TaxTMI 
TaxTMI 
2026 (8) TMI 537
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....the Interim Board remained non-functional and incapable of exercising jurisdiction for want of quorum ought to be excluded while computing the statutory period prescribed for disposal of the pending settlement proceedings. 2. The controversy in the present Petition is whether the Petitioner's settlement proceedings could have been treated as abated under Section 127C(12) of the Customs Act, 1962 when the Interim Board itself had admittedly ceased to function for want of quorum, resulting in its inability to pronounce orders despite the proceedings having been finally heard and reserved for orders. FACTUAL MATRIX: 3. In order to appreciate the controversy involved in the present Petition, the relevant facts, in brief, are required to be noticed. 4. The Petitioner is engaged in the business of import of components used in the manufacture of cellular mobile phones and allied products. Pursuant to an investigation conducted by the Directorate of Revenue Intelligence ['DRI'], two separate Show Cause Notices, both dated 21.09.2023, came to be issued against the Petitioner by the jurisdictional customs authorities. 5. While the first Show Cause Notice No. 27/2023-24SJ/PC/AC....
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....mained to be done on the part of the Petitioner insofar as the settlement proceedings were concerned. 9. Before any final orders could be pronounced, one of the Members constituting the Interim Board for Settlement-I, Delhi retired from service on 30.09.2025. As a consequence, with effect from 01.10.2025, the Interim Board admittedly ceased to possess the requisite quorum and became incapable of proceeding further with the pending settlement proceedings or of rendering a final decision thereon. 10. It is an admitted position that despite the aforesaid loss of quorum, no steps were taken for a considerable period to restore a duly constituted Interim Board capable of exercising jurisdiction under Chapter XIVA of the Customs Act. In view thereof, the Petitioner addressed a communication dated 02.03.2026 seeking information regarding the status of the pending settlement applications. In response, the office of the Interim Board, vide communication dated 12.03.2026, expressly informed the Petitioner that the settlement applications remained pending for disposal "for want of quorum since 01.10.2025". 11. Proceeding on the basis that the statutory period prescribed for disposal ....
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.... that the Respondents, having themselves failed to ensure the continued functionality of the statutory adjudicatory forum, could not deprive the Petitioner of the statutory remedy of settlement on account of such institutional incapacity. 13.3. It was submitted that Section 127C(12) of the Customs Act cannot be construed in a purely literal or mechanical manner so as to bring about an automatic abatement of settlement proceedings where the statutory authority itself had become incapable of functioning. It was contended that the statutory period prescribed for disposal of the settlement applications necessarily presupposes the existence of a duly constituted Interim Board competent to hear and decide the proceedings. According to the learned counsel, where the Interim Board remained legally incapable of exercising its jurisdiction for want of quorum, the period during which such incapacity continued is liable to be excluded while computing the period prescribed under Section 127C(12) of the Customs Act. 13.4. It was further submitted that the failure of the Interim Board to pronounce its decision within the prescribed period was occasioned entirely by circumstances beyond the ....
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....ings followed automatically by operation of law, leaving no discretion either with the Interim Board or with this Court to direct otherwise. 14.2. It was further submitted that the scheme of Chapter XIVA of the Customs Act prescribes strict timelines for every stage of the settlement process. According to the learned counsel, the period specified under Section 127C(12) constitutes an absolute statutory limitation, and the statute does not confer any power upon the Interim Board or upon any other authority to extend, suspend, or exclude any part of the prescribed period on account of administrative difficulties, including the absence of quorum. 14.3. It was further contended that where the language employed by the legislature is plain and unambiguous, the Court cannot read into the statute an exception which the legislature has consciously omitted to provide. It was submitted that Section 127C(12) does not carve out any exception for circumstances where the Interim Board becomes non-functional for want of quorum. Consequently, it was argued that accepting the interpretation advanced by the Petitioner would amount to supplying words to the statute and rewriting the legislative ....
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..... It is in furtherance of this objective that the legislature has prescribed definite timelines governing the various stages of the settlement proceedings. 18. Since the controversy in the present Petition centres around the interpretation of Section 127C of the Customs Act, it would be apposite to reproduce the relevant statutory provisions: "127C. Procedure on receipt of an application under section 127B - (5) After examination of the records and the report of the Principal Commissioner of Customs or Commissioner of Customs received under sub-section (3), and the report, if any, of the Commissioner (Investigation) of the Settlement Commission under sub-section (4), and after giving an opportunity to the applicant and to the Principal Commissioner of Customs or Commissioner of Customs having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating t....
