Legal principle

The Settlement Commission's power under Section 127H of the Customs Act, 1962 to waive interest extends only to interest chargeable under the Act, and cannot be exercised to waive interest payable under a statutory bond, which is contractual in character and waivable only with the consent of both parties.

Court decision

The court disposed of both writ petitions, upholding the settlement but partly succeeding the Revenue: it held the Settlement Commission does have power under Section 127H of the Customs Act to waive interest chargeable under the Act, rejecting the Revenue's contention to the contrary; however, it held the Commission wrongly equated interest payable under the bond (a contractual document at 24%, reduced to 15% from October 2002) with statutory interest, and could not waive contractual interest without the consent of both parties. The importer was directed to pay interest at 15% from the date of submission of the Bill of Entry up to payment of the first instalment and thereafter pro rata. The Commission's direction to nullify DEEC Book entries and revalidate advance licences was set aside as without jurisdiction, as such matters fall under a different Act, not the Customs Act, 1962.

Facts

Respondent No. 2 imported non-alloy steel billets and wire rods duty-free against advance licences under the DEPB scheme under Notification No. 43/2002-Cus., filing Bills of Entry showing 'nil' duty liability. Investigation revealed the goods were illegally disposed of in the domestic market instead of being used for export products, and the export obligation was never fulfilled. A show cause notice was issued under Section 124 of the Customs Act, 1962, whereafter the importers applied under Section 127B to the Settlement Commission, which admitted the application and, by final order dated 5th September 2003, computed a duty liability (largely paid), granted immunity from prosecution, fine and penalty, and directed interest at 10% with waiver of interest beyond 11th December 2002. The Commissioner of Customs (Port) challenged that final order in writ petitions seeking to unsettle the settlement.

Key provisions

• Section 127B, Customs Act, 1962 — Application for settlement of cases
• Section 127H, Customs Act, 1962 — Power of Settlement Commission to grant immunity from prosecution and penalty
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 2(2), Customs Act, 1962 — Definitions
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc