TaxTMI 
TaxTMI 
2017 (5) TMI 743
X X X X Extracts X X X X
X X X X Extracts X X X X
.... states that the power to grant immunity against criminal prosecution is to be used sparingly and in deserving cases and that the present case is not one of misclassification or mis-declaration but one in which respondent no. 1 offered to pay the differential unpaid tax only after incriminating evidence for prosecution had been gathered by the petitioner. The learned counsel relied on the principle laid down in CIT vs. B.N. Bhatacharya 1979 (118) ITR 461 (SC) wherein the court held that, "It is not to provide a rescue shelter for big tax-dodgers who indulge in criminal activities by approaching the Settlement Commission." The second ground on which the impugned order is challenged is that the settlement commission has erred in overlooking the fact that during settlement proceedings, it is not for the petitioner to establish respondent no.1's guilt beyond reasonable doubt; instead it was for the licence holder to establish its innocence apropos the issues raised in the show cause notice. The learned counsel further contended that the aspect of over invoicing of CD ROMs and Audio CDs could only have been appreciated after a full trial and the settlement commission is not the appropri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purchased CD ROMs from M/s Rainbow Technology, USA @ US$ 0.83 to $2.18 per piece. These titles were in turn supplied to the respondent @ US$ 2.5 per piece and invoices were supplied to M/s Inter Metallco, Singapore. The learned counsel for the petitioner argues that these transactions would bear evidence to the fact that M/s Multi Sync Trends as well as M/s Inter Metallco were aware of the actual value of CD ROMs, but were still prepared to import these titles by themselves and through their sister concern i.e. M/s Multimedia Intertrade and M/s. Indam Marketing at highly inflated prices. The petitioner alleged that, interestingly, most of the CD ROMs were lying unsold in warehouses in the USA. The petitioner had also alleged a relationship between M/s Indam Marketing owned by Mr. Ravi Gupta, who was also an employee of M/s Multi Sync Trends at the time when the CD titles had been purchased from the original copyright holder M/s Rainbow Technologies. The counsel alleged that Mr. Ravi Gupta was aware of the actual value of the CD ROMs yet he purchased them at 20 times the value and argued that there would be no justifiable reason for M/s. Multi Sync Trends, USA to bear such huge loss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs who had later exported the said goods at much higher prices than the export prices of Padmini. Reference was made to the example of M/s. Crown International, to whom Padmini had sold the CDs at a price of Rs. 640/- per piece which were exported by the former at Rs. 730/- per piece. Ultimately the proceedings against M/s Crown International were dropped, after accepting their FOB value of $18 per piece. Padmini, like the other 8 exporters before the Settlement Commission, had relied upon the aforementioned catalogue indicating the prevalent prices reflecting the value of the software in the market. The parties before the Settlement Commission had argued that the price of the CDs is not merely the basic cost of the CD plus replication cost but involves the software development, marketing and other overhead costs. Therefore, it was stated that "the value declared under Section 14 of the Act is that price at which the goods or the like goods are ordinarily sold or are offered for sale for delivery at the time and place of importation or exportation in the course of international trade, where the buyer and seller have no interest in the business of each other and the price is the sol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e fact that the applicant is alleged to have got certain trading concerns floated in the US to get their product disposed of, does not by itself establish mutuality of interest in the business of each other between the applicant and the said trading concern, got floated by others in the US, without any indication of flow back of money to the applicant. As against the actual repatriation of funds through bank remittances indicated by the applicant, the Revenue has failed to establish the extent of overvaluation and the manner in which it was got funded, inspite of the much lower actual sale price, though there is a reference to the allegation of over invoicing of certain imports, which is in the process of adjudication. 10.3 The applicant's plea that though the market for that product nose-dived in 1997, they still managed to persuade the purchasers to abide by the contract and honour payment is not without force. The success in getting proceeds repatriated should not boomerang against the exporter. It is also not in dispute that the moneys had come through banking channels indicating the invoices they pertained to. 10.4 The Bench also observes that the SCN does not propose to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llect duty on the imported goods. 9. The majority view of the three judge Bench in the Settlement Commission was that the evidence brought forward by the revenue regarding over-valuation did not conclusively prove Revenue's case. It held that: "Padmini" had made subsequent compliance of both the provisions of Exim Policy prevalent at the relevant time as well as Customs Notification NO. 203/92-Cus dated 19.5.1992 as amended by way of fulfilling the export obligation in respect of 16 out of 25 advance licences obtained during November, 1996 to March, 1997. Further they found that while no imports were made against 7 of the remaining advance licences and out of 7, no export were made against only one licence No. 83515 in respect of which the applicants have derived duty benefit of Rs. 33,37,257/- (RS.19,06,300/- + Rs. 13,76,937/-). The majority disagreed with the Chairman's view that a penalty of Rs. 10.00 lakhs and Rs. 5.00 lakhs should be imposed upon Padmini and its Managing Director Mr. Vivek Nagpal, respectively. 10. Hence, the matter was settled for additional duty liability of Rs. 33,37,257/- as admitted by Padmini to the extent of its failure to fulfil its export obl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....solve the essential problem pointed out by the Supreme Court in the Sayed Ali case, which is the absence of the assigning of functions to 'proper officers' under Section 2(34) of the Act. The even more serious problem is the impossibility of reconciling two contradictory provisions, viz., Explanation 2 to Section 28 and Section 28(11) of the Act. 67. The words 'this Section' in the newly inserted sub-section (11) of Section 28 obviously refers to Section 28 as enacted with effect from 8th April 2011 and not the Section 28 which existed prior to that date. The effect of Section 28(11) is to treat all officers of the Customs to be 'proper officers' only for the purposes of new Section 28 of the Act and not the earlier Section 28 of the Act. In particular, there is no validation of the SCNs issued prior to the amendment of Section 28of the Act. As observed in Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan (supra), a legal consequence cannot be deemed nor, therefrom, can the events that should have preceded it. The past actions of the officers of the DRI and DGCEI who are not designated as 'proper officer' in issuing SCNs for the period prior to 8th April 2011 ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not limited to customs officers, without any limits as to territorial and subject matter jurisdiction and in such event the provision would be vulnerable to being declared unconstitutional. 70.3 As regards the period subsequent to 8th April 2011, it is evident that if the administrative chaos as envisaged by the Supreme Court in Sayed Ali (supra) should not come about, there cannot be any duplicating and/or overlapping of jurisdiction of the officers. It would have to be ensured through proper co-ordination and administrative instructions issued by the CBEC that once a SCN is issued specifying the adjudicating officer to whom it is answerable, then that adjudication officer, subject to such officer being a 'proper officer' to whom the function of assessment has been assigned in terms of Section 2 (34) of the Act, will alone proceed to adjudicate the SCN to the exclusion of all other officers who may have the power in relation to that subject matter. 70.4 The question as to the constitutional validity and effect of Section 28 (11) of the Act is answered accordingly." 14. During the proceedings when the locus standi of the petitioner was questioned, they impleaded th....