Legal principle

An application under Section 127B is maintainable only upon a voluntary, full and true disclosure of concealed duty liability, and an applicant who elects settlement before the Settlement Commission cannot resile from his disclosures or cherry-pick the settlement order before higher forums.

Court decision

The Supreme Court dismissed the appeal with costs of Rs. 50,000, upholding the High Court's dismissal of the writ petition and the Settlement Commission's order sustaining the duty demand (Rs. 47,79,320 on the 8 consignments sold to Elektronik Lab, within the confirmed total of Rs. 68,78,106). The Court held the belated Sections 54/69 plea could not be entertained, though it agreed the appellant had not made a full and true disclosure, the failure of the Revenue to challenge the 08.02.2001 order allowing proceedings precluded rejection of the application at that stage.

Facts

M/s Sanghvi Reconditioners Pvt. Ltd, an importer and ship repair unit registered with the Director General of Shipping, imported multiple consignments of engineering cargo and navigational equipment (e.g., Radar System, SART, NATEX, EPIRB) declaring them as 'ship spares' and availed duty exemption under Notification No. 211/83-Cus dated 23.07.1983. Based on a December 1997 search and recovered documents, Customs issued two show cause notices demanding Rs. 3,12,030 and Rs. 65,66,076 (totalling Rs. 68,78,106), and the Commissioner of Customs (Preventive), Mumbai confirmed the duty, penalty and interest under Section 28AB by order dated 26.02.1999. Investigation showed spare parts were sold to M/s Mehta Earthmovers (10 imports) and that goods imported on purchase orders of M/s Elektronik Lab — a firm not registered with the DG Shipping — were sold to that firm, which installed them on ships of three shipping companies. The appellant withdrew its Tribunal appeal and applied under Section 127B to the Settlement Commission disclosing Rs. 20,98,786; the Commission sustained Rs. 47,79,320 duty on 8 consignments sold to Elektronik Lab, confirmed the total demand of Rs. 68,78,106, waived penalty in excess of Rs. 18 lakhs, granted immunity from prosecution, and held Section 28AB interest inapplicable to the pre-April 1995 period. The Bombay High Court dismissed the appellant's writ petition, refusing an amended plea based on Sections 54 and 69.

Key provisions

• Rule 6, Customs (Compounding of Offences) Rules, 2005 — Power of Compounding authority to grant immunity from prosecution
• Section 3, Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty