M/S.
Sanghvi Reconditioners Pvt. Ltd. Vs. Union of India & Ors. [2010] INSC 88
(5 February 2010)
Judgment
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1435 OF
2003 M/S SANGHVI RECONDITIONERS PVT. -- APPELLANT LTD.
VERSUS
D.K.
JAIN, J.:
1.
This appeal, by special leave, is directed against the final
judgment and order dated 23rd April, 2002 rendered by the High Court of
Judicature at Bombay in Writ Petition No.633 of 2002, whereby the High Court
has dismissed the writ petition, affirming the decision of the Settlement
Commission, Customs and Central Excise, Mumbai (hereinafter referred to as,
"the Settlement Commission").
2.
The facts, giving rise to the present appeal, may be summarised
thus:
The
appellant is an importer and ship repair unit registered with the Director
General of Shipping, Government of India. On the basis of the intelligence
gathered, premises of the appellant were searched by the officers of the
Customs Commissionerate, Mumbai in December, 1997, resulting in the recovery of
incriminating documents. The investigations revealed that the appellant had
clandestinely availed of benefit of import duty Exemption Notification
No.211/83-Cus dated 23rd July, 1983, as amended, on the import of multiple
consignments of engineering cargo as "Ship Spares". Based on the
material collected in the course of investigations, two show cause notices
dated 29th December, 1997 and 17th June, 1998, were issued to the appellant,
demanding customs duty of Rs.3,12,030/- and Rs.65,66,076/- respectively
(totalling Rs.68,78,106/-). Upon consideration of the reply furnished by the
appellant, the Commissioner of Customs (Preventive), Mumbai by his order dated
26th February, 1999 confirmed the demand of customs duty of Rs.68,78,106/-, besides
penalty and interest under Section 28AB of the Customs Act, 1962 (for short
"the Act").
3.
Aggrieved, the appellant preferred an appeal to the erstwhile
Customs, Excise and Gold (Control) Appellate Tribunal. However, the said appeal
was withdrawn by the appellant on the ground that they proposed to prefer an
application in terms of Section 127MA of the Act before the Settlement
Commission, constituted under the Act and have their case settled under Chapter
XIVA of the Act. The appeal was permitted to be withdrawn. The appellant,
thereafter, on 17th October, 2000, filed an application under Section 127B of
the Act with the Settlement Commission, disclosing and admitting a duty
liability of Rs.20,98,786/-.
4.
On receiving the application, the Settlement Commission called for
the statutory report from the Jurisdictional Commissioner in terms of Section
127C of the Act. In his report, it was submitted by the Commissioner that out
of 18 consignments, in respect of 10 imports, the appellant had imported spare
parts of Caterpillars and while clearing the cargo, they submitted transhipment
permit/shipping bills to the Customs Authorities declaring the cargo as `ship
spares' meant for repairs of ocean going vessels. However, in the course of
investigation, documents, viz., sales bills, account registers, etc.
retrieved
from the appellant, revealed the sale of these goods to one M/s Mehta
Earthmovers. In fact, diversion of these goods was admitted by the appellant
during investigation and they voluntarily deposited Rs.15 lakhs towards duty
liability against these 10 imports.
As
regards the 2nd show cause notice, the stand of the Commissioner was that one
M/s Elektronik Lab, a partnership firm dealing in sales and
servicing/maintenance of ship spares and navigation equipment, had placed
purchase orders on the appellant for import of spare parts to be fitted on
ocean going vessels, as they were not registered with the Director General of
Shipping as a ship repair unit and were not eligible for duty free imports under
the aforementioned Notification.
The
appellant imported the spare parts and sold the same to M/s Elektronik Lab; in
contravention of the exemption notification.
5.
Taking into consideration the report of the Commissioner and the
case records, the Settlement Commission, vide order dated 8th February, 2001,
allowed the application of the appellant to be proceeded with under sub-Section
(1) of Section 127C of the Act.
The
amount of additional duty determined to be payable under sub- Section (3) of
said Section was duly paid by the appellant.
6.
