2010 (3) TMI 372 - HC - Customs

High Court Upholds CESTAT Ruling on Settlement Commissioner's Order, Dismisses Union of India's Appeal

UNION OF INDIA Versus EAST & WEST SHIPPING AGENCY

The High Court upheld the CESTAT's reliance on the Settlement Commissioner's order, dismissing the appeal filed by the Union of India. The Court affirmed ... Suspension- Abatement in misdeclaration of goods- The show cause notice was issued to one M/s. Sonam Enterprises and M/s. Giriraj Enterprises, wherein one of the co-noticees was Pradeep H.Ambre along with 12 other persons. In the said show cause notice CHA, the respondents were not made a party. Mr. Pradeep Ambre was made a party who was holding power of attorney on behalf of the respondents. The Noticees in that case approached the Settlement Commissioner and got their cases settled. Settlement Commission granted immunity to power of attorney holder of Custom House Agent holding that conscious knowledge of mis-declaration not proved by revenue. Tribunal relying on the findings of Settlement Commission set aside the order of Commissioner revoking the Custom House Agent licence. Submissions now that Tribunal should not have relied upon Settlement Commission’s order will not affect revenue appeal against Tribunal order. Held that- Department accepted order passed by Settlement Commission. Section 11 of Code of Civil Procedure 1908 lays down that order of competent Court or Tribunal of Limited Jurisdiction operate as res judicata in subsequent suit/proceedings even if such court not competent to try subsequent suit. Findings of settlement commission if not challenged, Revenue cannot now hold the Tribunal order erroneous. Issues Involved:1. Validity of CESTAT's reliance on the Settlement Commissioner's order.2. Allegation of misconduct by Mr. Pradeep Ambre.3. Application of res judicata to the Settlement Commissioner's order.4. Jurisdiction of the Settlement Commissioner's order.Issue-wise Detailed Analysis:1. Validity of CESTAT's reliance on the Settlement Commissioner's order:The appeal was filed by the Union of India under Section 130 of the Customs Act, 1962, challenging the CESTAT's decision to set aside the Commissioner's order based on the Settlement Commissioner's findings. The CESTAT had revoked the suspension of the CHA license, concluding that the Settlement Commissioner's order, which granted immunity to Mr. Pradeep Ambre, indicated that the allegations of mis-declaration could not be substantiated. The High Court upheld CESTAT's reliance on the Settlement Commissioner's order, noting that it was a judicial order not challenged by the appellants.2. Allegation of misconduct by Mr. Pradeep Ambre:The Commissioner of Customs had suspended the CHA license of the respondents due to the alleged involvement of Mr. Pradeep Ambre in mis-declaration of goods. An Enquiry Officer confirmed the misconduct, leading to the revocation of the CHA license and forfeiture of the security deposit. However, the Settlement Commissioner found no evidence of conscious knowledge by Mr. Ambre regarding the mis-declaration, which was pivotal in the CESTAT's decision to revoke the suspension. The High Court noted that the Department did not challenge this finding, thus it stood uncontroverted.3. Application of res judicata to the Settlement Commissioner's order:The High Court emphasized the doctrine of res judicata, which prevents re-litigation of issues already decided by a competent authority. The Settlement Commissioner's order, being a judicial proceeding under Section 127M of the Customs Act, was considered final and binding. The Court referred to Section 11 (Explanation VIII) of the Code of Civil Procedure, which supports the application of res judicata even if the previous court had limited jurisdiction. Since the Department accepted the Settlement Commissioner's order without challenge, it could not contest its validity in subsequent proceedings.4. Jurisdiction of the Settlement Commissioner's order:The appellant argued that the Settlement Commissioner's order was without jurisdiction and thus void. However, the High Court rejected this argument, noting that the Department's failure to challenge the order in a timely manner meant it was accepted as valid. The Court cited precedents indicating that jurisdictional challenges must be raised promptly; otherwise, the order remains effective. The Court also highlighted that the Settlement Commissioner's proceedings are deemed judicial under the Customs Act, reinforcing the order's legitimacy.Conclusion:The High Court concluded that the CESTAT was correct in setting aside the Commissioner's order based on the unchallenged findings of the Settlement Commissioner. The appeal was dismissed, affirming the CESTAT's decision and emphasizing the finality and binding nature of the Settlement Commissioner's judicial order. The doctrine of res judicata and the procedural propriety of the Settlement Commissioner's findings were key factors in the judgment.