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....he application was pending shall dispose of the application in accordance with the provisions of this Act as if no application under the said section had been made: Provided that the period specified under this sub-section may, for reasons to be recorded in writing, be extended by the Settlement Commission for a further period not exceeding three months: Provided further that in respect of any application pending under sub-section (5) as on the date on which the Finance Bill, 2023 receives the assent of the President, the said period of nine months shall be reckoned from the date on which the said Finance Bill receives the assent of the President. (11) On and from the 1st day of April, 2025,- (a) the provisions of sub-sections (2), (3), (4), (5), (5A), (7), (8) and (8A) shall apply to pending applications with the modification that for the words "Settlement Commission", wherever they occur, the words "Interim Board" shall be substituted; (b) in sub-section (3), for the words "seven days from the date of order", the words "seven days from the date of receipt of the order" shall be substituted; (c) in sub-section (7), for the word....
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....n of a statute must receive a construction consistent with the object, purpose and scheme of the enactment, and that no single provision can be construed divorced from the context in which it occurs. Equally well settled is the principle that where two constructions are reasonably possible, the Court ought to prefer that interpretation which advances the object of the legislation and avoids consequences which are manifestly arbitrary, or incapable of practical implementation. 22. The scheme of Section 127C itself demonstrates that the statutory timelines are dependent upon the continued existence of a duly constituted adjudicatory forum capable of exercising the jurisdiction conferred upon it by law. The legislature has not merely prescribed a period within which the settlement proceedings are to conclude; it has simultaneously cast corresponding statutory obligations upon the Settlement Commission, and subsequently upon the Interim Board, to examine the material placed before it, afford an opportunity of hearing to the applicant as well as the jurisdictional Commissioner, evaluate the reports received under the Act, and thereafter pass an order under Section 127C(5). Thus, the ....
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.... the adjudicatory process itself. Rather, it arose because the statutory forum ceased to possess the minimum legal composition necessary to exercise its jurisdiction. A body which lacks the quorum prescribed by law cannot validly undertake any adjudicatory function, much less pronounce a final order determining substantive rights of the parties. 26. The submission advanced on behalf of the Respondents proceeds upon a purely literal reading of Section 127C(8A). According to the Respondents, once no order stood passed within the prescribed period, the consequence of abatement necessarily followed by operation of law, irrespective of the reasons which prevented the Interim Board from rendering its decision. Attractive though the submission may appear at first blush, this Court is unable to persuade itself to accept such an interpretation. 27. Acceptance of the aforesaid submission would lead to consequences which the legislature could never have intended. It would mean that notwithstanding the complete absence of a legally constituted Interim Board competent to exercise jurisdiction, the statutory clock would continue to run against the applicant. In other words, although the ap....
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.... not advance the object of Chapter XIVA but would, on the contrary, defeat it. 30. Equally, this Court finds no merit in the contention that exclusion of the period during which the Interim Board remained non-functional would amount to rewriting the statute. Courts do not rewrite legislation when they construe a statutory provision in a manner consistent with its object, scheme and practical operation. The exercise undertaken by this Court is not one of adding words to the statute, but of identifying the conditions which are necessarily implicit in the working of the statutory framework itself. The requirement that the prescribed period must be a period during which the Interim Board is legally capable of exercising its jurisdiction flows naturally from the scheme of Section 127C and is indispensable for giving meaningful effect to the legislative intent underlying the settlement mechanism. 31. The above interpretation is also consistent with settled principles governing statutory limitation. Unless the statute expressly provides otherwise, time cannot be permitted to run against a litigant during a period when the authority entrusted with adjudication is itself legally disab....
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....at the period during which the Interim Board remained legally disabled from exercising the jurisdiction vested in it is excluded while computing the prescribed period. The applicant does not thereby secure any additional advantage beyond that which the statutory scheme itself contemplates, namely, consideration of the settlement application by a duly constituted adjudicatory forum within the period available after excluding the duration during which the Interim Board remained incapable of exercising jurisdiction. 35. Any other interpretation would produce the anomalous result that although the settlement applications had been duly admitted, the parties had been heard, the proceedings had been reserved for orders, and nothing further remained to be done on the part of the applicant, the entire settlement proceedings would nevertheless stand extinguished solely because the statutory authority itself became incapable of functioning. Such a consequence would not only defeat the very object of the settlement mechanism but would also permit an administrative inability to render the statutory remedy itself illusory. The Court must avoid an interpretation which leads to such unreasonabl....