At the next hearing before the Settlement Commission, it was
asserted on behalf of the appellant that they had fulfilled all the conditions
as stipulated in Notification No.211/83 dated 23rd July, 1983 and that no spare
parts, so imported, were sold by them to M/s Elektronik Lab. The stand of the
appellant was that they had installed the imported equipment on the ocean going
vessels with the assistance of M/s Elektronik Lab, who were the authorised
agents of the foreign supplier, M/s Kelvin Hughes, in India from whom the
appellant had imported the goods. It was argued that the said Notification did
not prohibit an importer from taking assistance of a third party in the repair
of the ships. It was reiterated that all the "ship spares" imported
by the appellant were fitted in the ocean going vessels directly by them with
the assistance of M/s Elektronik Lab and, therefore, all the conditions,
stipulated in the Notification, were fulfilled. Apparently, the Settlement Commission
was not convinced with the explanation offered by the appellant. On the
contrary, the Settlement Commission felt that the appellant had
transferred/sold the imported goods to M/s Elektronik Lab; as pleaded by the Commissioner.
Accordingly, vide order dated 24th September, 2001, the Settlement Commission
directed the Commissioner to submit his final report along with the relevant
material to establish that the goods imported by the appellant were actually
sold to M/s Elektronik Lab.
7.
In his final report dated 27th September, 2001, the Commissioner
submitted that the appellant had imported navigational equipments, such as,
Radar System, SART, NATEX and EPIRB in pursuance of the Purchase Orders placed
by M/s Elektronik Lab on them; delivered the cargo on board the ships of M/s
Dredging Corporation, M/s Chowgule Steamships Ltd. and M/s Essar Coastal Ltd.
and the purchaser, M/s Elektronik Lab, subsequently carried out installation of
the said equipments on board the ships owned by the above three shipping
companies. The stand of the Commissioner was that since M/s Elektronik Lab, who
had purchased the imported spare parts from the appellant for the purpose of
fitting on board the ships of the said three shipping companies, was not
registered with the Director General of Shipping, they were not eligible to
claim benefit of exemption Notification, and, therefore, they routed the
imports through the appellant and further, since the "spare parts"
imported
for carrying out repairs of the ships were not actually used by the appellant
and had been sold to M/s Elektronik Lab; prior to its usage on ships, the
appellant was also not entitled to the benefit of duty exemption under the said
Notification. It was also pointed out that the rates of the spare parts charged
by M/s Elektronik Lab to the ship owners for the same items were higher than
those charged by the appellant from them, which undisputedly showed the value
addition.
8.
Upon consideration of the information furnished by the
Commissioner, particularly the fact that the appellant had given details of the
"consignee" as the ship owners, without disclosing the sale of
imported "spare parts" to M/s Elektronik Lab, the Settlement
Commission was satisfied that there was suppression of facts on the part of the
appellant so as to avail of the benefit of duty exemption fraudulently.
According to the Settlement Commission, the sale of ship spares/navigational
equipments by the appellant to M/s Elektronik Lab was an independent
transaction, distinct from the subsequent sale by the latter to the ship
owners, which was in the nature of home consumption. Finally, concluding that
the Revenue had been able to produce documentary evidence showing sale of
imported "spare parts" by the appellant to M/s Elektronik Lab, who in
turn sold the same items to ship owners, the appellant could not claim any
benefit under exemption Notification No.211/83, the Settlement Commission
sustained the demand of duty of Rs.47,79,320/- in respect of 8 consignments
sold by the appellant to M/s Elektronik Lab. The Settlement Commission, thus,
confirmed the additional customs duty of Rs.68,78,106/- demanded from the
appellant under the order of adjudication by the Commissioner. Inter alia,
observing that though the appellant had not made a full and true disclosure of
their duty liability but had cooperated with the Settlement Commission, the
Settlement Commission waived penalty in excess of Rs.18 lakhs and granted total
immunity to the appellant from prosecution. The Settlement Commission also held
that since the case of the appellant pertained to a period prior to April,
1995, when Section 28AB of the Act was inserted by the Finance Act, 1996, interest on delayed payment of duty could not be levied
on the appellant.
9.
