TaxTMI 
TaxTMI 
2002 (8) TMI 688
X X X X Extracts X X X X
X X X X Extracts X X X X
..... (ii) Whether the amount indicated by the applicant as admitted liability can be varied by the Settlement Commission, keeping in view the correct legal proposition relating to the facts referred to in the application and in accordance with the legal provisions in the Customs & Central Excise laws. (iii) What is the correct and proper construction of the term 'on matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the Commissioner of Customs or the Commissioner of Investigation under sub-section (1) or sub-section (6) appearing in sub-section (7) of Section 32F of the Central Excise Act, 1944/Section 127C of the Customs Act, 1962. (iv) Whether the law empowers the Settlement Commission to increase the amount of duty disclosed in the application either on account of calculation mistake made in the Show Cause Notice or on account of new issues arising in course of settlement proceedings or incorrect application of law or otherwise in the Show Cause Notice. 2. M/s. Crest Communication Ltd. have filed an application before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; Shri V.S. Nankani, Advocate 7. Shri T. Viswanathan, Advocate 8. Shri Sanjay Notani, Advocate 9. Shri A.K. Chatterjee, Advocate 10. Shri Vipin Kumar Jain, Chartered Accountant 11. Shri K.M. Mondal, Consultant 3.3 At the outset, Shri Doiphode, Advocate, submitted that the question of interpretation of classification may be involved in this case as it appears that the Commissioner (Inv.) has in his report worked out the duty based on a classification, different from the ones given in the Bills of Entries under which the goods were cleared. Accordingly, the application was not entertainable. At this juncture, the Advocate for the applicant stated that the Special Bench is concerned with the four questions framed and any specific reference to the application filed by M/s. Crest Communications will have to be addressed when the application filed by the said applicant is taken up. Shri Doiphode said he will address the Bench when his turn comes up. 3.4 Shri Chatterjee, Advocate, thereafter ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istant Commissioner by Section 31 of the Act". According to the Advocate, when the words are repeated in a legislation, then the interpretation already given to these words are binding. Hence the Settlement Commission has no powers to enhance the duty liability beyond Show Cause Notice amount, as the limits in the Show Cause Notice sets the fetters on the Adjudicating Authority. He further pointed out the limitation set out under Section 28(2) of the Act. According to the Advocate, as laid down in (1982) 137 ITR 415 even the Appellate Tribunal cannot remit a case back to the Adjudicating Authority for enhancement of the duty liability. He went on to say that even though an application for settlement can be made without a Show Cause Notice, the expression "any other matter relating to the case" used in the Section 127C(6) would only mean such matters covered in the Show Cause Notice but not mentioned in the settlement application. Since the Settlement Commission has to pass orders in accordance with the provisions of the Act, as laid down in Section 127C(7), and in view of the fetters placed in Section 28(2) of the Act, any order by the Settlement Commission enhancing duty liability....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....7.2 In so far as questions (2) and (3) are concerned, he said that Section 127C(7) talks of matters not covered in the application and not in the Show Cause Notice. Section 127C(7) is not worded "...... And any other matter relating to the case not covered by the application....." 3.7.3 With reference to Qn. (4), he stated that any mistake in the Show Cause Notice, the Department can rectify by issue of corrigendum and deal with it. But once an application is admitted, the exclusive jurisdiction rests with the Settlement Commission to deal with the case but confined to the issues raised in the Show Cause Notice only, as is evident from Section 127C(6). 3.8 Shri Vipin Jain, C.A. submitted that the final settled amount cannot be less than the admitted amount as there is no provision for refund. Conversely, the Commission cannot raise the duty liability more than Show Cause Notice amount. The settlement has to be between the amount in the Show Cause Notice and admitted in the application. The receipt of Show Cause Notice has been made a statutory requirement so that the contours of the dispute is well defined, and the Settlement Commission has to confine within t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... unearthed the hidden elements in the application by investigation and so long as the same is relevant to the case before the Commission, the same can be made use of by the Commission. 