2016 (4) TMI 1106 - HC - Customs

Court quashes DRI's Corrigendum/Addendum on duty demand classification, allows revival of settlement applications

The court quashed the Corrigendum/Addendum issued by the Directorate of Revenue Intelligence (DRI) after the Customs and Central Excise Settlement ... Exclusive jurisdiction to exercise the powers of customs officers under Section 127F(2) of the Customs Act - validity of corrigendum/Addendum issued during pendency of settlement proceedings - quashing of action for lack of jurisdiction - settlement proceedings before the Customs and Central Excise Settlement Commission (CCESC)Exclusive jurisdiction to exercise the powers of customs officers under Section 127F(2) of the Customs Act - validity of corrigendum/Addendum issued during pendency of settlement proceedings - Whether the Corrigendum/Addendum dated 12th August, 2014 issued by the DRI to the SCN dated 20th December, 2013 was valid in view of the CCESC having decided to proceed with the petitioners' settlement applications. - HELD THAT: - The Court noted that the CCESC by its order dated 24th April, 2014 had allowed the applications to be proceeded with under the settlement provisions. Once the CCESC decided to proceed, Section 127F(2) vested the Commission with exclusive jurisdiction to exercise the powers and perform the functions of any officer of customs in relation to the case until a final order under the settlement provisions. The DRI's contention that the CCESC's order was passed without hearing it did not entitle the DRI to issue a Corrigendum altering classification and enhancing duty while the Commission was seized of the matter; if aggrieved by the CCESC order the DRI had recourse to challenge that order in accordance with law. Therefore the Corrigendum/Addendum dated 12th August, 2014, which effected a substantive change in classification and duty demand after the CCESC had decided to proceed, was issued without jurisdiction and cannot be sustained. [Paras 13, 14, 15]The Corrigendum/Addendum dated 12th August, 2014 is quashed as being without jurisdiction in view of the exclusive jurisdiction of the CCESC under Section 127F(2).Settlement proceedings before the Customs and Central Excise Settlement Commission (CCESC) - forum for challenging actions during pendency of settlement - Whether the petitioners were required to challenge the Corrigendum/Addendum before the CCESC. - HELD THAT: - The Court observed that the question of the CCESC deciding the validity of a Corrigendum which could not lawfully have been issued while the Commission was seized does not arise on these facts. Because the Corrigendum itself was void for want of jurisdiction, the contention that petitioners should have first agitated its validity before the CCESC was misconceived. The Court accordingly declined to remit the question of validity to the CCESC. [Paras 16]The petitioners were not required to first challenge the Corrigendum before the CCESC because the Corrigendum could not lawfully have been issued while the CCESC had exclusive jurisdiction.Final Conclusion: The writ petition is allowed: the Corrigendum/Addendum dated 12th August, 2014 to the SCN dated 20th December, 2013 is quashed for want of jurisdiction; the petitioners may revive their application before the CCESC in terms of the CCESC order dated 23rd January, 2015; no order as to costs. Issues:Challenge to Corrigendum/Addendum dated 12th August, 2014 issued by DRI to SCN dated 20th December, 2013.Analysis:1. Facts and Background: The petitioners challenged a Corrigendum/Addendum issued by the Directorate of Revenue Intelligence (DRI) to a Show Cause Notice (SCN) dated 20th December, 2013. The petitioners were accused of importing old photocopier machines by undervaluing them, resulting in customs duty evasion.2. Settlement Commission Proceedings: The petitioners filed applications for settlement before the Customs and Central Excise Settlement Commission (CCESC) in April 2014, which were allowed to proceed. However, during the settlement process, the DRI issued the impugned Corrigendum/Addendum in August 2014, changing the duty demand classification.3. Jurisdiction of Settlement Commission: The main contention was whether the CCESC, after deciding to proceed with the applications, had exclusive jurisdiction as per Section 127F(2) of the Customs Act, 1962, to deal with the case.4. Validity of Corrigendum/Addendum: The court held that the DRI had no jurisdiction to issue the Corrigendum after the CCESC decided to proceed with the applications. The Corrigendum changing the duty demand was deemed unsustainable and contrary to the Act.5. Misconceived Submission: The argument that the petitioners should have challenged the Corrigendum before the CCESC was dismissed, as the CCESC had exclusive jurisdiction at that stage, and the DRI should not have issued the Corrigendum.6. Granting Liberty to DRI: The court noted a submission by the respondent's counsel seeking liberty for the DRI to challenge the CCESC's order from 2014. The court refrained from commenting on this, leaving it to the appropriate forum if the DRI decides to challenge the order.7. Court's Decision: The court quashed the Corrigendum/Addendum dated 12th August, 2014, and allowed the petitioners to revive their application before the CCESC as per the CCESC's order from January 2015. The writ petition was allowed with no order as to costs.This detailed analysis covers the issues involved in the legal judgment, outlining the background, proceedings before the Settlement Commission, jurisdictional questions, validity of the Corrigendum, and the court's final decision.