Being dissatisfied with the order passed by the Settlement
Commission, the appellant took the matter to the High Court by preferring the
aforementioned writ petition. Before the High Court, an application was moved by
the appellant for amendment of the writ petition, seeking to urge an additional
ground to the effect that some of the consignments of "spare parts"
having been imported under the procedure to be followed for
"Transhipment" or for "warehoused goods for exportation",
no customs duty was payable by virtue of the provisions contained in Sections
54 and 69 of the Act. Although, the amendment was allowed by the High Court in
order to examine whether the initial stand, based on the exemption notification,
could go hand in hand with the case now sought to be pleaded in the amended
petition, but, ultimately, the High Court did not permit the appellant to urge
the additional ground relating to the applicability of Sections 54 and 69 of
the Act. The High Court was of the view that since the ground now sought to be
raised was in fact contradictory to the earlier stand, at this belated stage, a
fresh ground could not be entertained. As stated above, the High Court has
dismissed the writ petition. Aggrieved by the said decision, the appellant is
before us in this appeal.
10.
Assailing the decisions of the Settlement Commission as also of
the High Court, Mr. S.K. Bagaria, learned senior counsel appearing on behalf of
the appellant, strenuously urged that the High Court committed a serious
illegality in declining to entertain the additional ground regarding
applicability of Sections 54 and 69 of the Act in respect of 8 consignments in
question, particularly when the point raised was a pure question of law going
to the root of the matter and did not involve any investigation of facts. In
support of the contention that a pure question of law can be raised for the
first time even before this Court, reliance was placed on the decisions of this
Court in Madhya Pradesh & Anr.3, Collector of Central Excise, the finality
clause contained in Section 127J of the Act did not bar the jurisdiction of the
High Court under Article 226 of the Constitution to interfere with the order
passed by the Settlement Commission when it was contrary to the provisions of
the Act. It was urged that instead of outrightly declining to go into the
merits of the additional ground 1 (1979) 3 SCC 280 2 (2000) 4 SCC 510 3 (1963)
2 SCR 135 4 (1997) 10 SCC 400 5 1993 Supp (3) SCC 389 6 (2004) 13 SCC 340 raised,
at best, the High Court could have given an opportunity to the Revenue to meet
the stand of the appellant. It was also contended that the expression
"clearance of the goods for home consumption"
under
Section 47 of the Act has a definite connotation and meaning under the Act and
the imported goods can be cleared for home consumption only when a bill of
entry for home consumption is filed; it is assessed; duties assessed are paid
and an order is passed by the proper officer for clearance of the goods for
home consumption, which is not the case here, as no bill of entry for home
consumption was filed. Learned counsel was at pains to explain that the said
consignments were correctly released for transhipment and re-export and the
conditions as stipulated in Sections 54 and 69 of the Act having been complied
with, no customs duty was leviable on the said 8 consignments. It was, thus,
pleaded that the matter deserved to be remitted back to the High Court for
reconsideration on merits.
11.
Mr. H.P. Rawal, learned Additional Solicitor General, appearing on
behalf of the Revenue, on the other hand, supporting the decision of the
Settlement Commission as also of the High Court strenuously urged that having
specifically pleaded before the Commissioner of Customs in adjudication
proceedings and also in the application before the Settlement Commission that
there was no sale of the imported equipment to M/s Elektronik Lab and that they
were brought into the picture for the purpose of installation and regular maintenance
of the said equipment and, therefore, there was no impediment in their availing
of benefit under the Exemption Notification, the subsequent change in their
stance that even sale of these parts to M/s Elektronik Lab for the purpose of
installation on ocean going vessels was not prohibited under the said
Notification or that 8 consignments were otherwise exempt from payment of
customs duty under Sections 54 and 69 of the Act, clearly shows that even
before the Settlement Commission, the appellant had not made a full and true
disclosure of the duty liability under the Act. It was argued that the
Settlement Commission having itself recorded a finding that the appellant had
not made a full and true disclosure of their duty liability, their application ought
to have been rejected by the Settlement Commission on this ground alone.
