Delhi High Court
Vikram Greenlands vs Union Of India (Uoi) And Ors. on 24 February, 2006
Equivalent citations: 2006(203)ELT397(DEL)
Author: T.S. Thakur
Bench: T.S. Thakur, Badar Durrez Ahmed
JUDGMENT T.S. Thakur, J.
1. In this petition for a writ of certiorari, the petitioner assails the validity of an order dated 13th July, 2004 passed by the Customs and Central Excise Settlement Commission whereby the petitioner's application under Section 127B of the Customs Act has been dismissed. The petitioner has also assailed the validity of an order dated 31st May, 2005 passed by the said Commission whereby an application under Section 154 of the Customs Act seeking rectification of the earlier mentioned order has also been dismissed. The facts giving rise to the present proceedings may be summarised as under:
2. The petitioner is a sole proprietorship concern engaged in the business of breeding and maintaining race horses in a farm at Gurgaon in the State of Haryana. In the course of its business, the petitioner imports Stallions and brood mares to produce off-springs which are eventually used for racing purposes. The petitioner's case, as set out in the writ petition, is that a Stallion named 'Black Cash' was purchased by M/s Allan Perry Bloodstock Services in an auction held on 9th November, 2002 at a price of US$ 65,000. According to the petitioner 'Black Cash' was, subsequent to its sale, found to have serious fertility problems which fact was conveyed to the petitioner by its agent M/s Allesberry Holdings Ltd. according to whom, the Stallion could be purchased by the petitioner at a discounted price. The petitioner claims to have authorised the purchase of 'Black Cash' pursuant whereto its agent finalised the deal with the owner at a sum of US$ 8,500. 'Black Cash' was accordingly imported through Mumbai Air Cargo, Customs upon payment of customs duty on the declared value of US$ 8,500.
3. In April, 2003, The Department of Revenue Intelligence (DRI), Mumbai initiated an enquiry regarding the import value of 'Black Cash'. The petitioner appears to have furnished evidence justifying the purchase value of US$ 8,500 to the authorities which did not find favor with the authorities. Realizing the futility of any further controversy on the subject and apparently with a view to avoiding litigation, the petitioner voluntarily revised the value of 'Black Cash' to US$ 25,000 and deposited a sum of Rs. 5,25,000/- towards additional duty in April, 2003 to cover a possible liability on account of any additional duty that may be determined by the DRI in the enquiry proceedings. Nearly 5 months thereafter, the Customs authorities issued a show cause notice in which allegations of undervalued invoicing were made and which proposed to value 'Black Cash' at US$ 65,000 for which amount it was originally auctioned. The show cause notice called upon the petitioner to pay a differential duty of Rs. 12,31,922/- apart from requiring the petitioner to explain why penalty and interest should not be imposed upon the petitioner.
4. On receipt of the show cause notice aforementioned, the petitioner filed an application under Section 127B of the Customs Act for settlement of the case before the respondent Settlement Commission at Mumbai. The petitioner also made an application for transfer of the hearing of the case to principal bench of the Commission in Delhi which request was granted and the matter transferred to the principal bench for hearing and disposal. The proceedings before the Commission eventually resulted in an order dated 13th July, 2004 whereby the petitioner's application was rejected on the ground that it had not made a full and true disclosure. Aggrieved by the said order, the petitioner filed CWP No. 15478/2004 before this court which was subsequently dismissed as withdrawn by order of this court dated 6th December, 2004 as the petitioner had approached the Settlement Commission for rectification of the order passed by it. The petitioner's request for rectification was also finally dismissed by the Commission in terms of its order dated 13th May, 2005 primarily on the ground that the prayer made by the petitioner was in essence a prayer for review of the order passed by the Commission which power was not available to the Commission under the Act. The present writ petition has, in the above backdrop, assailed the correctness of the orders passed by the Commission.
5. We have heard learned counsel for the parties at length and perused the record including the orders impugned in the writ petition. On behalf of the petitioner, a two-fold submission was urged before us. It was firstly argued that the order passed by the Commission was in violation of the mandatory provisions of Section 127C of the Customs Act which envisaged a hearing to be afforded to the party seeking settlement before any final order on its application could be passed. This hearing, it was contended, was denied to the petitioner in as much as the Commission had not, after inviting the clarifications from the parties, heard the matter as it ought to have. It was contended that a hearing within the meaning of Section 127C would be incomplete if it did not encompass the entire material placed before the Commission by the parties pursuant to its directions, as was the position in the instant case. In as much as the Commission had directed the petitioner to clarify whether at the time of clearance any certificate was obtained from Port Health/Quarantine authorities regarding any defect as also the basis on which the value of the Stallion was raised to US$ 32,000, it was obligatory for the Commission to hear the matter further after such clarification had been furnished in the context of the material placed on record. It was also submitted that apart from the clarifications sought from the petitioner, even the Revenue had been asked to clarify as to how the auction price was being adopted by it for justifying its claim keeping in view the provisions of Section 14 of the Act, according to which, the price had to be the one paid to the seller abroad by the buyer (importer) in India. It was, in conclusion, argued that the parties had, in obedience to the directions issued by the Commission, furnished the requisite clarifications but since no hearing had been granted to the petitioner after the furnishing of the said clarifications, the requirement of Section 127C of the Act was not complied with, nor even the principle of natural justice.
