Case Note & Summary
The matter arose from a writ petition filed by a public limited company engaged in manufacturing automotive furnishing fabrics, challenging the order of the Settlement Commission, Customs and Central Excise, concerning the levy of interest on additional duty of customs (Counter Veiling Duty or CVD) and the refusal to rectify an alleged error in its final order. The company had obtained an Export Promotion Capital Goods (EPCG) licence on 26th May, 1997, allowing import of capital goods worth Rs.8,06,23,847/- at concessional duty under Notification No.28/97-Cus., against an export obligation of four times the value of imports. The company imported capital goods worth Rs.6,70,96,822/-, availing duty exemption of Rs.1,73,33,363/- (comprising basic customs duty of Rs.66,94,272/- and CVD of Rs.1,06,39,081/-). It failed to meet the export obligation and voluntarily paid Rs.1,73,21,127/- on 30th March, 2000 towards the foregone duty. Subsequently, the Customs Department issued show cause notices proposing to demand duty under Section 28 of the Customs Act, 1962, confiscate goods under Section 111(o), levy interest at 24% from the date of imports under Notification No.28/97-Cus., and impose penalty under Section 112. The company approached the Settlement Commission under Section 127B of the Customs Act, 1962, accepting duty liability and depositing a balance of Rs.12,226/- as directed. The Commission admitted the applications and finally heard the matter on 8th January, 2002. During hearing, the company argued that no interest should be levied on CVD because it was available as Modvat credit under Rule 57Q of the Central Excise Rules, 1944, and it had paid excise duty in cash through Personal Ledger Account to the tune of Rs.1,10,14,735/-; therefore, no financial accommodation accrued and there was no revenue loss. The Settlement Commission, by its final order dated 26th February, 2002, granted partial waiver of interest but directed the company to pay interest at 10% per annum on the entire duty saved, including CVD, without specifically addressing the submissions on CVD. Aggrieved, the company filed an application on 18th April, 2002 for rectification, contending that the Commission had not dealt with its submission and that the omission was an accidental error. The Commission, by order dated 10th June, 2004, rejected the application, stating that all aspects were considered and there was no mistake. The company then invoked the writ jurisdiction of the Bombay High Court under Article 226 of the Constitution, raising three main questions: whether interest is leviable on CVD; whether the Settlement Commission has inherent power to rectify mistakes in its final order; and whether the Commission could correct the accidental oversight of the company's submission on CVD. The petitioner's counsel argued that failure to consider a specific submission constitutes an error apparent on the face of the record, and that every court or tribunal, including the Settlement Commission, has inherent jurisdiction to correct its own errors to prevent injustice. He relied on Gindlays Bank Ltd. v. Industrial Tribunal (1980), Ram Kirpal v. Union of India (Gujarat High Court), and S. Nagaraj v. State of Karnataka (Supreme Court) to support the contention that technicalities cannot obstruct justice. The available judgment text ends during the recording of submissions, without the court’s analysis or final decision. Consequently, the court’s reasoning, operative directions, and ultimate holding on the levy of interest or the power to rectify are not contained in the provided extract.
Headnote
A) Customs Duty - Levy of Interest on Counter Veiling Duty (CVD) - Additional duty of customs - Customs Act, 1962, Sections 28, 111(o), 112, 127H; Central Excise Rules, 1944, Rule 57Q - The petitioner contended that no interest is leviable on CVD as it is available as modvat credit and no financial accommodation accrued, thus no revenue loss; the Settlement Commission had directed payment of interest on CVD along with basic customs duty at 10% per annum, but the petitioner argued that the Commission did not deal with the specific submission on waiver of interest on CVD (Paras 1, 5, 8). B) Settlement Commission - Inherent Power to Rectify Mistake - Rectification of accidental error in final order - Customs Act, 1962, Sections 127B, 127H; Central Excise Act, 1944, Section 32 - The petitioner sought to rectify the order dated 26th February, 2002, on the ground that the Commission had not considered its submission on interest on CVD, which was an error apparent on the face of record; the Settlement Commission held there was no mistake; the issue is whether the Commission has inherent power to set right a mistake, even without a specific review provision, for the ends of justice (Paras 1, 8, 9, 10, 11, 13). C) Administrative Law - Inherent Jurisdiction of Tribunals - Power to Correct Own Errors - Customs Act, 1962; Central Excise Act, 1944 - The court considered precedents including Gindlays Bank Ltd. v. Industrial Tribunal, 1980 (Supp) SCC 420 and S. Nagaraj v. State of Karnataka, JT 1993 (5) SC 27, which held that courts and tribunals have inherent powers to correct errors to avoid injustice; the principle is that an act of the court shall not prejudice a party, and even in the absence of express review powers, incidental or ancillary powers to rectify mistakes exist (Paras 11, 12, 13).
Issue of Consideration
whether or not the interest is leviable on the additional duty of customs/ Counter Veiling Duty; whether the Settlement Commission has inherent power to rectify the mistake in the final order; and whether or not the Settlement Commission has power to correct its accidental error since the submission that no interest was leviable on the additional duty of customs had escaped its attention in the final order
Law Points
- whether interest is leviable on additional duty of customs/CVD
- inherent power of Settlement Commission to rectify mistakes
- accidental error in final order
- modvat credit
- export obligation
- Customs Act
- 1962
- Central Excise Act
- 1944