Referring to the invoices raised by the appellant on M/s Elektronik Lab,
learned counsel submitted that the documents on record clearly establish that
the transactions between the appellant and M/s Elektronik Lab were purely
trading transactions, which not only show the untruthfulness of the appellant's
initial stance but also prove the violation of the order passed in favour of
the appellant permitting re-export of the consignments in question. As regards
the plea of the appellant that these consignments were not exigible to any duty
in terms of Sections 54 and 69 of the Act, learned counsel submitted that apart
from the fact that it involved determination of disputed questions of fact, an
application under Section 127B of the Act for determination of question whether
an item is dutiable or not, was not maintainable before the Settlement
Commission. In support of the proposition, learned counsel relied on the
decision of the Delhi High Court in Ltd.7 Relying heavily on the decision of
this Court in Union of India Commission, Mumbai & Ors.9, wherein while
explaining the concept of compounding in terms of Rule 6 of the Customs
(Compounding of Offences) Rules, 2005, which confers power on the compounding
authority to grant immunity from prosecution to a person who has made full and
true disclosure of facts relating to the case and has 7 2006 (199) E.L.T. 388
(Delhi) 8 2008 (222) E.L.T. 481 (S.C.) 9 2000 (246) ITR 63 (Bom) cooperated in
the proceedings before him, it was held that applications for compounding ought
to be disallowed if there are demonstrable contradictions or inconsistencies or
incompleteness in the case of the applicant, learned counsel asserted that in
the light of the facts found by the Settlement Commission and affirmed by the
High Court, the appellant does not deserve any further relief.
12.
Before adverting to the merits of the issues raised on behalf of
the parties, it would be appropriate to briefly notice the scheme of Chapter
XIVA of the Act. The said Chapter was inserted in the Act by the Finance Act,
1998 (Act 21 of 1998) with effect from 1st August, 1998, for setting up of
Customs and Central Excise Settlement Commission on lines of similar Commission
already functioning under the Income Tax Act, 1961 since its incarnation on the
recommendation of Justice Wanchoo Committee. The proceedings under the Chapter
commence by an application being made under Section 127B, relevant part whereof
reads thus:
"127B.
Application for settlement of cases.- (1) Any importer, exporter or any other
person (hereinafter in this Chapter referred to as the applicant) may, at any
stage of a case relating to him, make an application 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 or otherwise of
goods, to the Settlement Commission to have the case settled and such
application shall be disposed of in the manner hereinafter
provided:........."
13.
It is manifest from a bare reading of the provision that in the
application filed under Section 127B, an applicant is required to make a full
and true disclosure of his duty liability, which he had failed to disclose
before the proper officer. He is also required to exhaustively explain to the
Settlement Commission the manner in which such liability has been incurred; the
additional amount of customs duty accepted to be payable by him as also the
price of such dutiable goods in respect of which he admits short levy on
account of misclassification or otherwise of goods. In other words, the
applicant is supposed to make a clean breast of his affairs in regard to short
levy or non payment of customs duty admitted to be payable by him.
14.
Section 127C of the Act prescribes the procedure to be followed by
the Settlement Commission on receipt of an application under Section 127B of
the Act. The section mandates that on receipt of an application under Section
127B, the Settlement Commission shall call for a report from the Commissioner
of Customs having jurisdiction and on the basis of the materials contained in
such report and having regard to the nature and circumstances of the case or
the complexity of the investigation involved therein, the Settlement Commission
may allow the application to be proceeded with or reject the application.
15.
Section 127E empowers the Settlement Commission to reopen the
completed proceedings in appropriate cases, while Section 127F confers all the
powers upon the Settlement Commission, which are vested in an officer of the
Customs under the Act. Section 127H empowers the Settlement Commission to grant
immunity from penalty and prosecution, with or without conditions, in cases
where it is satisfied that the assessee has made a full and true disclosure of
his duty liability. Under Section 127-I, the Settlement Commission can send
back the matter to the proper officer where it finds that the applicant is not
cooperating with it. Section 127J declares that every order of settlement
passed under sub-Section (7) of Section 127C shall be conclusive as to the
matters stated therein and no matter covered by such order shall, save as otherwise
provided in Chapter XIVA, be reopened in any proceeding under the Act or under
any other law for the time being in force.
