Karnataka High Court
The Commissioner Of Customs vs A. Mahesh Raj on 6 January, 2006
Equivalent citations: 2006(195)ELT261(KAR)
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
ORDER D.V. Shylendra Kumar, J.
1. Writ Petition by the Commissioner of Customs, Bangalore, a statutory functionary in terms of Section 3 of the Customs Act, 1962 [for short, the Act], as one class of officer of the Customs Department, questioning the legality of the order dated 26-9-2001, a copy of which is produced at Annexure-A to the writ petition, passed by the Customs and Central Excise Settlement Commission [for short, the Settlement Commission], Additional Bench, Chennai in proceedings Settlement Application No. SA(C) 10/2001.
2. The order passed by the Settlement Commission is sought to be quashed on the premise that the commission lacks jurisdiction to settle the case at the instance of the respondent to whom the adjudicating authority under the Act had issued a showcause notice in terms of Section 124 of the Act, calling upon the respondent to show cause as to why correct duty should not be assessed and realized from the respondent in respect of certain goods which the respondent had cleared without a bill entry but by claiming the goods as his personal baggage on 3-12-1999, when the respondent was returning from Singapore.
3. The show cause notice had, inter alia, indicated that the declaration by the respondent that the personal baggage contained only toys was a mis-declaration; that it contained large quantities of mobile phones, mobile phones in CKD condition, computer ROMS, notebooks ROMS and such other notified items notified for the purpose of Section 123 of the Act which were being brought for sale on commercial lines and not for mere personal use of the respondent. The show cause notice had indicated the duty liability and also proposed to levy penalty etc.
4. It is on receipt of such show cause notice dated 23-5-2000, the respondent had filed an application before the Settlement Commission under the provisions of Section 127B of the Act, praying for the case to be settled in terms of Section 127C of the Act.
5. The Settlement Commission had called for a report from the Commissioner of Customs and took up the matter for settlement, the result of which is the impugned order. For the purpose of invoking the jurisdiction of the Settlement Commission, the respondent as applicant had indicated the goods which were brought as part of his personal baggage to be electronic items and had also indicated the value of the said goods, but had disputed the duty liability on the premise that the respondent should claim the benefit of exemption notification No. 136/1990 dated 20-3-1990 as amended by Notification No. 28/1998 dated 2-6-1998, on the premise that a person who imports such articles with licence will be entitled for such benefit of duty concession and had claimed as such.
6. The Commissioner of Customs in his report to the Settlement Commission had, inter alia, indicated that the Commissioner of Customs, Bangalore had also accorded sanction for prosecuting the respondent in view of repeated violations of the provisions of the Act and that the respondent had been detained for a year or so under the provisions of COFEPOSA and it was not a fit case for settlement etc.
7. The Settlement Commission examined such aspects and as it found that there was no representation on behalf of the Commissioner before the Settlement Commission, proceeded to examine the matter after hearing the learned Counsel for the applicant-respondent and on the basis of the material placed by the applicant before it. The Settlement Commission was also of the view that the applicant had made a full and true disclosure of both the value and the duty liability and as the applicant had accepted the proposition in the show cause notice and had only claimed that the benefit of Notification No. 136/1990 as amended by Notification No. 28/1998 and on such premises proceeded to determine the duty liability at Rs. 11,25,040/- as against the duty liability that had been proposed in the show cause notice at Rs. 18,38,300/-.
8. The Settlement Commission was also of the view that the applicant having disclosed the value correctly before it, the applicant should be given immunity from prosecution, but as it found that the applicant had indulged in smuggling activity, thought it fit to levy penalty of Rs. 25,000/-, as indicated in terms of the order, which reads as under:
...However, taking into account the fact that this was a clear case of brazen attempt at clearance without payment of duty and smuggling, a penalty of Rs. 25,00/- is imposed under Section 112(b)(v) of the Customs Act, 1962 and immunity is given in excess thereof in terms of Section 127H [emphasis supplied] It is aggrieved by this order, the present writ petition by the Commissioner of Customs.
9. It is, inter alia, urged in the writ petition that the Settlement Commission should not have entertained the application for the reason that the respondent had indulged in activity of smuggling; that the respondent had tried to smuggle goods and the Settlement Commission itself having found the same, levied penalty of Rs. 25,000/-, the Settlement Commission could not have entertained the application in view of the third proviso to Section 127B of the Act, which reads as under:
Provided also that no application under this sub-section shall be made in relation to goods to which Section 123 applies or to goods in relation to which any office under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed.
10. It is also the contention of the petitioner that the jurisdiction of the Settlement Commission is only in respect of such goods where there is a short levy on account of misclassification and not in respect of short levy or non-levy due to misdeclaration and therefore the Settlement Commission could not have entertained the application for settlement.
