By TIOL News Service

NEW DELHI, MAY 22, 2017: THE petitioner had issued two SCNs alleging that the respondent had claimed fraudulent fulfillment of the export obligation in respect of DEPB/EPCG/DEEC licences and had demanded jointly and severally Customs duty of Rs.20,84,75,559/- &Rs.7,81,73,260/-. The notices proposed a charge of interest as well as confiscation of the imported goods and of the CD ROMs and Audio CDs exported. It also proposed imposition of penalty u/s 114, 114A r/w Section 112(a) & (b) of the Act.

The respondent had in their application for settlement admitted the duty liability of Rs.33,37,257/- towards non-fulfillment of its export obligation.

The majority view of the three-judge Bench in the Settlement Commission was that the evidence brought forward by the revenue regarding over-valuation did not conclusively prove Revenue's case.

The majority disagreed with the Chairman's view that a penalty of Rs.10.00 lakhs and Rs.5.00 lakhs should be imposed upon Padmini and its Managing Director, respectively.

Hence, the matter was settled for additional duty liability of Rs.33,37,257/- as admitted by the applicant. The said amount was to be adjusted from the deposit of Rs.2.5crore voluntarily made and the remaining amount was to be refunded after adjustment of interest @ 10 % per annum.

The Settlement Commission also viewed that the goods were imported under valid licences, therefore, "the latter's (DGFT's) ab initio cancellation subsequent to imports would not have any impact on the said import".

The DRIhas filed writ petitions before the Delhi High Court seeking quashing of the orders passed by the Settlement Commission.

The order is impugned on two grounds - that the provisions of Section 127A and 127B of the Customs Act are for bona fide applicants and not for tax dodgers indulging in criminal activities; that the power to grant immunity against criminal prosecution is to be used sparingly and in deserving cases and that the present case is not one of misclassification or mis-declaration but one in which respondent offered to pay the differential unpaid tax only after incriminating evidence for prosecution had been gathered by the petitioner. [ CIT vs. B.N. Bhatacharya = 2002-TIOL-2003-SC-IT refers ]

The second ground is that the CCESChas erred in overlooking the fact that during settlement proceedings, it is not for the petitioner to establish respondent'sguilt beyond reasonable doubt and instead it was for the licence holder to establish its innocence apropos the issues raised in the show cause notice.

Moreover, the aspect of over invoicing of CD ROMs and Audio CDs could only have been appreciated after a full trial and the Settlement Commission is not the appropriate forum to adjudicate the same or appreciate the evidence submitted to it.

The respondent argued that the Directorate of Revenue Intelligence has no locus standi to file the writ petition under Article(s) 226/227 of the Constitution of India; that if the Custom department was aggrieved by the impugned order, then the appropriate authority could have filed the writ petition; that the petitioner being merely an investigating authority cannot contest the adjudication by the Settlement Commission; that the ADG (DRI) had not been appointed as proper officer under Section 2(34) of the Act for the purposes of assessment or re-assessment. [ Commissioner of Customs v. Sayed Ali &Anr. = 2011-TIOL-20-SC-CUS , MangaliImpex Ltd. V. Union of India &Ors. = 2016-TIOL-877-HC-DEL-CUS relied upon]

The High Court observed –

++ During the proceedings when the locus standi of the petitioner was questioned, they impleaded the Commissioner of Customs, ICDTuglaqabad, which was allowed on 12.11.2013, about 7 years after the writ petition was filed. However, the same would not validate the filing of the petition when such powers were not specifically conferred upon the DRI . Therefore, in the absence of a specific jurisdiction of the petitioner to have preferred this writ petition against the order of the Settlement Commission, the writ petition would not be maintainable.

++ Court is of the view that in the absence of sufficient proof being led, Revenue's doubt about the FOB value of the goods cannot be sustained. It has not substantiated its contention that the exported goods were overpriced. Furthermore, there was nothing on record to conclude that there were business interests between Padmini and its importers in Singapore, United States and USA so as to doubt that the transactions between them were not in the normal course of trade or that it was not a transaction at arms' length. Hence, the declared FOB would have to be accepted.

++ Since Revenue has not led any evidence to indicate either a 'Hawala' transaction or a flow-back of money to Padmini through illegal means regarding the value of the exported goods, the export transaction cannot be viewed with suspicion. In any case, all monies were received by Padmini through the banking channels as have been so certified by its bankers through remittance certificates.

Reliance is also placed on the judgment in W.P.(C) 9783/2015 = 2015-TIOL-2445-HC-DEL-CUS where in it is held that proceedings before the Settlement Commission are not adjudicatory but are by way of settlement; that the Court does not sit in appeal over the settlement orders passed.

  Concluding that no reasons are found to interfere with the impugned order of the Settlement Commission, the Writ Petitions were dismissed.

(See 2017-TIOL-962-HC-DEL-CUS)