16.
To appreciate the rival submissions in this behalf, it would be
appropriate at this juncture to refer to Exemption Notification No.211/83 dated
23rd July, 1983. In so far as it is relevant for this appeal, the Notification
reads as follows:
"Exemption
to capital goods, raw materials and consumables for repairs of ocean-going
vessels - In exercise of the powers conferred by sub-Section (1) of Section 25
of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied
that it is necessary in the public interest so to do, hereby exempts capital
goods, components, raw materials and consumables, when imported into India for
repairs of Ocean-going vessels by the ship repair unit registered with the
Director General of Shipping, Government of India, from the whole of the duty
of customs leviable thereon under the First Schedule to the Customs Tariff Act,
1975 (51 of 1975), and from the whole of the additional duty leviable thereon
under Section 3 of the said Customs Tariff Act,
subject to the following conditions, namely:- (1) the importer shall maintain a
proper account of import, use and consumption of the capital goods, components,
raw materials and consumables imported into India for the aforesaid purpose and
shall submit such account periodically to the Collector of Customs in such form
and in such manner as may be specified by the said Collector;
(2) the
importer, by the execution of a bond in such form and for such sum as may be
specified by the Collector of Customs, binds himself to pay on demand an amount
equal to the duty leviable:- (a) on goods which are capital goods, as are not
proved to the satisfaction of the Collector of Customs to have been installed
or otherwise used for the aforesaid purpose:
(b) on
goods which are components, raw material and consumables, as are not proved to
the satisfaction of the Collector of Customs to have been used or consumed for
the aforesaid purpose;
within a
period of three months from the date of importation thereof or within such
extended period as the Collector of Customs, on being satisfied that there is
sufficient cause for not installing, using or consuming them, as the case may
be, for the aforesaid purpose within the said period, allow.
..................................................
.................................................."
17.
It is clear from the language of the Notification that in order to
avail of the benefit of exemption from whole of the duty of customs leviable
under the Customs
Tariff Act, 1975, twin conditions, viz., (1) capital
goods, components, etc. are required for repairs of ocean going vessels, and
(2) the ship repair unit should be registered with the Director General of
Shipping, Government of India, are to be fulfilled. Both the conditions are
cumulative and admit of no exception. Being the foundation for availing the
benefits under the notification, both the conditions have to be strictly
complied with.
Besides,
under the Notification, an importer is also required to maintain a proper
account of import, use and consumption of the capital goods, components, etc.
imported for the aforesaid purpose in a prescribed form and failure to satisfy
the Collector about their installation or consumption for the said purpose
makes the importer liable to pay an amount equal to the duty payable on such
goods. It is a settled position in law that Exemption Notifications have to be
strictly construed. A person claiming the benefit of exemption notification,
must show that he satisfies the eligibility criteria. (See:
18.
With this background, we may now advert to the facts at hand to
examine if the findings recorded by the Settlement Commission and the view
taken by the High court in the judgment in appeal, 10 (2006) 4 SCC 772 11 2004
(171) E.L.T. 296 (S.C.) 12 1985 (19) E.L.T. 15 holding that the appellant could
not be permitted to urge additional ground was justified or hit by the
contentions to the contrary raised on behalf of the appellant.
19.
In so far as the first issue is concerned, we feel that it would
be expedient to extract the stand of the appellant before the Settlement
Commission, which is as follows:
"During
the hearing the learned Advocate of the applicant gave his written submission.
He argued that the applicant has fulfilled the conditions of Notification
No.211/83. All the end use bonds have been finalised. The Commission asked the
applicant whether he has sold the material to M/s Elektronik Lab. The applicant
submitted that he has not sold the goods to M/s Elektronik Lab. He is the
importer and he installed the equipment on the vessel with the assistance of
M/s Elektronik Lab. M/s Elektronik Lab is the authorised agent in India of the
foreign supplier M/s Kelvin Hughes from whom the applicant imported the goods.
He argued that the Notification does not say that the imported cannot get the
assistance from a third party.
