petitioners alleging that electronic components (DVD parts) were imported by the Petitioners (in addition to the four consignments), using ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2014 on the issue of the admissibility of the Applications. However, on that day, the matters were adjourned and new date was fixed on 28th October, 2014. (g) Pending the hearing of the above Settlement Applications, a Corrigendum / Addendum dated 8th August, 2014 was issued by Respondent No.2 whereby the demand made pursuant to the said show-cause notice dated 31st October 2013, inter alia, was sought to be revised from ₹ 5,66,05,713/- to ₹ 13,02,06,668/-. By the said Corrigendum / Addendum, certain other amendments to the said show-cause notice dated 31st October, 2013 were sought to be made. According to the Petitioners, the said Corrigendum / Addendum was issued based on the alleged report dated 20th November, 2013 received by Respondent No.2 from the Hong Kong Customs through the Consulate General of India allegedly giving the value of the imported goods declared at the port of shipment before the Chinese Customs. The alleged report gave the alleged value of the 22 consignments, out of the said 24 consignments, which was the subject matter of the said show-cause notice dated 31st October, 2013 before the Chinese Customs by the exporters. The demand was ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and is liable to be quashed and set aside by us. He submitted that Chapter XIV-A of the Customs Act, 1962 deals with settlement of cases. Section 127B of the Act allows any importer / exporter or any other person to approach the Settlement Commission by way of a Settlement Application for settlement of his case. This, of course has to be done before the adjudication of the show-cause notice which would be the subject matter of settlement. The proviso to section 127B(1) stipulates the conditions of filing the Application before the Settlement Commission. Thereafter, section 127C talks about the procedure to be followed on receipt of a Settlement Application under section 127B of the said Act. Mr Prakash Shah laid great stress on section 127C(1) and argued that once the Settlement Application has been filed, the Settlement Commission shall, within seven days from the date of receipt of the said Application, issue a notice to the Applicant to explain in writing as to why the Application made by him should be allowed to be proceeded with. After taking into consideration the explanation provided by the Applicant, the Settlement Commission shall, within 14 days of the notice, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of this Act, pass such order as it thinks fit on the matters covered by the Application and any other matter relating to the case not covered by the Application but referred to in the report under subsection (3) or sub-section (4). He submitted that this order as contemplated under section 127C(5), is a final order, which is an order passed on merits and not an order passed under section 127C(1) which is on the admissibility of the Settlement Application. 8. Mr Prakash Shah also drew our attention to the impugned order itself which states that the impugned order has been passed under section 127C(5) of the Customs Act 1962. This being the case, he submitted that the Settlement Applications of the Petitioners could not have been rejected on the ground that they were inadmissible and this was a grave error on the part of the Settlement Commission. He submitted that in the facts of the present case, admittedly the Applications were filed on 27th May, 2014 and a notice as required under section 127C(1) was issued to the Petitioners within a period of seven days from the receipt thereof. The second notice was issued by the Settlement Commission on 23rd September, 2014 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the impugned order is liable to be set aside and the matter be remanded back to the Settlement Commission for a de novo hearing and on merits. 11. On the other hand, Mr Jetly, learned counsel appearing on behalf of the Revenue, sought to support the impugned order. He submitted that looking to the record before the Court as well as before the Settlement Commission, it was all along the Petitioners who were well aware that their Settlement Applications were not admitted. Mr Jetly drew our attention to the record and proceedings held on 28th October, 2014 as well as 4th March, 2015 whereunder it was clear that the Petitioners were aware that the Bench was hearing the matter on the issue of admissibility of the Settlement Applications. He submitted that looking to the fact that admittedly the full duty as also required under the Corrigendum was not paid by the Petitioners, the Settlement Commission was fully justified in coming to a finding that the Settlement Applications filed by the Writ Petitioners were not admissible under section 127B of the Customs Act, 1962 in view of the fact that they had not complied with the conditions and stipulations stated therein. Conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification, undervaluation 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 28-AB: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove). Section 127B was amended much thereafter by Finance (No.2) Act, 2014 w.e.f. 6th August, 2014. Hence, even though section 28-AB was deleted from the statute books w.e.f. 8th April, 2011, a reference to the same still continued in section 127B till 6th August, 2014, when section 127B was amended. The reason why we are mentioning this is because when the Settlement Applications were filed by the Petitioners (i.e. on 27th May, 2014), reference to section 28-AB continued in section 127B even though the said section was deleted w.e.f. 8th April, 2011 and section 28-AA was substituted in its place. 15. Thereafter comes section 127C which prescribes the procedure to be followed on receipt of a Settlement Application under section 127B. Section 127C, in so far as the same is relevant for our purpose, reads thus:- 127-C. Procedure on receipt of an application under Section 127-B.-(1) On receipt of an application under Section 127-B, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant to explain in writing as to why the application made by him should be allowed to be proceeded with and after taking i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (3), and the report, if any, of the Commissioner (Investigation) of the Settlement Commission under sub-section (4), and after giving an opportunity to the applicant and to the Commissioner of Customs having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner of Customs and Commissioner (Investigation) under sub-section (3) or sub-section (4). (6) . (7) . (8) . (9) . (10) .. 16. Section 127C(1) clearly stipulates that on receipt of an Application under section 127B, the Settlement Commission shall, within seven days from the date of receipt of the Application, issue a notice to the Applicant to explain in writing as to why the Application made by him should be allowed to be proceeded with. After taking into cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e report of the Principal Commissioner of Customs or Commissioner of Customs and Commissioner (Investigation) under sub-section (3) and/or sub-section (4). 17. Looking at the entire scheme of section 127C, what becomes clear is that it contemplates two orders being passed. The first order is passed under section 127C(1). Whilst passing this order, the Settlement Commission simplicitor examines whether the Settlement Application should be allowed to be proceeded with. If not, then the Settlement Commission rejects the Application on the ground that it is not compliant with the mandatory provisions of section 127B. If no order is passed as contemplated under section 127C(1) within a period of 14 days, as stipulated in the said section, then the Application shall be deemed to have been allowed to be proceeded with. This order under section 127C(1) is an order that is passed at the threshold and the Settlement Commission is not required to discuss the merits of the case at all. Once the threshold bar is crossed, it is only thereafter that the Settlement Commission shall proceed to call for a report as contemplated under section 127C(3) and / or section 127C(4). After perusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement Commission was of the opinion that the Settlement Application filed by the Petitioners ought not to be proceeded with, there was no question of calling for any report as contemplated under section 127C(3). The fact that the report was called for by the Settlement Commission under the provisions of section 127C(3) would itself show that the Settlement Applications of the Petitioners were deemed to be allowed to be proceeded with. It was then not open to the Settlement Commission to reject the Settlement Applications on the ground that they are not admissible. If it wanted to dismiss or reject the Applications of the Petitioners, they ought to have done it on merits. However, the operative part of the impugned order states that the Settlement Applications filed by the Petitioners are all rejected as inadmissible under section 127B of the Customs Act, 1962. This to our mind, could not have been the procedure adopted by the Settlement Commission. Another factor that one needs to take note of is that the impugned order itself records that it is an order passed under section 127C(5). As set out earlier by us, an order passed under section 127C(5) is the final order passed on the Se ..... 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