Settlement Commission grants immunity for Rs. 57,94,748 duty liability disclosure under Customs Act

The Settlement Commission accepted the applicant's disclosure of duty liability of Rs. 57,94,748, granting immunity from penalties, interest, and prosecution under the Customs Act, 1962. The Commission directed the applicant to deposit the balance amount and noted that the disclosure, although based on a presumed PFY content rate, was considered full and true. Immunity was contingent on the order not being obtained through fraud or misrepresentation, with pending proceedings with the DGFT yet to be resolved.

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Issues Involved:

1. Show Cause Notices and Duty Demand
2. Mis-declaration of Exported Fabrics
3. Settlement Application under Section 127B of the Customs Act, 1962
4. Admission and Payment of Duty
5. Pending Proceedings with DGFT
6. Jurisdiction of Settlement Commission
7. Full and True Disclosure of Duty Liability
8. Immunity from Penalty, Interest, and Prosecution

Issue-wise Detailed Analysis:

1. Show Cause Notices and Duty Demand:
The applicant, M/s. Harco Exports (India), received two Show Cause Notices (SCN) from the Commissioner of Customs, demanding a total Customs duty of Rs. 1,36,42,260/-. The first SCN (No. S/10-1/97 SIIB) demanded Rs. 58,59,445/- for imports against six specific Advance Licenses. The second SCN (No. S/10-2/97 SIIB) demanded Rs. 77,81,815/- for imports against another six Advance Licenses.

2. Mis-declaration of Exported Fabrics:
The SCNs alleged that the applicant mis-declared the net weight and composition of the exported fabrics to avail higher duty-free import entitlements. The applicant admitted to certain mis-declarations in the Shipping Bills regarding the net weight of the fabrics.

3. Settlement Application under Section 127B of the Customs Act, 1962:
The applicant filed a settlement application on 27-7-2000, under Section 127B of the Customs Act, 1962, disclosing and admitting a duty liability of Rs. 57,94,348/-. The Commission allowed the application to proceed under Section 127C(1) and directed the applicant to deposit the balance amount of Rs. 5,94,748/-, adjusting the already deposited Rs. 52 lakhs against the admitted liability.

4. Admission and Payment of Duty:
During the hearings, the applicant confirmed the payment of the remaining amount of Rs. 5,94,748/-. The Commission noted that the applicant had used a formula similar to that of adjudicating officers in similar cases and accepted a duty liability of Rs. 57,94,748/-, based on a presumed PFY content of 25% in the exported fabrics.

5. Pending Proceedings with DGFT:
The applicant clarified that six licenses were canceled ab initio by the DGFT, and the matter was remanded for re-adjudication, which was still pending. The Revenue argued that the Commission should keep the matter pending until the DGFT issues a fresh SCN for de novo adjudication.

6. Jurisdiction of Settlement Commission:
The Commission addressed the jurisdiction issue, citing previous decisions, including the Bell Granito Ceramica Ltd. case, which established that EPCG/DEEC cases are within the purview of the Settlement Commission under Section 127B of the Customs Act, 1962.

7. Full and True Disclosure of Duty Liability:
The Commission evaluated whether the applicant's disclosure was full and true. The applicant's duty liability was based on a flat PFY content rate of 25%, which was lower than the actual content found in test reports (27.3% to 46.8%). The Commission accepted the disclosure of Rs. 57,94,748/- as full and true, noting that the actual duty liability could be around Rs. 32 lakhs if based on test reports.

8. Immunity from Penalty, Interest, and Prosecution:
The Commission granted full immunity to the applicants from penalties under the Customs Act, 1962, and from payment of interest, considering the full and true disclosure and cooperation. Immunity from prosecution under the Customs Act, 1962, and the Indian Penal Code was also granted.

Conclusion:
The Settlement Commission concluded that the applicant's disclosure of Rs. 57,94,748/- was a full and true disclosure of duty liability. The Commission granted immunity from penalties, interest, and prosecution, subject to the condition that the order would be void if obtained by fraud or misrepresentation of facts.

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