The
Commission asked him about his argument on the statement of Shri K.D. Motta,
Manager of M/s Sanghvi Reconditioners that the signature of representatives of
M/s Shipping Corpn. of India were forged by him. The applicant submitted that
he is admitting it and he is guilty of that. The Commission further asked him
on not admitting the duty of Rs.47,79,320/-. The applicant submitted that the
ship spares were imported and fitted in the ocean going vessels directly by him
with the assistance of M/s Elektronik Lab. and, therefore, he fulfilled the
conditions of Notification No.211/83. The Commission drew his attention to some
of the invoices issued by M/s Sanghvi Reconditioners to M/s Elektronik Lab
which showed that the goods were cleared from Customs and delivered to M/s
Elektronik Lab. If it is so, it appears that the applicant has transferred/sold
the goods to M/s Elektronik Lab. To this query of the Commission, the applicant
submitted that it is only a language mistake and all the bills do not show this
and these invoices are issued only for collecting the money."
20.
It is evident from the afore-extracted paragraph that the
unequivocal stand of the appellant was that the material imported by them was
installed/used for repairs of ocean going vessels directly by them with the
assistance of M/s Elektronik Lab, an authorised agent in India of the foreign
supplier from whom the appellant had imported the goods. It was pleaded that
the Exemption Notification did not bar the importer getting assistance from a
third party for installation of the equipment on the vessels. The appellant
stood its ground even when they were confronted by the Settlement Commission
with some invoices, showing that the goods imported were got cleared from
Customs and delivered to M/s Elektronik Lab. When the Settlement Commission
asked the Revenue to submit further report to establish their case that the
goods imported by the appellant were actually sold by them to M/s Elektronik
Lab, the Revenue produced sale invoices and delivery challans, showing sale of
imported cargo by the appellant to M/s Elektronik Lab, who in turn, sold these
goods to the ship owners for which necessary documents, such as, bills were raised.
Taking into consideration the documents on record and the sale pattern of the
goods and not the value addition, the Settlement Commission came to the
conclusion that in the first instance, the goods in question were sold by the
appellant to M/s Elektronik Lab and then by the latter to the ship owners under
the cover of their own sales invoices and, therefore, the appellant was not
entitled to duty exemption under the said Notification. Similarly, M/s
Elektronik Lab were also not eligible for duty exemption under the said
Notification because they were not registered with the Director General of
Shipping, Government of India, as required under the Exemption Notification. As
stated above, before the High Court an unsuccessful attempt was made to lay more
emphasis on exemption from payment of customs duty on eight consignments in
terms of Sections 54 and 69 of the Act and not under the Exemption Notification
No.211/83- CUS dated 23rd July, 1983. Thus, there was a shift in the stand of
the appellant before the High Court when sale of the imported components by
them to a third party stood proved on the basis of overwhelming documentary
evidence on record, disentitling them to the benefit of the exemption
notification. In the final analysis, the High court came to the conclusion, and
in our opinion correctly, that in the light of the material available on
record, the order of the Settlement Commission did not suffer from any error
warranting its interference.
21.
In so far as the second issue with regard to the applicability of
Sections 54 and 69 of the Act is concerned, in our view, it was too late in the
day for the appellant to raise such a plea. In the first instance, if the
appellant felt that these 8 consignments were intended for transhipment and were
cleared from the warehouse for exportation and, therefore, no import duty was
payable, there was no occasion for them to withdraw their appeal before the
Tribunal and prefer an application before the Settlement Commission, more so
when in respect of the remaining consignment, they had accepted and paid the
customs duty. We feel that when according to the appellant, no customs duty was
payable in respect of the 8 consignments, then on the plain language of Section
127B of the Act, appellant's application before the Settlement Commission was
not maintainable. In our view, an application under Section 127B of the Act
would be maintainable only if it discloses duty liability, which had not been
disclosed to the proper officer. Obviously, a disclosure contemplated by the
said Section is in the nature of voluntary disclosure of the concealed
additional customs duty. Secondly, indubitably, such a plea was neither raised
before the adjudicating authority in response to the show cause notices issued
to the appellant nor before the Tribunal as also before the Settlement
Commission. Even before the High Court, in the original writ petition, such a
plea was not raised and it was only by way of an amendment application, that an
additional ground was sought to be raised.
