Legal principle

A settlement applicant under Section 127B must maintain a clear and consistent stand on its admitted liability, and where the Settlement Commission rejects an application solely because of an unexplained change of stand, the High Court may remit the matter for fresh consideration confined to the originally admitted amounts while leaving the maintainability bar under the third proviso to Section 127B(1) read with Section 123 open.

Court decision

The Court set aside the Final Order dated 16.07.2015 and remitted the case to the Settlement Commission to pass a fresh order within six months, but only on the condition that the petitioner settle by accepting the amounts originally offered as admitted liability (Rs.83,27,539 plus interest of Rs.23,82,092). The maintainability issue under the third proviso to Section 127B(1) read with Section 123 was expressly left open for the Settlement Commission to decide, and the second respondent was permitted to file objections within thirty days. The writ petition was disposed of with these observations and without costs, giving the petitioner partial relief of remand rather than an adjudication on jurisdiction.

Facts

M/s. Millions Fashion, a Chennai importer, imported cotton, rayon and poly-cot woven fabrics under DFIA licences claiming duty-free clearance under Customs Notification No.98/2009-Cus dated 11.09.2009. A Show Cause Notice dated 06.09.2013 proposed rejection of its declared values under Rule 12 of the Customs Valuation Rules, 2007 and re-determination under Rule 3, reclassification of the goods under various CTH headings, confiscation under Sections 111(1) and 111(m) read with Section 119, penalties under Sections 112(a), 114A and 114AA, and a duty demand of Rs.2,10,10,983 under Section 28(4) with interest under Section 28AA. The importer applied to the Settlement Commission under Section 127B, admitting a liability of Rs.83,27,539 plus interest of Rs.23,82,092 (total Rs.1,07,09,631), claiming to have paid it before approaching the Commission. During the hearing it sought to reduce the admitted amount to Rs.77,81,844 with proportionate interest and a refund of the excess. The Settlement Commission, by Final Order No.25/2015 dated 16.07.2015, rejected the settlement application on the ground that the petitioner had raised several contentious arguments, and this rejection was challenged in the writ petition.

Key provisions

• Section 123, Customs Act, 1962 — Burden of proof in certain cases
• Section 127B, Customs Act, 1962 — Application for settlement of cases
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Rule 3, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Determination of the method of valuation
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 119, Customs Act, 1962 — Confiscation of goods used for concealing smuggled goods
• Section 127(b), Customs Act, 1962 — Award of confiscation or penalty by customs officers not to interfere with other punishments
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• 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