Case Note & Summary
The petitioner, a partnership firm engaged in importing solvents and chemicals, challenged an order of the Settlement Commission, Customs and Central Excise, which allowed adjustment of Rs.16,99,781 towards anti-dumping duty on imported Sodium Saccharin and imposed a penalty of Rs.50,000 on its partner. The dispute arose when the Directorate of Revenue Intelligence (DRI) investigated the imports and alleged that the goods were of Chinese origin, thus subject to anti-dumping duty. The petitioners had voluntarily deposited Rs.1,98,11,000 before a show cause notice was issued. The Settlement Commission, while settling the case, adjusted the deposited amount against a demand that included a Bill of Entry dated 3.4.2007, which was beyond the five-year limitation period from the show cause notice. The petitioners contended that the adjustment was time-barred under Section 28 of the Customs Act, 1962, and that the penalty on the partner was imposed without a specific proposal in the show cause notice. The High Court found that the Settlement Commission had committed an error apparent on the face of the record by allowing recovery of duty beyond the statutory limitation period. It held that the Commission cannot override the limitation provisions under the Act and that the adjustment was illegal. The Court further held that the imposition of penalty on the partner without a specific show cause notice was invalid. Consequently, the writ petition was partly allowed; the adjustment of Rs.16,99,781 and the penalty on the partner were set aside, and the respondents were directed to refund the amount if recovered, with interest, while the rest of the settlement order was upheld.
Headnote
A) Customs Law - Limitation for Recovery of Duty - Limitation period of five years under Section 28(4) for collusion, wilful misstatement or suppression cannot be extended by Settlement Commission for demands beyond five years from relevant date; adjustment of Rs.16,99,781 for Bill of Entry dated 3.4.2007 was beyond five years from show cause notice dated 17.5.2012 and thus time-barred (Paras 13-18).
B) Customs Law - Settlement Commission - Scope of Settlement - Settlement Commission while settling a case under Chapter XIVA of the Customs Act, 1962 must act within the provisions of the Act, including limitation; it cannot grant relief contrary to statutory provisions (Paras 18-19).
C) Customs Law - Rectification of Mistake - Error apparent on the face of record under Section 154 of Customs Act, 1962 - The Settlement Commission's failure to rectify an order allowing time-barred demand constitutes an error apparent on the face of record; rectification application ought to have been allowed (Paras 19-20).
D) Customs Law - Penalty on Partner - Penalty imposed on partner (Petitioner No.2) without a specific proposal in the show cause notice is invalid; show cause notice must explicitly indicate the person proposed to be penalized (Paras 21-22).
Issue of Consideration
Whether the Settlement Commission committed an error apparent on the face of record in allowing adjustment of anti-dumping duty of Rs.16,99,781 for a period beyond five years and imposing penalty on petitioner No.2 without show cause notice
Final Decision
The High Court allowed the petition partly, setting aside the adjustment of Rs.16,99,781 and the penalty of Rs.50,000 imposed on Petitioner No.2. The Court directed that the amount of Rs.16,99,781 if recovered, be refunded with interest, and that the penalty on partner be set aside. The rest of the settlement order was upheld.
Law Points
- Settlement Commission cannot allow recovery of duty beyond statutory limitation period of five years under Section 28(4) of Customs Act
- 1962
- Error apparent on the face of record must be rectified under Section 154
- Penalty on partner requires specific proposal in show cause notice
Case Details
2017 LawText (BOM) (08) 65
WRIT PETITION NO. 10245 OF 2016
ANoop V. Mohta and Smt. Anuja Prabhudessai, JJ.
Mr. Prakash Shah i/by PDS Legal for the petitioners; Mr. Pradeep S. Jetly for respondents
M/s. C. J. Shah & Co and Apurva M. Shah
Union of India, Joint Secretary, Ministry of Law and Justice; Commissioner of Customs (Import); Settlement Commission, Customs & Central Excise
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Nature of Litigation
Writ Petition under Article 226 of the Constitution of India challenging the order of the Settlement Commission, Customs and Central Excise, imposing adjustment of anti-dumping duty beyond limitation period and penalty on partner.
Remedy Sought
Petitioners sought quashing of Settlement Commission order dated 30.05.2016 to the extent it allowed adjustment of Rs.16,99,781 towards anti-dumping duty on Bill of Entry dated 3.4.2007 and imposed penalty of Rs.50,000 on Petitioner No.2.
Filing Reason
The Settlement Commission erroneously allowed adjustment of duty for a period beyond five years from show cause notice, in violation of Section 28 of Customs Act, and imposed penalty on partner without a specific proposal in show cause notice.
Previous Decisions
The Settlement Commission passed Order No. 92/FINAL ORDER/CUS/SBR/2016 dated 30.05.2016 settling the case, allowing adjustment of duty including time-barred demand and imposing penalties. The petitioners filed an application for rectification which was rejected by the Commission on 08.08.2016.
Issues
Whether the Settlement Commission could adjust anti-dumping duty for a period beyond five years from the relevant date, contrary to Section 28 of the Customs Act, 1962.
Whether the Settlement Commission committed an error apparent on the face of record warranting rectification under Section 154 of the Customs Act, 1962.
Whether the penalty of Rs.50,000 imposed on Petitioner No.2 (partner) without specific show cause notice proposing such penalty is valid.
Submissions/Arguments
Petitioners contended that adjustment of Rs.16,99,781 was for a bill of entry dated 3.4.2007 which was beyond five years from show cause notice dated 17.5.2012, thus time-barred under Section 28; that this error was apparent on record and should have been rectified; and that no penalty was proposed in show cause notice against partner, so imposition is illegal.
Respondents argued that the settlement order is final and binding, and that the payment was voluntarily made and could be adjusted.
Ratio Decidendi
Settlement Commission cannot allow recovery of duty beyond the limitation period prescribed under Section 28 of the Customs Act, 1962; an order that adjusts time-barred demand suffers from an error apparent on the face of record and must be rectified under Section 154; penalty on a partner cannot be imposed without a specific proposal in the show cause notice.
Judgment Excerpts
The right to recover the duty, if any, for the period beyond five years, in the facts and circumstances, is clearly barred by limitation.
The Settlement Commission, therefore, in our view, has committed an error apparent on the face of record...
The penalty imposed upon Petitioner No.2... without there being any proposal in the show cause notice, is also illegal.
Procedural History
The petitioners imported Sodium Saccharin from Taiwan during 2007-2011 and cleared goods without anti-dumping duty. DRI investigated in 2012 alleging Chinese origin, requiring anti-dumping duty. On 22.03.2012, petitioner deposited Rs.1,98,11,000. On 17.05.2012, show cause notice issued. Petitioners replied on 20.10.2012. Addendum issued on 14.10.2015. On 16.11.2015, petitioners filed settlement application under Chapter XIVA. On 19.01.2016, Commissioner submitted report. On 30.05.2016, Settlement Commission passed final order allowing adjustment of time-barred duty and imposing penalties. Petitioners filed rectification application on 29.07.2016, which was rejected on 08.08.2016. Hence, writ petition filed.
Acts & Sections
- Customs Act, 1962: 28, 28AA, 28AB, 127C(3), 127C(5), 154, Chapter XIVA