Though it
is true that there is no bar in the High court and for that matter this Court
entertaining an additional ground, involving a pure question of law, but on
facts at hand, in the light of the findings of the Settlement Commission, based
on documentary evidence that the goods in question imported by the appellant
were actually sold by them to M/s Elektronik Lab, before these were used for
repair of ocean going ships, it cannot be held that the additional ground did
not involve any investigation into facts. Documents on record show that the
bills of transhipment as also bills of export were filed by the appellant
before the proper officer after the property in the said goods had passed to
M/s Elektronik Lab. It is clear that since M/s Elektronik Lab. was not
registered with the Director General of Shipping, they were not eligible to
avail of duty exemption under the said notification, they entered into an
arrangement with the appellant, a registered ship repairing unit, to import the
goods for repair of ocean going vessels without payment of import duty under
the Exemption Notification.
Thus, the
sole object of the transactions was to avail of duty exemption under the said
notification. Additionally, in order to claim the benefit of the Exemption Notification,
the components, consumables etc. had to be used by the importer himself for
repair of the vessels and not through someone else, who incidentally was not
even named in the shipping bills. Moreover, proper accounts of imports, use and
consumption of such goods was to be maintained by the importer, and in the
event of failure to render the account for such consumption, the importer was
liable to pay the customs duty as may be demanded by the Commissioner of
Customs. However, once the imported goods were sold to a third party, the
appellant was incapacitated from maintaining and rendering the account to the
Commissioner in terms of the notification. All these factors go to show that
the additional ground sought to be raised before the High Court was not only an
afterthought, adjudication thereon did involve investigation into facts and,
therefore, the decision of the High court in not entertaining the additional
ground did not suffer from any 25 infirmity.
22.
We also find substance in the contention of learned counsel for
the Revenue that having observed that the appellant had not made a full and
true disclosure, their application should have been rejected by the Settlement
Commission on that count itself and no relief should have been granted to the
appellant. However, in view of the fact that order dated 8th February, 2001
passed by the Settlement Commission allowing the application of the appellant
to be proceeded was not challenged by the Commissioner nor such a plea was
urged by the Revenue before the High Court or in their reply to the present
appeal, we find it difficult to reject the application at this stage, though,
having perused some of the documents available on record, we are convinced that
the appellant had not made a full and true disclosure of its affairs before the
Settlement Commission. Be that as it may, we are of the opinion that having
opted to get their customs duty liability settled by the Settlement Commission,
under Chapter XIVA of the Act, the appellant cannot be permitted to dissect the
Settlement Commission's order with a view to accept what is favourable to them
and reject what is not. As observed by Krishna 26 Wanchoo Committee was a
compromise measure of a statutory settlement machinery, where a big evader
could make a disclosure, disgorge what the Commission fixes and thus buy
quittance for himself and accelerate recovery of taxes in arrears by the State,
although less than what may be fixed after long protracted litigation and
recovery proceedings. It is manifest from the procedure laid down in Section
127C of the Act that interim order under sub-Section (1) of Section 127C as
also the final order under sub-Section (7) of the said Section are to be made
by the Settlement Commission after examination of the reports of the
Commissioner of Customs or its Commissioner (Investigation). Obviously, these
reports are submitted on the disclosures made in the application under Section
127B of the Act and, therefore, the applicant cannot be permitted to resile
from his pleadings in the application at any stage of proceedings before the
Settlement Commission or set up a new case before the higher Fora.
23.
Having considered the rival submissions with reference to the
pleadings, the provisions of Section 127B of the Act and exemption 13 (1979) 4
SCC 121 notification No.211/83 dated 23rd July, 1983, we are of the opinion
that the order of the Settlement Commission did not suffer from any error,
legal or factual, and, therefore, the High Court was fully justified in
dismissing the writ petition.
24.
In view of the foregoing discussion, we see no merit in this
appeal. The appeal is dismissed accordingly with costs, quantified at
Rs.50,000/-.
........................................J.(D.K. JAIN)
........................................J.(T.S. THAKUR)
NEW DELHI;
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