6. The alternative submission urged on behalf of the petitioner was based on a revision of the price of 'Black Cash' to US$ 65,000 as claimed by the Revenue. It was submitted by Ms. Bina Gupta, counsel appearing for the petitioner, that the petitioner was ready and willing to pay the differential amount of duty treating the value of the Stallion to be US$ 65,000 provided the matter is given a quietus by granting immunity to the petitioner against penalty and interest etc. Ms. Gupta has, to that effect, filed an affidavit also.
7. We have given our anxious consideration to the submissions made at the bar. The only question that falls for our determination is whether the petitioner has, for the twin reasons put forth on its behalf before us, made out a case for interference with the order passed by the Commissioner. Our answer to that question is in the affirmative. The reasons are not far to seek. The Commission had, in its proceedings held on 13th May, 2005, recounted the facts giving rise to the controversy before it and the contentions urged on behalf of the parties. Having done that, it considered it appropriate to seek certain clarifications from the parties on points that were summed up in the following passage of its order passed on 14th May, 2004:
The Bench sought clarifications from the applicant on, whether at the time of clearance, any certificate obtained from the Port Health / Quarantine authorities regarding any defect, and also the basis on which they now seek to raise the value of US$ 32,000/-. He was further asked whether the applicant can given the chain of transactions including the price from the original bidder till the agent of the applicant shipped the goods. He was also asked to clarify as to the owner from whom the purchase was made, and produce the invoice issued by the said owner. It was pointed out that shipper's invoice is no substitute. Similarly, the Revenue was asked to clarify as to who the auction price is being adopted, since as per Section 14 of the Customs Act, the price is the one between the seller abroad, and the buyer (importer) in India. Both sides sought 15 days time to clarify the points. The time was allowed.
8. It is not in dispute that pursuant to the above directions, the petitioner had submitted the requisite clarification of the points mentioned by the Commission and attempted to explain the circumstances in which the price of the Stallion was discounted heavily and the declared value revised upwards by the petitioner for purposes of payment of customs duty. The clarification also referred to other comparable cases to justify the revised value declared by it. Additional documents were also, it appears, placed on record by the petitioner in support of the clarifications. It is common ground that the Commission did not, after receiving the clarifications from the parties, hear the matter any further before dismissing the application for settlement by its order dated 13th July, 2004 This the Commission ought to have done. It ought to have granted a further hearing to the petitioner before passing a final order on the subject. That is because both the parties had, pursuant to the directions issued by the Commission, filed additional documents and explanations aimed at supporting their respective versions. Any hearing afforded by the Commission prior to the production of the said additional material could not possibly deal with the said additional material which was placed before the Commission only after its order dated 14th May, 2004 was passed. It is trite that a hearing has to be meaningful. It is not a ritual to be performed without any visible gain. A hearing under Section 127C was meant to afford to the petitioner an opportunity to explain the documents it was relying upon or those which were pressed into service against it by the opposite party. The petitioner was, in that view, justified in its expectation that the Commission would grant a further hearing to it after the requisite material/clarification had been furnished to it. The failure of that expectation which was legitimate, could have and has caused prejudice to the petitioner.
9. Super added to the above is a material change in the declared value of the Stallion which should, in our opinion, call for a fresh look at the matter by the Commission. The petitioner has, as noticed earlier, offered to pay the differential duty at the value mentioned in the show cause notice. If that be so, the question would be whether it is a fit case in which the Commission ought to grant immunity to the petitioner against penalty and levy of interest etc. It was feebly argued before us by Ms. Gupta that this Court could itself accept the revised value, direct payment of differential duty and grant immunity to the petitioner. We are not however inclined to do so. In our opinion, the proper forum for the petitioner to plead for immunity in the light of its preparedness to pay the differential duty on the revised value of US$ 65,000 is the Settlement Commission. The Commission has not yet examined the said request in the context of the revised value now offered by the petitioner. It would, therefore, be premature for this Court to express any opinion in that regard.
10. In the result, this writ petition succeeds in part and to the extent that order dated 13.07.2004 passed by the Settlement Commission is hereby quashed and the matter is remitted to the Commission for a fresh hearing and disposal in accordance with law keeping in view the observations made hereinabove. As a necessary consequence of the above, order dated 31.05.2005, passed by the Commission, shall also stand quashed. No costs.