Legal principle

The Settlement Commission under Chapter XIV-A has a very wide jurisdiction to entertain all kinds of settlement applications under Section 127B — including cases involving fraud or mis-declaration — provided the mandatory conditions of filing a Bill of Entry/Shipping Bill, issuance of a related show cause notice, and full and true disclosure of the undisclosed duty liability are satisfied; the reference to 'short levy on account of misclassification or otherwise' is only a procedural particular, not a limit on jurisdiction.

Court decision

The Court held that the Settlement Commission has a very wide jurisdiction to entertain all kinds of settlement claim applications under Section 127B, including cases involving fraud or mis-declaration, subject only to the mandatory requirements of filing a Bill of Entry/Shipping Bill, issuance of a related show cause notice, and full and true disclosure of the undisclosed duty liability, with liberty to reject applications even at the preliminary stage. Rule was discharged in all five Government writ petitions and made absolute in all five private-party writ petitions; the Court respectfully disagreed with the Madras High Court's narrower view.

Facts

Ten writ petitions were decided together on the common issue of the jurisdiction of the Settlement Commission constituted under Chapter XIV-A of the Customs Act, 1962. In Writ Petition No. 115/2004, the respondents imported duty-free raw material under the DEEC Scheme which was not used in the manufacture of export products, and the Department alleged a systematic fraud over several years by manipulation of records, showing about 12% wastage when it was admittedly not more than 4.16%, and sale of imported goods in violation of licence conditions. Seven show cause notices were issued to the respondents under Sections 111(d), 111(m), 111(o), 112, 113, 114, 114A and 117 read with Section 28 of the Customs Act, though for two of them the amount involved was below Rs. 2 lakhs so the Settlement Commission had no jurisdiction over them. The Union of India filed five writ petitions contending the Settlement Commission's jurisdiction was very narrow, while private parties filed five writ petitions contending it was wide.

Key provisions

• Section 127B, Customs Act, 1962 — Application for settlement of cases
• Section 127, Customs Act, 1962 — Award of confiscation or penalty by customs officers not to interfere with other punishments
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 127H, Customs Act, 1962 — Power of Settlement Commission to grant immunity from prosecution and penalty
• Section 127A(b), Customs Act, 1962 — Definitions
• Section 114, Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Section 113, Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases