Legal principle

A settlement before the Customs Settlement Commission under Section 127B operates only for the declarant and confers no automatic immunity from penalty on co-noticees, whose liabilities are separate and severable under the Customs Act.

Court decision

The Division Bench dismissed both appeals, holding that no substantial question of law arose and thereby sustaining the Section 112(a) penalties of ₹23,00,000 and ₹13,00,000 against the appellant. It found no infirmity in the Tribunal's decision upholding the penalties, rejected the contention that co-noticee settlements conferred any benefit on the appellant, and rejected the challenge to jurisdiction, expressly declining to agree with the Madras High Court's view in A.M. Ahamed & Co.

Facts

The appellant, a Dubai-based exporter of confectionery items (wafers, cookies, toffees), was penalised after DRI found that Indian importers (M/s S.R. International and M/s Jai Maa Ambey Impex) evaded duty by under-invoicing consignments — clearance was taken on a lower-value invoice while the balance consideration was collected by the appellant's Indian agent in cash/hawala. Show cause notices dated 16.06.2014 and 11.08.2014, issued by the Additional Director, DRI, culminated in orders-in-original dated 06.05.2016 and 29.04.2016 imposing penalties of ₹23,00,000 and ₹13,00,000 respectively on the appellant under Section 112(a) for abetting duty evasion. Several co-noticees settled their liability before the Settlement Commission under Section 127B, but the appellant contested the proceedings, and the Commissioner (Appeals) and the Tribunal upheld the penalties.

Key provisions

• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 127B, Customs Act, 1962 — Application for settlement of cases
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 122, Customs Act, 1962 — Adjudication of confiscations and penalties
• Section 127C(5), Customs Act, 1962 — Procedure on receipt of an application under Section 127B
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases