TaxTMI 
TaxTMI 
2015 (11) TMI 139
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....w Cause Notice dated 29th / 31st January, 2013. In a nutshell, it is the case of the Petitioners that after common investigation in the matter, three Show Cause Notices dated 15th October 2012, 7th December, 2012 and 29th / 31st January, 2013 were issued to issued them. To settle the claims in these three Show Cause Notices, the Petitioners filed separate Settlement Applications before the Settlement Commission. In respect of first Show Cause Notice dated 15th October 2012, the Settlement Commission allowed the Settlement Applications of the Petitioners vide its Final Order No.03/FINAL/ORDER/CUS/SK/2014 dated 29th January, 2014. However, vide the impugned orders (Exhs. 'A' and 'B' to the Petition), the Settlement Commission erroneously rejected the balance Settlement Applications arising out of the second and third Show Cause Notices dated 7th December, 2012 and 29th /31st January, 2013 respectively. Challenge is laid to these impugned orders on the ground that they violate the constitutional mandate enshrined in Article 14 of the Constitution and that they are arbitrary, unjust, erroneous on merits and passed in denial of the principles of natural justice. It is in these circumsta....
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....mber, 2012 was registered as Application No.SA(C)- 06/2013 and the discrepancies noticed therein were pointed out to Petitioner No.1. In the said notice, it was inter alia pointed out that Petitioner No.1 has not paid interest on the admitted duty liability which was a pre-condition for making an application under section 127B, failing which the Application was liable to be rejected. In this view of the matter, Petitioner No.1 was called upon to explain in writing as to why the Settlement Application filed by him should be allowed to be proceeded with. A similar notice under section 127C dated 28th August, 2013 was also issued to Petitioner No.2 wherein his Settlement Application dated 26th August, 2013 was registered as Application No.SA(C)-556/2013. 8. In reply to the aforesaid notices issued under section 127C, the Petitioners filed a detailed explanation inter alia submitting that since section 28AB of the said Act no longer remained on the Statute book, no interest under the said section had been deposited before filing the Settlement Applications. It was however submitted that they would pay/deposit the interest liability as and when determined by the Settlement Commission u....
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....n of any appeal pending in relation to the 3rd SCN before any Tribunal or Court. 12. Be that as it may, with a view to settle the claim even under the 2nd SCN and the 3rd SCN (as amended), on 26th August, 2013 the Petitioners filed separate Applications under section 127B of the said Act before the Settlement Commission by admitting the entire amount of differential duty as demanded in the said 2nd and 3rd SCNs of Rs. 18,38,658/- and Rs. 1,62,70,028/- respectively and inter alia submitted that since section 28AB of the said Act no longer remained on the statute book, no interest under the said section was paid/deposited before filing the Settlement Applications. These Applications, on behalf of Petitioner No.1 were signed by his son - Petitioner No.2. This was done because Petitioner No.1 was detained under COFEPOSA since 14th August, 2013. 13. The settlement Applications arising out of the 2nd and 3rd SCNs were numbered as SA(C)559-560/2013 and SA(C)557- 558/2013 respectively. With reference to these Settlement Applications, a statutory notice dated 29th August, 2013 under section 127C of the said Act was issued by the Settlement Commission to the Petitioners wherein the above A....
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....at the Petitioners had failed to comply with the express provisions of section 127B of the Act, the said Settlement Applications were not admissible. The Settlement Commission opined that by its notice dated 29th August, 2013 it was pointed out to the Petitioners about the non-payment of interest by them and also stated that the said Applications would be liable for rejection on that count. Since the Petitioners had not paid any interest whilst submitting their Settlement Applications on 26th August 2013, the mandatory provisions of section 127B were not complied with, and therefore, rejected the said Settlement Application Nos.SA(C)559-560/2013. Similarly, whilst rejecting the Settlement Application Nos. SA(C)557-558/2013 arising out of the 3rd SCN dated 29th /31st January 2013, the Settlement Commission opined that the Petitioners had failed to fulfill the following two conditions of section 127B, namely, (i) that no Appeal relating to the case was pending before the Appellate Tribunal; and (ii) the interest payable on the admitted duty liability had not been paid. In these circumstances, even Settlement Application Nos.SA(C)557- 558/2013 were rejected by the Settlement Commissio....
