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TMI Blog2025 (1) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... application under Section 127B of the Act. In terms of Section 127C(1) of the Act, the Settlement Commission is required to issue a notice to the applicant to explain why its application should be allowed. After taking into consideration the said explanation, the Settlement Commission is required to pass an order either to proceed with the application or reject the same. A copy of the said order is required to be sent to the Principal Commissioner of Customs or Commissioner of Customs having the jurisdiction. The Principal Commissioner of Customs or the Commissioner of Customs, as the case may be, is required to furnish a report within thirty days on receipt of communication from the Settlement Commission. Sub- section (4) of Section 127C of the Act empowers the Settlement Commission to direct further enquiry or investigation if it considers apposite and records the reasons in writing. Sub-section (8) of Section 127C of the Act also expressly provides that an order passed under Sub-section (5) of Section 127C of the Act shall provide for terms of settlement including payment by way of duty, penalty or interest and the manner in which the sums shall be paid - In the present case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tlement of a case under Section 127B of the Act, were disposed of. 2. The petitioners also impugn the constitutional validity of the Notification No. 18/2015-Cus dated 01.04.2015 (hereafter the Notification) as being discriminatory and arbitrary. The petitioners claim that the said notification is beyond the statutory mandate of the Act read with the Customs Tariff Act, 1975 (hereafter the CT Act). 3. Additionally, the petitioners impugn the recovery proceedings initiated by the respondents for recovery of dues as determined. 4. Petitioner no.1 is a company named M/s. KBS Industries Limited (hereafter KBS) and petitioner no. 2 is a director of KBS. The petitioners filed an application under Section 154 of the Act seeking rectification of the impugned order to the extent that it imposed the interest of Rs. 1,15,13,067/- (Rupees One Crore Fifteen Lacs Thirteen Thousand and Sixty-Seven only), which was rejected. The Settlement Commission held that the rectification of errors under Section 154 of the Act is confined to arithmetical or clerical errors and the petitioners application was beyond the scope of the Section 154 of the Act. The Settlement Commission found that there was no cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the intelligence to the aforesaid effect was gathered by the Officers of the Customs (Preventive) Commissionerate. Accordingly, search operations were carried out at the premises of KBS (Plot No.418, HSIIDC Phase-1, Barhi Industrial Area, Sonepat, Haryana-131001 and Plot No. F-1730, DSIIDC, Narela Industrial Area, Delhi - 110040) on 08.06.2017. It is stated that during the course of search, 1500 Kgs of copper scrap was found at Sonipat premises, however, no stocks of goods imported were found. The search was also conducted at the office premises of KBS. 13. Thereafter, the summons was issued to petitioner no. 2 and his premise (House No. 24/70, West Punjabi Bagh, New Delhi) was also searched on 15.06.2017. During the search, statement of petitioner no. 2 was recorded under Section 108 of the Act. He acknowledged that the goods imported under the Advance Licenses were sold in the local market. 14. The impugned order records that on enquiries, petitioner no. 2 claimed that the goods were sold in the local market due to financial crisis and he was ready to pay the custom duty alongwith interest and penalty. After making necessary enquiries, the custom officials ascertained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Arjun Anand, Director of M/s. KBS Industries Ltd. is hereby called upon to show cause to the Principal Commissioner of Customs (Preventive), New Custom House, Near IGI Airport, New Delhi within 30 days of the receipt of this notice, as to why penalty should not he imposed on him under Section 112 and/or114A and 114AA of the Customs Act, 1962, for the acts of omission. 16. In the aforesaid context, the petitioner company filed an application under Section 127B of the Act before the Settlement Commission for settlement of the disputes arising in connection with the show cause notice dated 16.07.2021. KBS was the main applicant and petitioner no. 2 was a co-applicant. 17. It is material to note that the petitioners accepted their liability to pay an amount equal to the duty leviable along with the interest at the rate of 15% per annum from the date of clearance of the said materials in terms of the notification dated 01.04.2015. However, the petitioners disputed that the said goods imported were liable for confiscation. The Settlement Commission disposed of the petitioners application in terms of the impugned order. 18. The impugned order notes that certain discrepancies were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable Interest paid by Applicant Balance amount of Interest payable 1 0510399488/17.08.2016 67,27,232.57 0.00 67,27,232.57 2 0510395142/31.07.2015 47,85,834.29 20,00,000 27,85,834.29 Total 1,15,13,066.86 20,00,000 95,13,066.86 9.3 The applicant vide his letter dated 01.01.2024 submitted a duly certified calculation sheet by a chartered accountant and claimed that the total duty saved/foregone against Advance Authorization No. 0510395142 was Rs. 96,24,379/ only and that only balance amount of duty of Rs. 1,69,009/- and interest of Rs. 81,819/- is payable by them. In the calculation sheet in respect of Advance Authorization no 0510395142 dated 31.07.20215 the applicant accepted interest liability of Rs 46,39,280.07 and claimed to have paid Rs.44,70,270.88 of its interest liability. As regards to Advance Authorization no 0510399488 dated 17.08.2016, though no such calculation sheet was provided but the applicant accepted interest liability of Rs. 29,87,477 68/-. 9.4 The Commissioner (Inv.) carefully examined the reports submitted by both sides and submitted as under: (i) That against Advance Authorization No. 0510395142 dated 31.07.2015, the applicant imported the impugned goods under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is an established fact that duty and interest go together. In the instant case, the applicant has accepted the duty liability and the records show that there was delay in payment of the same therefore the applicant cannot escape from payment of interest thereon. (viii) In the instant case, the applicant, M/s KBS Industries Ltd. has failed to discharge export obligation and the department has provided date wise details of the interest payable from such relevant date as prescribed under the said Notification. Therefore, the total interest payable by the applicant is Rs. 1,15,13,066.86/ (Rs.67,27,232.57 for Advance Authorization No.0510399488 + Rs.47,85,834.25/- for Advance Authorization No.0510395142) Out of which, the applicant has already paid Rs 20,00,000/- and balance amount of interest Rs.95,13,067/- is yet to be paid by the applicant. The details have been verified as per provisions of the Customs Act, 1962 and found in order. 