SHOW CAUSE NOTICE AFTER ADMISSION OF SETTLEMENT APPLICATION – SUSTAINABLE?
Chapter XIV A of the Customs Act, 1962 deals with the procedure of filing application before the Settlement Commission and the procedure of disposal of the application by the Commission. Section 127B (1) provides that any importer, exporter or any other person may, in respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled, 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, under-valuation or inapplicability of exemption notification or otherwise. No such application shall be made unless-
the applicant has filed a bill of entry, or a shipping bill, or a bill of export, or made a baggage declaration, or a label or declaration accompanying the goods imported or exported through post or courier, as the case may be, and in relation to such document or documents, a show cause notice has been issued to him by the proper officer;
he additional amount of duty accepted by the applicant in his application exceeds three lakh rupees; and
the applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28AA.
No application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court. 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 offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 has been committed. No application under this sub-section shall be made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975.
Section 127F(2) provides that Where an application made under section 127B has been allowed to be proceeded with under section 127C, the Settlement Commission shall, until an order is passed under Section 127C(5), have, subject to the provisions of Section 127C(4), exclusive jurisdiction to exercise the powers and perform the functions of any officer of customs or Central Excise Officer as the case may be, under this Act or in the Central Excise Act, 1944, as the case may be, in relation to the case.
Thus it is clear that once an application is entertained by the Settlement Commission it has exclusive jurisdiction on the said matter and none other can interfere with that matter.
In ‘Amit Sirohi V. Directorate of Revenue Intelligence, New Delhi’ – 2016 (4) TMI 1106 – DELHI HIGH COURT a search was conducted in the residence, godown and office premises of the three petitioners resulting in recovery of records, documents, computers, hard discs, laptops, pen drives etc., During the search many pieces of old and used photocopier machines were recovered from the premises. Investigations were commenced and statements were recorded which showed that the petitioners had been importing old and used photocopier machines by undervaluing the goods up to the extent of 50%. In the show cause notice issued to the petitioner, the plea of DRI was that there has been extensive undervaluation of the imported photocopier machines by the petitioners resulting in evasion of customs duty.
The petitioners opted to file applications for settlement of their case before the Settlement Commission and filed the application before Principal New Delhi bench. They received letter from the Commission allowing the applications under Section 127C(1) of the Act with the indication – the case is allowed to be proceeded with subject to the conditions that the applicant satisfies all the requirements of the time of final hearing.
While the application is pending before the Settlement Commission, the petitioner received a corrigendum to the show cause notice already issued to them, which deals the same issue before the Settlement Commission. In the corrigendum there is a change in the classification of the import of the photocopier machines thereby enhancing the duty demand. When a hearing took place before the Commission, the petitioners informed the Commission that they had challenged the said duty of demand in this writ petition before the High Court. They requested to defer the hearings and keep the settlement in abeyance for a further period of three months. The Settlement Commission disposed the applications but granted liberty to the petitioners to apply afresh after the decision of the High Court.
The DRI contended that a wrong statement was made by the petitioner before the Commissioner when the matter was heard on 05.12.2014 that the petitioners had already agitated the correctness of the corrigendum before the High Court. The copy of the writ petition was served on them only on 11.02.2015 and no writ petition appears to have been filed by 05.12.2014. The High Court ordered for verification of filing the writ petition. The digital file was uploaded through electronic filing vide diary No. 251539/2014 on 04.12.2014 at 03.00 P.M., It is made clear that the present writ petition had been filed on04.12.2014, i.e., one day prior to the hearing of the matter by the Commission on 05.12.2014.
The High Court found that DRI is not in dispute that by its order dated 24.04.2014, the Commission decided to proceed with the applications filed by the petitioners before it in exercise of its powers under Section 127C(1) of the Act. The DRI also accepted that once the Commission decided to proceed with the applications, under Section 127F(2) the Commission is having exclusive jurisdiction to exercise the powers and perform the functions of any officer of Customs or Central Excise Officer, in relation to the case.
The Department contended that the order dated 24.04.2014 was passed by the Commission without hearing the DRI. The High Court held that there was sufficient opportunity for the DRI, if aggrieved by the order passed by the Commission on 24.04.2014, to have challenged that order in accordance with law. The DRI did not adopt this course. It was not open to the DRI to have proceeded to issue a corrigendum to the show cause since in terms of Section 127F (2A) the exclusive jurisdiction to deal with the matter vested with the Settlement Commission. The DRI has no jurisdiction to issue corrigendum which made a very significant change to the show cause notice whereby the classification of the imported goods was changed and the duty demand correspondingly increased. The High Court held that the corrigendum issued by the DRI is not sustainable and set aside the same.