Settlement bar under Customs Act failed for diamond-studded jewellery, allowing confiscation, redemption, penalties and limited immunity.

For settlement under the Customs Act, the bar in the proviso to Section 127B turns on whether the seized goods are goods to which Section 123 applies; diamond-studded jewellery was not treated as falling within Section 123 merely because gold formed its base. The objections based on incomplete disclosure, absence of import/export documents, and classification were rejected, so the applications were maintainable. On merits, the record showed concealment and attempted smuggling of jewellery, supporting confiscation and penalty, but redemption was permitted because Section 123 did not apply. The Commission settled the duty, interest, fine and penalties, and granted limited immunity, including immunity from prosecution on compliance.

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Issues: (i) Whether the applications for settlement were barred by the proviso to Section 127B of the Customs Act, 1962 on the ground that the seized goods were goods to which Section 123 applied and on the ground of alleged incomplete disclosure; and (ii) whether, on merits, the seized goods were liable to confiscation and the applicants were liable to penalty, with a right to redemption and ancillary immunity.

Issue (i): Whether the applications for settlement were barred by the proviso to Section 127B of the Customs Act, 1962 on the ground that the seized goods were goods to which Section 123 applied and on the ground of alleged incomplete disclosure.

Analysis: The legislative history of Section 123 showed that diamonds and manufactures of diamonds had been deleted from its ambit by amendment, and the nature of the seized jewellery had to be examined on its own character rather than by treating every diamond-studded article as manufacture of gold. The goods were therefore held not to fall within Section 123 merely because gold formed a base metal. The objection based on the lone watch was also rejected. The objection of incomplete disclosure was not accepted because the applications were confined to the show cause notice covering the live seizure and the separate proceeding for past consignments had been kept distinct by the Revenue itself. The objection based on absence of Bill of Entry or Shipping Bill and the objection on classification were also rejected.

Conclusion: The applications were held maintainable and not barred by Section 127B.

Issue (ii): Whether, on merits, the seized goods were liable to confiscation and the applicants were liable to penalty, with a right to redemption and ancillary immunity.

Analysis: The record established a deliberate attempt to conceal and smuggle high-value jewellery into India and to facilitate its sale through the showroom. Since the goods were held not to be covered by Section 123, there was no legal bar to redemption under Section 125. The applicants were found liable for confiscation and penalty on the basis of the contraventions alleged in the show cause notice, while the Commission also settled the duty, interest, fine and penalties and granted limited immunity in accordance with the settlement framework.

Conclusion: The seized goods were ordered to be confiscated with redemption on payment of fine and duty, and penalties were imposed, subject to the immunities granted in settlement.

Final Conclusion: The settlement applications were allowed to be proceeded with and finally disposed of by settling the duty, fine, interest and penalty liabilities, while granting partial immunities and full immunity from prosecution on compliance with the adjudged dues.

Ratio Decidendi: For purposes of the settlement bar in Section 127B, the decisive question is whether the goods themselves are goods to which Section 123 applies; diamond-studded jewellery is not automatically treated as manufacture of gold merely because gold forms its base, and maintainability depends on the statutory classification of the goods under Section 123, not on a stretched construction of the proviso.

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