3.9.2 With reference to the fourth question, his view is that the Commission is not bound by the disclosure in the application and that new issues can be considered if they relate to the case. According to him, mention of wrong rate of duty in the Show Cause Notice is a clerical mistake which can be corrected under Section 154 as held by the Kerala High Court in 1996 (83) E.L.T. 41 (Ker). The Commission can correct the error in the notice and decide the case. 3.10 Shri Rohan Shah, Advocate submitted that the proceedings start with the issue of Show Cause Notice. The applicant may admit an amount which may be either more or less than the Show Cause Notice amount. The applicant admits a duty liability based on his conception of law, decisions rendered by different judicial fora, arithmetic etc. and in the process he is expected to be immaculately accurate and if he slips then he is condemned as not having made a full and true disclosure; whereas the Revenue can commit any mistake and it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pulated therein. 4.3 Section 127C deals with admission of the case, payment of admitted liability, examination of the case and thereafter drawing out the terms of settlement. The Settlement Commission has no inherent power to review its own order of settlement in as much as there is no statutory provision to the said effect. In the case of Paul Industries (India) this Bench vide Order No. 9A/CUS/2001 dated 4-12-2001 rejected the miscellaneous application filed by the Applicant praying to withdraw and/or modify and/or vary the final order dated 2/8-8-2001 passed by the Commission. The said miscellaneous application was rejected not being in accordance with the law and also on merit The Hon'ble High Court of Mumbai vide their Order dated 25th February 2002 dismissed in limine the Writ Petition No. 267 of 2002 filed by M/s. Paul Industries against the aforesaid order of settlement dated 4-12-2001 of this Commission. 4.4 Section 127F deals with power and procedure of Settlement Commission whereas 127H deals with grant of immunity from prosecution, penalty, interest etc. when the applicant has cooperated with the Settlement Commission and made a full and true disclosure.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been committed; Provided also that no application under this sub-section shall be made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975 (51 of 1975). (2) Where any dutiable goods, books of account, other documents or any sale proceeds of the goods have been seized under Section 110, the applicant shall not be entitled to make an application under sub-section (1) before the expiry of one hundred and eighty days from the date of the seizure. (3) Every application made under sub-section (1) shall be accompanied by such fees as may be specified by rules. (4) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant." 4.8 Sub-section (6) of Section 127C - "Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner of Customs having jurisdiction and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion to such Bill of Entry or Shipping Bill, a Show Cause Notice need to have been issued; (2) The additional amount of duty disclosed and accepted as payable is more than Rs 2 lakhs; (3) The matter covered in the application should not be pending in the Tribunal or any Court; (4) No application can be made if the matter of settlement is covered in relation to goods to which Section 123 of the Act applies or to goods in relations to which any offence under Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed; (5) Matters dealing with interpretation of the classification of goods under the Customs Tariff Act, 1975 is outside the purview of the Settlement Commission. 5. From the aforesaid stipulation, it is apparent that the full and true disclosure of the duty of Customs is in relation to assessment documents and not in relation to the Show Cause Notice issued though the issue of Show Cause Notice is one of the conditions before approaching the Settlement Commission. 5.2 To our mind, it appears that the conditions for issuing of S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion, the Hon'ble Supreme Court was considering certain assessment orders served on the assessee appellants and demand notice issued to them. The Appellant in that case had also approached the Settlement Commission and the Settlement Commission passed the order of settlement thereon. The Hon'ble Supreme Court has observed as below : - "It is a settled principle in law that the Courts while construing Revenue Acts have to give a fair and reasonable construction to the language of a statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process, the Courts must adhere to the words of the statute and the so-called equitable construction of those words of the statute is not permissible. The task of the Court is to construe the provisions of the taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the taxpayer is brought within the net he is caught, otherwise he has to go free. This principle....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the application. This is sine qua non for grant of immunity by the Settlement Commission. 