11. Sri R. Veerendra Sharma, learned Additional Standing Counsel for Central Government, appearing on behalf of the petitioner, submits that the impugned order of the Settlement Commission is liable to be quashed for the sole reason that the Commission lacks jurisdiction to entertain the application of this nature; that the act of the respondent in not only mis-declaring the goods but also trying to smuggle the goods meant for commercial disposal as personal baggage clearly amounted to a deliberate mis-declaration, both with regard to goods as well as with regard to the nature of the goods and more so with regard to the value, which the respondent had declared at about Rs. 35,000/- as against the value, as suggested in the show cause notice being Rs. 18,38,300/-, which in fact had come to be accepted by the very respondent before the Settlement Commission and when such is the nature of infraction, provisions of Section 127B and 127C are not attracted; that it is not a case covered by Chapter-XIV of the Act and therefore the order deserves to be quashed.
12. It is also the submission of learned Counsel for the petitioner that the very Commission having recorded a finding that it was a clear act of smuggling of goods, it was not a mere case of misclassification of goods and the moment the Settlement Commission noticed that there was an act of smuggling, it should not have entertained the application and on the other hand rejected the application and not doing so is fatal to the order; that entertaining an application of this nature can only lead to misuse or abuse of the provisions by habitual smugglers like the petitioner, as such persons can always take chance by attempting to clear goods and when detected to come up with an application before the Settlement Commission; that the provision of Chapter-XIV should be so interpreted and understood so as to give protection only to bona fide importers to provide immunity when action is sought to be taken for short levy or non-levy due to misclassification and not in favour of persons like the respondent who are on the facts and on the findings of the Settlement Commission itself a smuggler.
13. In this regard, Sri Veerendra Sharma would place reliance on the decision of a learned Single Judge of the Madras High Court in the case of Commissioner of Customs (AIR), Chennai v. Customs & Central Excise Settlement Commission . Submission of learned Counsel for the petitioner is that the Settlement Commission can entertain an application only from such persons who approach the Commission with application for settlement in a situation where they come up with true disclosure even before the act of evasion is detected by the department and not such persons who are fence sitters and to take their chance and after they are detected and proceeded against approach the Settlement Commission with an application for settlement, Learned Counsel submits that in the present case, the respondent had in fact by himself declared the same, but was later detected to have cleared the goods not only declared and goods that had been seized and action taken in terms of the provisions of the Act and after show cause notice had been issued for levy of duty, proposing to levy penalty and also confiscation of seized goods and alter the respondent had also filed his objections to the show cause notice, had approached the Settlement Commission and such an application at that stage could not have been entertained by the Settlement Commission in the light of the law laid down by the Madras High Court in the case relied upon and cited supra.
14. Another submission is that the Settlement Commission can entertain an application only in a situation of misclassification and not mis-declaration and that the words 'mis-classification or otherwise of goods' are used in Section 127B of the Act, which reads thus:
127B. Application for settlement of cases:
(1) Any importer, exporter or any other person (hereinafter referred to as the application in this chapter) may, at any stage of a case relating to him make an application in such form and in such manner as may be specified by rules, and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification or otherwise of goods, to the Settlement Commission to have the case and such application shall be disposed of in the manner hereinafter provided:
xxx xxx xxx should be interpreted or understood to a situation of the nature of misclassification and not a situation of the nature of mis-declaration or deliberate wrong declaration as in the present case.
15. One another submission of Sri Veerendra Sharama, learned Counsel appearing for the petitioner, is that many of the goods which were sought to be cleared by mis-declaring on the part of the respondent are covered by notifications issued under Section 123 of the Act; that in respect of such goods also the Commission cannot entertain an application at all in terms of the third proviso to Section 127B of the Act and therefore the impugned order deserves to be quashed.
16. Sri S S Hiremath, learned Counsel for the respondent, on the other hand, submits that not all goods are notified goods in terms of Section 123 of the Act and not all goods are prohibited goods either; that many of the gods were permitted for import on payment of proper customs duty; that the respondent had in tact immediately volunteered to accept the valuation as well as the liability for payment of duty on such valuation; that the respondent had the benefit to invoke the jurisdiction of the Settlement Commission; that the Settlement Commission after taking into account the overall circumstance and the situation had passed a tare settlement proceedings; that no interference is called for in exercise of writ jurisdiction, as the matter has already been settled by the Commission and therefore the writ petition should be dismissed.
17. It is also submitted by the learned Counsel for the respondent that as not all goods were covered by the notification issued under Section 123 of the Act, the Settlement Commission has jurisdiction to entertain application and settle the matter.
