Case Note & Summary
The dispute concerned the power of the Settlement Commission to grant immunity from interest under the Customs Act, 1962 after its amendment in 2007. Frontier Cycle Industries Pvt. Ltd., an importer, faced a show cause notice for short-levied duty of Rs.93.75 lakhs. Prior to the notice, it had twice attempted to approach the Settlement Commission, but those applications were rejected because no show cause notice had been issued. After the show cause notice was issued on 24 January 2008, the petitioner filed a valid application before the Settlement Commission. By order dated 27 April 2009, the Commission directed payment of the duty and granted immunity from penalty exceeding Rs.3 lakhs and from prosecution, but did not address interest. The Union of India challenged this before the Bombay High Court, which on 19 March 2010 directed the Commission to reconsider the issue of interest. On reconsideration, the Commission, by order dated 24 March 2011, held that interest was payable under Section 28AB and that after the 2007 amendment, it could not grant immunity from interest. The petitioner challenged that order. The core legal issue was whether the amended Section 127H, which removed the Commission's power to waive interest, applied to its case. The petitioner argued that the relevant events predated the amendment and that a pre-existing right of appeal could not be taken away, citing Hoosein Kasam Dada. The Court rejected this contention, holding that the jurisdiction of the Settlement Commission could only be invoked after a show cause notice, which in this case was issued after the amendment came into force. Therefore, the proceedings were governed by the amended law, under which the Commission had no power to grant immunity from interest. The Court emphasised that interest under Section 28AB is mandatory. Consequently, the writ petition was dismissed, and the Commission's interest order was upheld. The Court granted four weeks' time for compliance and made no order as to costs.
Headnote
A) Customs Law - Settlement Commission - Immunity from Interest - Customs Act, 1962, Sections 127H, 28AB - The Settlement Commission's order directing payment of interest was challenged on the ground that events occurred before the 2007 amendment. The Court held that the liability to pay interest under Section 28AB is mandatory and the amended Section 127H removes the Commission's power to grant immunity from interest. As the application was filed after the amendment came into force, the Commission had no jurisdiction to waive interest. Held that no error in the Commission's order. (Paras 2-3) B) Customs Law - Settlement Commission - Invocation of Jurisdiction - Customs Act, 1962, Section 127B - The Court noted that under Section 127B, an application to Settlement Commission can be made only after a show cause notice is issued. Since the show cause notice in the present case was issued after the amendment to Section 127H, the proceedings were governed by the amended provision, and the Commission could not grant immunity from interest. (Para 3) C) Statutory Interpretation - Prospective Amendment - Right of Appeal - Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh distinguished - The Court rejected the argument based on the Supreme Court decision regarding pre-existing right of appeal, holding that the present case involved the initiation of proceedings after the amendment, thus the amended law applied and no retrospective effect was needed. Held that the Commission's order was valid. (Para 4)
Issue of Consideration
Whether the Settlement Commission has jurisdiction to grant immunity from payment of interest under Section 28AB of the Customs Act, 1962 after the amendment to Section 127H effective from 1 June 2007?
Final Decision
Writ petition dismissed. The Settlement Commission's order directing payment of interest was upheld. Time for compliance extended by four weeks. No order as to costs.
Law Points
- Settlement Commission has no jurisdiction to grant immunity or waiver from statutory liability to pay interest after amendment of Section 127H
- liability to pay interest under Section 28AB is mandatory
- jurisdiction of Settlement Commission can be invoked only after show cause notice
- amended provision applies if application is filed after amendment effective date