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....ommission could not have rejected the Applications on the ground that the Petitioners had not paid/deposited interest as required under section 127B of the said Act, was the submission of Mr. Shah. 19. Mr. Shah additionally submitted that though not required by law, the Petitioners themselves had given an undertaking that they would pay interest under section 28AA as and when determined by the Settlement Commission. He submitted that with reference to the Settlement Applications arising out of the 1st SCN, the exact same undertaking was given and the Settlement Commission in that case directed the Petitioners to pay/deposit a sum of Rs. 13,78,448/- towards interest, which was duly paid/deposited by the Petitioners. This is how the Settlement Application Nos. SA(C)-06/2013 & No. SA(C)-556/2013 arising out of the 1st SCN came to be allowed by the Settlement Commission. As far as the Settlement Applications arising out of the 2nd and 3rd SCN are concerned, he submitted that admittedly the Settlement Commission did not impose any condition on the Petitioners to pay/deposit any interest (as was done with reference to the Settlement Applications arising out of the 1st SCN), and therefor....
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....to the 3rd SCN was issued by Respondent No.2 under which Respondent No.2 himself recalled his erroneous ex-parte decision communicated vide the said 3rd SCN. He, therefore, submitted that the Appeal before the CESTAT had become infructuous and in fact the said Appeal has been subsequently withdrawn. In light of this, Mr. Shah submitted that there was no violation of the provisions of section 127B which inter alia stipulate that no Settlement Application shall be entertained by the Settlement Commission in cases which are pending in the Appellate Tribunal. It was only after the addendum dated 24th May, 2013 was issued, that the Petitioners (on 26th August, 2013) filed these Settlement Applications under section 127B of the said Act for settlement of the case arising out of the 2nd and 3rd SCN (as amended). In this factual background, the learned counsel submitted that the Settlement Commission was totally in error whilst dismissing the Petitioner's Settlement Application Nos. SA(C) 557-558/2013 arising out of the 3rd SCN, on this ground. For all the aforesaid reasons, Mr Shah submitted that the impugned orders were unsustainable and ought to be set aside by us in our writ jurisd....
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....ry, 2014 and 31st January, 2014 respectively. To understand the controversy raised in the present Writ Petition, it would be necessary to make note of the relevant provisions of the Customs Act. 25. Chapter XIV-A of the Customs Act, 1962 deals with settlement of cases. This Chapter contains sections 127A to 127N and was inserted w.e.f. 01-08-1998 by section 102 of Finance (No.2) Act, 1998 (21 of 1998). The object for inserting this Chapter was that the door to settlement with an errant and defaulting tax-payer should be kept open, keeping in mind the primary objective to raise revenue. The Legislature was of the view that a rigid attitude would inhibit a one-time tax evader or an unintending defaulter from making a clear breast of his affairs and unnecessarily strain the investigation resources of the Government. The settlement machinery was thus meant for providing a chance to a tax-evader who wants to turn a new leaf as recommended by the Direct Taxes Inquiry Committee, popularly known as the 'Wanchoo Committee'. Keeping the aforesaid objective in mind, this Chapter viz. Chapter XIV-A was inserted in the Customs Act, 1962 under which the Settlement Commission is constituted. 26....
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.... is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the interest shall be payable on such increased or further increased amount of duty." 27. With effect from 08-04-2011, section 28AB was deleted and replaced with section 28AA, which reads thus:- "28-AA. Interest on delayed payment of duty.-(1) Notwithstanding anything contained in any judgment, decree, order or direction of any court, Appellate Tribunal or any authority or in any other provision of this Act or the rules made thereunder, the person, who is liable to pay duty in accordance with the provisions of section 28, shall, in addition to such duty, be liable to pay interest, if any, at the rate fixed under sub-section (2), whether such payment is made voluntarily or after determination of the duty under that section. (2) Interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as the Central Government may, by notification in the Official Gazette, fix, shall be paid by the person liable to pay duty in terms of section 28 and such interest shall be calculated from the first day of the mont....
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....nt of duty accepted by the applicant in his application exceeds three lakh rupees; and (c) the applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28-AB: Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court: Provided also that no application under this sub-section shall be made in relation to goods to which section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) 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). (1-A) Notwithstanding anything contained in sub-section (1), where an application was made under sub-section (1) before the 1st day of June, 2007 but an order under sub-section (1) of section 127-C has not been made before the said date, the applicant shall within a period of thirty days from the 1st day of June, 2007 pay the accepted duty liability failin....
