2006 (6) TMI 127 - HC - Customs

Court Upholds Settlement Commission's Decision on Contractual Liability vs. Statutory Terms

RIVAA EXPORTS Versus UNION OF INDIA

RIVAA EXPORTS Versus UNION OF INDIA - 2007 (210) E.L.T. 664 (Guj.) Issues:1. Whether the Settlement Commission has the power to grant immunity from the payment of interest covered by a bond.2. Whether the obligation under the contract is statutory in nature.3. Whether the agreement in the form of an undertaking is a statutory contract.4. Whether the Settlement Commission was justified in remanding the matter to the adjudicating authority.Analysis:1. The primary issue in this case is whether the Settlement Commission has the authority to grant immunity from the payment of interest covered by a bond. The controversy arose when the Settlement Commission remanded the matter to the adjudicating authority, citing a decision of the Calcutta High Court. The petitioner argued that as per the terms of Notification No. 31/97-Cus., payment of interest is a statutory liability, and the bond should be treated as part of the statute. The petitioner also referred to a decision of the Bombay High Court supporting this view. The court observed that the agreement in the form of an undertaking was a contractual liability, and thus, the Settlement Commission rightly remitted the matter back for adjudication.2. The second issue revolves around whether the obligation under the contract is statutory in nature. The petitioner contended that the obligation to pay interest was statutory as per the terms and conditions of Notification No. 31/97-Cus. The court noted that the agreement between the parties, although adopting the terms of the notification, did not transform into a statutory contract. The court emphasized that the petitioner's agreement to pay interest under the undertaking remained a contractual liability, leading to the dismissal of the petition.3. The third issue concerns whether the agreement in the form of an undertaking constitutes a statutory contract. The court clarified that the undertaking was a simple agreement between the Assistant Commissioner of Customs, acting on behalf of the President of India, and the petitioner. The court highlighted that the agreement did not originate from any provisions of the Act and was purely a contractual arrangement. Therefore, the court concluded that the agreement, despite adopting the terms of the notification, did not amount to a statutory contract, reinforcing the contractual nature of the liability.4. Lastly, the court addressed the issue of whether the Settlement Commission was justified in remanding the matter to the adjudicating authority. The court analyzed the terms of the undertaking and the nature of the liability, ultimately affirming the Settlement Commission's decision to not entertain the petitioner's application and sending the matter back for adjudication. Consequently, the court dismissed the petition and rejected the connected Civil Applications.In conclusion, the judgment clarifies the contractual nature of the liability to pay interest under the agreement in the form of an undertaking, emphasizing that despite adopting statutory terms, the agreement remains a contractual obligation. The court's decision upholds the Settlement Commission's authority and underscores the distinction between statutory and contractual liabilities in customs matters.