23. The petitioners were once again given an opportunity to be heard in the context of the report submitted by the Commissioner under Section 127C (4) of the Act. 24. After hearing the petitioners, the Settlement Commission passed the impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CT Act. It is contended that since there is no statutory provision for payment of interest on the said duties, interest as imposed by the impugned order which is stated to include interest on the said duties is erroneous and contrary to law. It is submitted that although an order passed under Section 127C (5) of the Act cannot be challenged on merits, the same is untenable if it is not in accordance with the provisions of the Act. 26. The learned counsel for the petitioners rested her submissions on the decision of the Bombay High Court in Mahindra Mahindra Ltd. vs. Union of India 2022 SCC OnLine Bom 3155 . She also pointed out that the Special Leave Petition (SLP) preferred by the Revenue against the said decision [ SLP(C) Diary No. 18824/2023 ] was dismissed as the Supreme Court had found no merit in the said petition. [Union of India and Others v. Mahindra Mahindra Ltd. 2023 SCC OnLine SC 1435] . 27. At the outset, it is relevant to bear in mind the Scheme of Chapter XIV-A of the Act which contains provisions regarding Settlement of Cases. In terms of Section 127B of the Act any importer, exporter or any other person may in respect of a case relating to him make an application b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) or Sub-section 4 of Section 127C of the Act. 32. Section 127J of the Act expressly provides that an order of settlement shall be conclusive as to the matters stated therein. Section 127C of the Act and Section 127J of the Act are set out below for ready reference: 127C. Procedure on receipt of an application under Section 127B. ( 1) 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 and after taking into consideration the explanation provided by the applicant, the Settlement Commission, shall, within a period of fourteen days from the date of the notice, by an order, allow the application to be proceeded with or reject the application, as the case may be, and the proceedings before the Settlement Commission shall abate on the date of rejection: Provided that where no notice has been issued or no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with. (2) A copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Principal Commissioner of Customs or Commissioner of Customs and Commissioner (Investigation) under sub-section (3) or sub-section (4). (5A) The Settlement Commission may, at any time within three months from the date of passing of the order under sub- section (5), amend such order to rectify any error apparent on the face of record, either suo motu or when such error is brought to its notice by the jurisdictional Principal Commissioner of Customs or Commissioner of Customs or the applicant: Provided that no amendment which has the effect of enhancing the liability of the applicant shall be made under this sub-section, unless the Settlement Commission has given notice of such intention to the applicant and the jurisdictional Principal Commissioner of Customs or Commissioner of Customs as the case may be, and has given them a reasonable opportunity of being heard. *** *** *** (7) Subject to the provisions of section 32A of the Central Excise Act, 1944 (1 of 1944), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re for settlement of cases and not for adjudication of disputes. In the circumstances, it is not open for an applicant to dissect the order passed by the Settlement Commission or to seek merit review of the such an order. Since the nature of the order passed under Section 127C of the Act is that of a settlement of a case, the applicant is required to accept the same in its entirety. 34. Sub-section (8) of Section 127C of the Act also expressly provides that an order passed under Sub-section (5) of Section 127C of the Act shall provide for terms of settlement including payment by way of duty, penalty or interest and the manner in which the sums shall be paid. 35. In the present case, the impugned order expressly provides that the order would be void and immunities granted would be withdrawn if the petitioners fail to comply with the order. 36. Given the nature of the order passed under Section 127C of the Act which is in the nature of a settlement it would not be permissible to dissect the same and accept that parts of the order which are favourable to the applicant while rejecting the other directions which are not. The order of Settlement Commission must be accepted in entirety. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of interest in respect of countervailing duty and special additional duty levied under Sections 3 and 3A of the CT Act. The court found that there was no statutory provision enabling levying of interest on such duties and therefore the same was impermissible. However, it is necessary to note that the case settled by the order of the Settlement Commission in that case pertained to four show cause notices alleging that the petitioner had not declared the entire amount payable in connection with the goods imported, which amounted to misdeclaration with an intent to avoid payment of custom duty. In the given facts, the court found that no interest was payable on the countervailing duty or the special additional duty. However, the present case is clearly distinguishable on facts from the case in Mahindra Mahindra Ltd. v. Union of India (supra). The petitioners case is not based on any misdeclaration of the duty payable on goods; it arises on account of failure on the part of the petitioners to satisfy the export obligations. 40. The petitioners had availed of a scheme, which enabled the importer to import material against advance authorization without payment of any custom duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. 42. Section 25(1) of the Act expressly empowers the Central Government to impose such conditions as may be specified in the notification, for exempting goods of any specified description from the whole or any part of duty of customs leviable thereon. In the present case, admittedly, KBS had imported goods for the purpose of export without payment of custom duty, additional duty, safeguard duty and anti-dumping duty, subject to the conditions as stipulated in the Notification dated 01.04.2015. The petitioners had availed the benefit of the said Notification and had bound themselves to comply with the conditions as stipulated in the said Notification. 43. As noted above, one of the conditions required the importer to execute bond with such security or surety in such form as may be specified binding the importer to pay on demand an equal amount to the duty leviable on the imported material along with interest at th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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