2011 (3) TMI 1310 - HC - Customs

Court sets aside Settlement Commission's order for disregarding investigation report, orders reconsideration based on evidence.

BOND STORES PVT. LTD. Versus CUS. & C. EX. SETTLEMENT COMMISSION

BOND STORES PVT. LTD. Versus CUS. & C. EX. SETTLEMENT COMMISSION - 2011 (272) E.L.T. 366 (Mad.) Issues Involved:1. Challenge to the Final Order dated 28-2-2008 by the Settlement Commission.2. Compliance with Section 127C of the Customs Act.3. Allegations of inconsistent and incomplete disclosures by the petitioner.4. Consideration of the Commissioner (Investigation)'s report.5. Payment and encashment of bank guarantees by the petitioner.6. Applicability of the Supreme Court decision in Union of India v. Anil Chanana.Issue-wise Detailed Analysis:1. Challenge to the Final Order dated 28-2-2008 by the Settlement Commission:The petitioner sought a writ of certiorarified mandamus to quash the Final Order dated 28-2-2008 issued by the Settlement Commission and to direct the first respondent to reconsider the application on merits with the assistance of the Commissioner (Investigation). The Settlement Commission had remitted the case back to the jurisdictional Customs Officer under Section 127-I of the Customs Act, stating that the petitioner did not make a full and true disclosure of facts, leading to the present writ petition.2. Compliance with Section 127C of the Customs Act:The Settlement Commission admitted the petitioner's case and directed an investigation under Section 127C(6). The Commissioner (Investigation) conducted a thorough investigation and submitted a detailed report. The relevant provisions of Section 127C outline the procedure for handling applications, including calling for a report from the Commissioner of Customs, allowing the application to proceed, and conducting further inquiries if necessary. The Settlement Commission is required to pass orders based on the investigation report and materials presented.3. Allegations of inconsistent and incomplete disclosures by the petitioner:The Settlement Commission concluded that the petitioner did not make full and true disclosures, citing contradictions and inconsistencies in the information provided. The petitioner contended that the variations in the figures were due to errors in the department's calculations, which were corrected during the investigation. The petitioner argued that there was only one disclosure at the time of application, and the subsequent clarifications were part of the investigation process, not additional disclosures.4. Consideration of the Commissioner (Investigation)'s report:The Commissioner (Investigation) submitted a detailed report, which included a working sheet showing the calculations of duty demanded and admitted. The report scaled down the original demand from Rs. 1,69,22,099 to Rs. 70,97,432.42. The Settlement Commission, however, ignored the investigation report and concluded that the petitioner made multiple inconsistent disclosures. The court found that the Settlement Commission failed to consider the investigation report on its merits, which was a crucial error.5. Payment and encashment of bank guarantees by the petitioner:The petitioner had paid part of the duty before the issuance of the show cause notice and provided bank guarantees for the balance amount. The Settlement Commission directed the Revenue to encash the bank guarantees, which the department delayed. The investigation report confirmed that the admitted liability was discharged by the petitioner, contradicting the department's claim of non-compliance.6. Applicability of the Supreme Court decision in Union of India v. Anil Chanana:The Settlement Commission relied on the Supreme Court decision in Union of India v. Anil Chanana, which dealt with false disclosures in a compounding application under Section 137(3) of the Customs Act. The petitioner argued that this case was not applicable, as the facts differed significantly. The court agreed, noting that the petitioner's case involved admitted liability and compliance with the Settlement Commission's directions, unlike the false disclosures in the Anil Chanana case.Conclusion:The court found that the Settlement Commission erred in ignoring the investigation report and wrongly concluded that the petitioner made multiple inconsistent disclosures. The court set aside the Settlement Commission's order and remitted the matter back for reconsideration based on the evidence and the investigation report. The writ petition was allowed, and the connected miscellaneous petition was closed.