5.8 It is incumbent on the Settlement Commission to satisfy itself that the applicant has made a full and true disclosure of duty liability. The Karnataka High Court had held in the case of N. Krishnan v. Settlement Commission & Others - (1989) 180 IT (Kar) that the Commission is a forum for self surrender and seeking relief and not a forum for challenging the legality of assessment order or orders passed in any other proceedings. The Hon'ble High Court further observed that this is not only evident from the provisions of the Act, which prevents the application made from being withdrawn as also the provision which makes the decision of the Settlement Commission final and conclusive both on the questions of law and fact. The power conferred on the Settlement Commission is so wide that it can take any view on any questions of law which it considers appropriate having regard to the facts and circumstances of a case which would be applicable only to that case and it has also the power to give immunity against prosecution or imposition of penalty. 5.9 The Hon'ble High Court of M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....219) ITR 618 (S.C.) and has concluded as below: - "38. The Commission is of the view, after considering the overall facts and circumstances of this case and the submissions of both the Applicant's Advocate as well as of Revenue, that Commissioner (Investigation), has sought to extend the scope of the Show Cause Notice, in his report, which is legally incorrect. This is fully borne out by the decision of the Hon'ble S.C. in CIT v. Paharpur Cooling Towers Pvt. Ltd. --ITR 618 (1996). The Commission is of the considered view that it cannot go beyond the period and the quantum of duty demanded as specified in the Show Cause Notice, in "the case" before it, for settlement and rejects the Commissioner (Investigation), recommendations in this regard as legally untenable." 6.4 The aforesaid conclusion has to be viewed with reference to facts of that case. In para 21, the Principal Bench has clearly observed that "the Commissioner (Inv) in his report has stated that both the Show Cause Notice figures and the computation of the quantity on which duty has been demanded are not actual clearance but is a derived figure of actual production which has been assumed to have been clea....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Trust etc. The decision of the Commission is conclusive in nature. As such, the Settlement Commission has a wide discretionary power to draw the terms of settlement. 6.8 The Learned Advocates in course of their pleadings had referred to certain decisions of the Courts in relation to the powers of the Adjudicating/Appellate Authority where it has been held that such authorities cannot travel beyond the show cause notice. For instance, in the Hukkumchand Mills Ltd. v. CIT - 1967 (63) ITR 232 (SC), the Hon'ble Court has held that the term "passed orders as the Tribunal thinks fit" does not cover the power of enhancement of duty liability. For this purpose, as rightly pointed out by the Learned Consultant that the law in relation to the Tribunal as contained in Chapter XV of the Customs Act stipulates that the Appellate Tribunal cannot increase the liability of the applicant without giving proper notice to the affected parties. In other words, it implies that with the consent of the affected parties, the tribunal can enhance the liability. In view of this, the decision of the Hukkumchand Mills Ltd. referred to supra is not in all fours with the laws and facts relating to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r to grant consequential relief, if any." 6.9 The Settlement Commission is to order terms of settlement after observing the principles of natural justice. There is transparency in the proceedings before the Settlement Commission in as much as both the affected parties remain present. The procedural law governing Settlement Commission stipulates for providing a copy of the report of the Commissioner, a copy of the report of Commissioner (Investigation), content of sealed cover tendered by the applicant etc. to the affected parties on payment of appropriate fees or otherwise. As rightly brought to the notice of the Bench, the decision of the Supreme Court in the case of Diwan Brothers v. Central Bank of India and Benarasi Debi v. Income-tax officer is quite appropriate. In the case of Diwan Brothers v. Central Bank of India, Bombay - AIR 1976 SC 1503, the Hon'ble Supreme Court has held as below : "20. Apart from the above considerations, it is a well settled principle of interpretation of statutes that where the Legislature uses an expression bearing a well-known legal connotation it must be presumed to have used the said expression in the sense in which it has been s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ult and the disclosure will not normally breed further tax evasion. Each individual case can be considered on its merits and full disclosures not only of the income but of the modus operandi it build up can be insisted on, thus sealing off chances of continued evasion through similar practices." 