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....section 127B to substitute the figures and letters "28AA", for the words and figures and letters "section 28AB" to align it with the existing provision on interest on delayed payment of duty. Section 127B after its amendment in 2014, and in so far as it is relevant for our purposes reads as under :- "127-B. Application for settlement of cases. - (1) Any importer, exporter or any other person (hereinafter referred to as the applicant in this chapter) may, in respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled, in such form and in such manner as may be specified by rules, and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification, undervaluation or inapplicability of exemption notification or otherwise and such application shall be disposed of in the ....
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.... that since section 28AB no longer remained on the statute-book, no interest was paid by them under the said section. Despite this, the Petitioners had undertaken that they would pay interest under section 28AA as and when determined by the Settlement Commission. Admittedly, the Settlement Commission, whilst ordering that the Settlement Applications (arising out of the 2nd and 3rd SCNs) are allowed to be proceeded with, did not impose any condition or direct the Petitioners to pay any interest. In these circumstances, we are clearly of the view that the Settlement Commission was in error in rejecting these Settlement Applications of the Petitioners on the ground that the Petitioners had failed to pay the interest due under section 28AB as stipulated under section 127B. If section 28AB did not remain on the statute-book at all, there was no question of asking the Petitioners to pay interest under the aforesaid provision. This is more so in the peculiar facts of the present case inasmuch as the Petitioners had undertaken that they would pay interest under section 28AA, as and when determined by the Settlement Commission. In fact, this course of action was itself undertaken by the Set....
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.... According to Mr Jetly, the 2nd proviso to section 127B(1) clearly stipulates that no Settlement Application shall be entertained by the Settlement Commission in cases which are pending in the Appellate Tribunal or any Court. This being a mandatory provision and admittedly since the Appeal of the Petitioners was pending before the CESTAT, the Settlement Commission was fully justified in holding that the Petitioners had failed to fulfill the condition that no Appeal relating to the case was pending before the Appellate Tribunal. 35. On carefully perusing the papers and proceedings in Writ Petition, we find that this argument is wholly fallacious. Firstly, the 3rd SCN dated 29/31-02-2013 has not been adjudicated at all. In the said SCN, an ex-parte decision of the Additional Director General, Directorate of Revenue Intelligence was communicated to the Petitioners vide para 25(xii) thereof whereby Respondent No.2 had appropriated a sum of Rs. 41,79,324/- (out of Rs. 50,00,000/- paid by Petitioner No.1 during the course of investigations) towards the alleged duty liability on the cranes imported and assessed more than five years before the date of the 3rd SCN. It was this ex-parte dec....
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....127B(1) of the said Act. This was on the ground that the Baggage Declaration Form required to be filed, was not filed by the Petitioners, thus disentitling the Petitioners from making an application for settlement before the Settlement Commission under section 127B(1) of the Act. In the facts of that case, this Court found as a matter of fact that no Baggage Declaration Form was filed by the Petitioners before the Settlement Commission and therefore this Court held that the Settlement Commission was justified in not entertaining the application for settlement filed by the Petitioners therein. We fail to see how this judgment can be of any assistance to the revenue in the facts of the present case. The statutory provision under consideration in the said case was clause (a) of the 1st proviso to section 127B(1). In the facts of the present case, the Revenue contends that clause (c) of the 1st proviso to section 127B(1) has not been complied with. As discussed earlier, we have rejected this argument. We therefore find that the reliance placed on this judgment is wholly misplaced. 37. The next judgment relied upon by Mr Jetly is in the case of K. Amishkumar Trading Pvt. Ltd. (supra). ....
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....elief sought for refund of interest paid, or for waiver of interest. The Settlement Commission, after considering the contention that there was no power to waive interest, was pleased to direct that the interest paid by the Respondent could not be charged and therefore had to be refunded within 30 days. It was this direction of refund that was challenged by the Union of India before this Court. After considering the facts in that case, the Division Bench held that the Settlement Commission suo motu could not have ordered refund of interest in the Settlement Application of the Respondent who had not even sought for refund of interest paid, or for waiver of interest. In the facts of that case, this Court found that interest was payable under the Act, and therefore there was no question of the Settlement Commission exercising jurisdiction, directing refund of interest. This judgment, according to us, is wholly inapplicable to the facts of the present case as the issue decided therein is totally different from the one that arises before us. Be that as it may, it would be important to note that this Court, after relying upon a decision of the Supreme Court in the case of India Carbon Li....