18. I have given anxious consideration of the rival submissions. The provisions of Chapter-XIVA of the Act is no doubt brought in for settlement of cases involving misclassification so that the dispute is resolved expeditiously without going through hierarchy of appellate provisions as under the Act. The settlement of cases is an exception to the normal procedure of adjudication of duty liability and other deterrent provisions like levy of penalty and prosecution in cases of violation. An examination of Chapter-XIVA of the Act indicates that the protection or immunity that is given only in respect of levy of penalty and prosecution and not in respect of duty liability. In fact for the purpose of determination of duty liability, the Settlement Commission itself acts as an adjudicating authority and can determine the duty liability and the applicant is also liable to pay such duty liability within 30 days from the date of receipt of a copy of the order and the Commission is given power to extent time subject to payment of interest by the applicant beyond the initial period of 30 days. The Settlement Commission also has power to levy penalty or interest in respect of the amount quantified as liable to be paid as duty by the applicant. The provisions of Section 127C also indicate that the order indicating settlement brought about by the commission will become void if it is subsequently found that such orders had been obtained by fraud or mis-representation of facts by the applicant.
19. The scheme indicates that while the Settlement Commission has power to grant immunity from levy of penalty and prosecution, the duty liability has to be enforced. The Commission may also levy not only interest but also penalties. In the present case, the fact that the Settlement Commission itself tailed to compel levy of penalty of Rs. 25,000/- on the respondent on the premise that the respondent had indulged in brazen of smuggling.
20. Chapter XIVA of the Act being an exception to the normal procedure contemplated under the Act and occurring in a fiscal statute, has to be necessarily construed strictly. The scope of the provisions cannot be unduly enlarged if the intendment of the Legislature to provide for settlement in cases of short levy or non-levy on account of misclassification or mis-declaration also, as there is a vast and considerable distinction between the cases of misclassification of goods and misdeclaration of goods. A misclassification of goods will only result in duty liability being at a different rate in terms of entry under which it is classified, whereas mis-declaration can be a situation of suppression, distortion and misrepresentation. In a situation of misclassification, only goods are disclosed or declared but goods are not properly classified for the purposes of determination of rate of duty, whereas in a case of mis-declaration, goods might not have been declared correctly at all, in the sense description is not of the actual goods also quantity may varying and mischief being deliberate and designed to avoid payment of customs duty. In case of mis-classification, it may be bona fide case of wrong classification as the importer or the person clearing the goods may not be fully conversant with the schedule to the Act. In the case where there was no deliberate or intended desire on the part of the importer to evade or avoid payment of any customs duty, in fact, to provide immunity and protection of such class of people, Chapter-XIVA has been ushered in. I am of the view that such a provision cannot be interpreted to enlarge the scope unduly particularly to provide protection under this Chapter even to cases of smugglers and habitual offenders. If it is to be so interpreted, even as submitted by the learned Standing Counsel appearing for the petitioner, the provisions of Chapter XIV-A can be utilized by such unscrupulous elements than any bona fide persons claiming benefit under such provisions. In, this regard, I respectfully agree with the view taken by the Madras High Court that Chapter XIVA cannot be extended to cases of misdeclaration also.
21. If it was a misdeclaration and not a case of misclassification, the very provisions of Section 127B are not attracted and the Settlement Commission could not have entertained the application. One another affirming provision is the third proviso, which seeks to expressly exclude from the purview of the Settlement Commission applications in respect of goods to which Section 123 applies, in the sense, the goods which are notified for the purpose of raising initial presumption on the possessor that the goods are smuggled goods unless the person in possession of the same is in a position to establish the proper import of the goods into the country. While the Settlement Commission itself has described the respondent as a smuggler and thought it fit to levy penalty of Rs. 25,000/-, that act itself should have cautioned the Settlement Commission not to entertain the application in the light of the third proviso to Section 127B of the Act and the Settlement Commission should have rejected the application relegating the respondent to workout his remedy in accordance with the normal course provided under the Act.
22. As I am of the view that the Settlement Commission lacks jurisdiction to entertain the application of the nature tiled by the respondent before it, particularly application under Section 127B of the Act, the impugned order cannot be sustained. It is not necessary to go into the merits of the impugned order. Accordingly this writ petition is allowed and the order dated 26-9-2001 in Application No. SA(C) 10/2001, passed by the Customs and Central Excise Settlement Commission, Chennai is quashed by issuing a writ of certiorari. Rule issued and made absolute. No order as to costs.
23. It is now open to the authorities under the Act to adjudicate the show cause notice that had been issued by the authorities to the respondent in respect of which the respondent had taken the matter before the Settlement Commission. The respondent to appear before the adjudicating authority for the adjudication of the show cause notice and if need be by filing any additional explanation/objections to the same and to appear for such purpose before such authority on 15-2-2006 without waiting for any further issue of notice from the adjudicating authority.