Customs interest on suppressed short levy may be included in settlement without fresh notice, Bombay HC holds.

Interest on short-levied customs duty arising from suppression or wilful misstatement is compensatory and follows by operation of law. The Settlement Commission could include such interest in the terms of settlement because its jurisdiction extends to matters covered by the application and other case-related issues, including duty, penalty and interest. On that basis, the direction to pay interest was within jurisdiction and the challenge failed. The judgment did not decide whether a fresh notice would be required where a person was not before the Settlement Commission.

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Issues: Whether the Settlement Commission had jurisdiction to direct payment of interest on short-paid customs duty without a fresh show cause notice, where the short levy arose from suppression of facts and wilful misstatement.

Analysis: Interest under the customs scheme is compensatory and becomes payable by operation of law where duty is short levied or not levied due to suppression or wilful misstatement. The settlement mechanism empowers the Commission to pass orders on matters covered by the application and any other matter relating to the case, and to include terms of settlement concerning duty, penalty, and interest. The Commission also has the powers of the customs for the purpose of settlement. Since the case itself involved a duty demand arising from suppression, interest was part of the settlement controversy and could be directed without requiring a separate notice for that component. The question whether a fresh notice is necessary in a situation where a person is not before the Settlement Commission was not decided.

Conclusion: The direction to pay interest was within jurisdiction and the challenge to it failed.

Ratio Decidendi: Where short-levied customs duty is found to arise from suppression or wilful misstatement, interest follows by statutory operation and the Settlement Commission may include such interest in the terms of settlement within its jurisdiction under the Customs Act, 1962.

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