Court decision

The petition was allowed. The Court held that the demand notices dated 12.10.2001 issued by the Joint Director General of Foreign Trade read with the Deputy Commissioner's letters dated 14.2.2001 are proceedings covered by the definition of 'case' in Section 127-B/127A(b), and the petitioners' settlement applications were maintainable. Subject to the petitioners paying the balance customs duty of Rs.11,87,456.39 (Rs.65,82,370.39 less Rs.53,94,914 recovered) within one month, the Settlement Commission's orders dated 14.5.2003/14.6.2003 were quashed and the Commission was directed to entertain the Section 127-B applications on merits, leaving interest, fine/penalty, prosecution and para 71 disentitlement open.

Facts

Mahendra Petrochemicals Ltd., a polyester yarn manufacturer, imported 2,62,500 kgs of chips/inputs under an Advance Licence dated 15.9.1998 with an export obligation of 2,50,000 kgs of yarn, clearing the goods against a Bill of Entry showing basic customs duty and SAD as Nil. A crash in international yarn prices left it unable to export, so it disposed of the material in the domestic market, and the Customs department encashed bank guarantees of Rs.53,94,914 furnished at licence registration. Demand notices dated 12.10.2001 issued by the DGFT office advised payment of customs duty of Rs.65,82,370.39 plus 24% interest on the unutilized imported material, failing which the petitioners would be declared defaulters under para 71 of the Import Policy 92-97. The petitioners' four applications under Section 127-B were rejected by the Settlement Commission (orders dated 14.5.2003/14.6.2003) on the ground that no show cause notice had been issued by a 'proper officer' under Section 2(34), DGFT officers not being Customs officers. The petitioners challenged those orders before the Gujarat High Court under Article 226.

Key provisions

• Section 127, Customs Act, 1962 — Award of confiscation or penalty by customs officers not to interfere with other punishments
• Section 2(34), Customs Act, 1962 — Definitions
• Section 127A, Customs Act, 1962 — Definitions