6.10.2 The recommendation of the Wanchoo Committee has been quoted with approval by the Hon'ble Supreme Court in the case of CIT (Central) v. B N. Bhattacharjee and Another - 1979 (S.C.2)-GJX-0299-S.C. 6.11 From the aforesaid, it is apparent that the Settlement Commission is an extra-ordinary body as distinct from the appellate channel provided in taxing statute. The Settlement Commission has extra-ordinary powers to arbitrate and comes to a settlement instead of making an assessment. To make the settlement effective, the Settlement Commission is vested with the power to grant immunity not only from fine, penalty and interest but also from prosecution under any Central Act. In short, it is an unique organisation created with a view to collect revenue in exchange of the protracted litigation. The dispute redressal machinery by way of Settlement Commission is short, simple and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aw. Even the law bends before justice." 6.12.3 In view of what is stated above, we are of the considered view that if the facts and circumstances of a particular case require the Commission to travel beyond the Show Cause Notice, in the interest of justice to either of the parties before the Commission, there cannot be any objection to go beyond the SCN, on the ground that the Commission is barred from going beyond the Show Cause Notice. 7. In view of the legal position enumerated supra, the issues referred to Special Bench for decision can be answered as below :- (i) Under the statutory provisions applicable to settlement of Customs and Central Excise cases, whether the applicant can disclose more than the amount mentioned in the Show Cause Notice. Ans.: The Applicant has inherent right to disclose any amount above Rs. 2 lakhs as the disclosure is related to the assessment documents and not in relation to the Show Cause Notice. The Show Cause Notice may or may not have covered all the issues or the entire amount in as much as it is the Applicant who knows what is the amount not paid by him. Besides, the Applicant has exclusive kn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s determines the CIF value and thereafter by adding to it landing charges to the extent of 1% of the CIF value, determines the assessable value for the purposes of assessment of duty. Later, this case is brought to the Commission by the importer for settlement. After admission of the application, the Commission finds from the report of the Commissioner that the assessable value would be more than what has been determined by the assessing officer in as much as during the investigation, the department has found that the importer has actually paid more freight and insurance which have not been disclosed before the proper officer earlier. Consequently, the admitted liability falls short of the actual liability. In this situation, the Commission cannot ignore the report of the Jurisdictional Commissioner or the Commissioner (Investigation) in as much as the report is the statutory requirement in terms of sub-section (6) and sub-section (7) of Section 127C of the Customs Act, 1962. If it is not taken into account, the report of the Commissioner would be merely an empty form....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d full disclosure of his duty liability and the Applicant can always go beyond the SCN. (ii) My answer to query No. 2 will again be in the affirmative as the Commission can always vary the amount admitted by the Applicant after going through the records and arguments in the case. However, the Commission shall not be justified in going beyond the SCN as once a SCN is issued and is not revised within available time by the department, neither the department nor the Commission can go beyond it, and the law of Estoppel (under Section 115 of Evidence Act, 1872) shall also apply against the department. (iii) The term "on the matters covered by the Applicant and any other matter relating to the case not covered by the Applicant but referred in the report of the Commissioner of Customs or Commissioner (Inv.) under sub-section 1 of sub-section 6" is to be construed with respect to "case before the Commission". The case starts with the issue of SCN to the Applicant. Within the limits of the SCN, the department or the Commission can decide the amount of duty liability of the Applicant as also the amount of penalty, fine and interest to be charged....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the time of admission as well as the time of final hearing. It is the Commission who has to decide the exact amount of duty to be settled which can be between the amount mentioned in SCN and the amount admitted by the Applicant. If the Revenue has committed a mistake in not demanding full duty and time limit for issuing further demand has lapsed, there is no remedy in law and it becomes like a bad debt. The Commission cannot assume powers to increase this amount. But if the applicant is not willing to pay the same voluntarily, the Commission can always sent the case back to the department on ground that applicant is not making true and full disclosure of his duty liability and is not cooperating with the Commission in disclosing the correct amount. The Commission cannot assume itself the power to go beyond the SCN, which in law is not there with the Commission. The various judgments quoted in the detailed order above and also the quotation from Wanchoo Committee and from some books, generally relate to Income Tax Cases where the mode of assessment is quite different as there is no SCN or demand notice under Income Tax Act which only passes assessment orders on the returns filed by ....