2020 (3) TMI 775 - HC - Customs

High Court overturns Settlement Commission's rejections, remits for reconsideration

KRISHNA ASHTEKAR Versus CUSTOMS & C. EX. SETT. COMM., CHENNAI

The High Court set aside the orders of the Settlement Commission rejecting the applications and remitted the matters back for reconsideration. The Court ... Import of vehicle bearing Chassis Number - specific discrepancy noticed was that the payment of interest, which is mandatory for maintaining the settlement application before the Commission, had not been effected - HELD THAT:- No order in terms of Section 127C(1) has been passed in this matter, rejecting the application at the threshold. However, as the application has been allowed to be proceeded with for final hearing, it is deemed to have been admitted in terms of the proviso to Section 127(1). The legal and logical result of this sequence of events is that the application has been found to be proper and maintainable, the SC presumably being satisfied prima facie with the explanations offered at that stage - No doubt, the question regarding payment of interest on merits will stand reserved for detailed decision at the time of final hearing. However, since the condition for both maintainability, as well as the legal issue raised on merits, are one and the same in this case, the Commission ought to have adjudicated the matter on merits in full and rendered a speaking order on this issue. All the impugned orders of the Settlement Commission is set aside and the matters remitted back to its file - petition disposed off. Issues Involved:1. Challenge to orders of the Settlement Commission rejecting applications under Section 127C(5) of the Customs Act, 1962.2. Maintainability of settlement applications due to non-payment of interest under Section 28AB of the Customs Act.3. Alleged collusion between the petitioner and the importer.4. Requirement for the Settlement Commission to adjudicate on merits.5. Erroneous basis for rejection of applications by the Settlement Commission.Detailed Analysis:1. Challenge to Orders of the Settlement Commission:The petitioners challenged the orders of the Settlement Commission dated 10-12-2008 and 12-12-2008, which rejected their applications under Section 127C(5) of the Customs Act, 1962. The petitioners had imported a used Toyota Prado vehicle and faced issues related to the declaration of the chassis number and the payment of customs duty.2. Maintainability of Settlement Applications:The Settlement Commission raised a query regarding the maintainability of the applications, specifically focusing on the non-payment of interest as mandated under Section 28AB of the Customs Act. The Commission noted that one of the conditions for maintainability was that the additional customs duty along with interest should have been paid at the time of filing the application. The petitioner argued that interest under Section 28AB could only be demanded from the importer and not from a subsequent purchaser. The Commission, however, concluded that the petitioner was liable for the interest and dismissed the application as not maintainable.3. Alleged Collusion Between the Petitioner and the Importer:The investigation revealed that the petitioner had colluded with the importer in violating the terms of the Public Notice No. 3, dated 31-3-2000. The petitioner had entered into a lease agreement with the importer and an intermediary, which led to the seizure of the vehicle and the issuance of a show cause notice. The Commission distinguished the petitioner's case from another case (Puneet Bhatia) where the assessee had not colluded with the importer. The Commission concluded that the petitioner had colluded with the importer, making the application non-maintainable.4. Requirement for the Settlement Commission to Adjudicate on Merits:The High Court noted that the issue of maintainability and the legal issue of liability to interest were intertwined. The Commission should have adjudicated the matter on merits and rendered a detailed order on the issue of interest liability. The Court observed that since the condition for maintainability and the legal issue on merits were the same, the Commission should have provided a comprehensive decision on the merits of the case.5. Erroneous Basis for Rejection of Applications:For the respondents in W.P. Nos. 3053 and 3054 of 2009, the Settlement Commission had rejected their applications on the erroneous basis that the petitioner had previously approached the Commission for the same cause of action. This understanding was factually incorrect, and the High Court directed that the matter be heard de novo by the Commission.Conclusion:The High Court set aside the impugned orders of the Settlement Commission and remitted the matters back to its file. The Court directed the parties to appear before the Commission, and the Department was instructed to compute and communicate the interest payable to the petitioners. Upon remittance of the interest, the Commission was to consider the waiver of penalty and prosecution alone, in accordance with law, and pass orders within four weeks from the date of completion of the personal hearing. The writ petitions were disposed of accordingly, with no costs.