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M/s. Millions Fashion, Chennai v/s The Customs, Central Excise & Service Tax Settlement Commission, Additional Bench, Chennai & Another

    W.P. No. 29424 of 2015 & M.P. Nos. 1 & 2 of 2015

    Decided On, 19 February 2020

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE C. SARAVANAN

    For the Petitioner: S. Murugappan, Advocate. For the Respondents: A.P. Srinivas, Standing Counsel.



Judgment Text


(Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorarified Mandamus, to call for the records of the first respondent culminating in the Final Order No.25/2015 dated 16.07.2015 issued from File No.S.A.Cus.68/2014SC and quashing the same and directing the first respondent herein to re-examine the case, if needed with assistance of Commissioner (Investigation) and settle the case arising out of Show Cause Notice issued from File No.SIIB/16/2012 dated 06.09.2013 in accordance with law.)

1. In this Writ Petition, the petitioner has challenged the impugned Final Order dated 16.07.2015 in Order No.25/2015-Cus passed by the 1st respondent.

2. By impugned order, the 1st respondent has rejected the application filed by the petitioner for settling the dispute under Section 127B of the Customs Act, 1962. The petitioner had imported the goods namely Cotton Woven Fabrics which are notified under Customs Notification No.98/2009-Customs dated 11.09.2009 issued by the Government of India.

3. The petitioner was issued with a Show Cause Notice dated 06.09.2013, to show cause as to why the value adopted by the petitioner for the imported goods should not be rejected under Rule 12 of the Customs Valuation Rules, 2007 and why the benefit of the Notification claimed by the petitioner, under Customs Notification No.98/2009- Customs dated 11.09.2009 should not be denied to the petitioner. The relevant portions of the Show Cause Notice are reproduced below:

21. In view of the foregoing, M/s. Millions Fashion, No.79, Coral Merchant Street, Mannady, Chennai-1, the importer, is hereby called upon to show cause within 30 days of receipt of this notice, to the Commissioner of Customs (Exports) at Custom House, Chennai-1, as to why: a) In respect of the Bill of entry no 4566636 dated 06.09.2011:

i) The declared value of Rs.4,91,541/- for the import of 19385.5 meters of rayon/poly-cot woven printed fabrics imported should not be rejected under Rule 12 of the Customs Valuation Rules, 2007 and re-determined as Rs.10,32,711/- under Rule 3 of the CVR, 2007;

ii) The 15279.2 meters of rayon woven printed fabrics and 4106.3 meters of poly-cot printed fabrics, actually imported vide the above said Bill of Entry, should not be classified under CTH 55161490 and 55134100 respectively and as corroborated by the Textile Committee Reports.

iii) The benefit of Customs Notification 98/2009 dated 11.9.2009, for duty free clearance of the above goods should not be denied and duty of Rs.6,53,087 /- should not be demanded;

iv) The 19385.5 mtrs of rayon/poly-cot woven printed fabrics valued at Rs.10,32,711/- and imported vide the aforesaid B/E no. 4566636/6.9.11, should not be confiscated under Sec 111(m) of the Customs Act, 1962 for misdeclaration of description, quantity and value of the goods;

b) In respect of the Bill of entry no 4547455 dated 05/09/2011:

i) The total quantity of 25044.5 mtrs of cotton woven fabrics of yarns of different colours including the excess quantity of 6678.8 meters imported vide B/E No. 4547455/5.9.11, totally valued at Rs.25,90,455/-, should not be confiscated under Sec 111(m) of the Customs Act, 1962 for mis-declaration of quantity of the goods and why DFIA licence debit should not be done for 25044.5 meters including the excess quantity of 6678.8 than the declared quantity of 18365.7 wherein the duty sought to be evaded worked to Rs.2,55,760/- and

c) In respect of the Bill of entry no 4990516 dated 21.10.11:

i) The declared value of Rs.25,75,128/- for the import of 49042.5 meters of cotton/polyester/poly-cot woven fabrics should not be rejected under Rule 12 of the Customs Valuation Rules, 2007 and are to be redetermined under Rule 3 of the CVR, 2007 as per the discussions in the preceding paragraphs.

ii) 37405.75 meters of cotton woven fabrics of yarns of different colours along with 8957.20 meters of 53.8% Cotton 46.2% polyester fabrics of YODC, 1528.6 meters of polyester fabrics and 1150.90 meters of cotton fabrics of higher GSM actually imported vide the above said Bill of Entry, should not be classified under CTH 52084230, 52014130, 58013690 and 52084230 respectively and as corroborated by the Textile Committee Reports.

iii) 37405.75 meters of 100% Cotton woven fabric of YODC (GSM 120+/-10%) including the excess quantity of 7505.75 than the 29900 meters declared should not be allowed under the DFIA licence, but why action should not be taken under Section 112(a) of the Customs Act, for rendering the goods liable for confiscation under 111(m) of the Customs Act, 1962.

iv) 8957.20 meters of 53.8% cotton +46.2% poly woven fabrics of YODC should not be redetermined at Rs.6,78,383/- and duty of Rs.3,35,852.06/- should not be collected from them.

v) 1528.60 meters of polyester fabrics should not be determined at Rs.100360/- and duty of Rs.3,60,983.04/- should not be collected from them.

vi) 1150.90 meters of cotton fabrics of higher GSM should not be re-determined are Rs.69,965/- and duty of Rs.84640.08/- should not be collected from them.

vii) the above 49042.5 meters of cotton/polyester/poly-cot woven fabrics, totally valued at Rs.35,78,945/- and imported vide the aforesaid B/E no. 4990516/21.10.11, should not be confiscated under Sec 111(m) of the Customs Act, 1962 for mis-declaration of description, quantity and value of the goods;

d) In respect of Bill of entry no 5987437 dated 13/02/2012:

i) The declared value of Rs.29,13,175/- for the import of 54112 meters of various different types of imported vide Bill of Entry no. 5987437/13/02/2012 should not be rejected under Rule 12 of the Customs Valuation Rules, 2007 and why the re-determined value of Rs.30,92,433/- should not be considered as the true transaction value of the goods under Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

ii) The 14237.6 meters of 100% Cotton woven fabrics/printed imported vide the above bill of entry no 5987437 dated 13/02/2012 should not be re-classified under CTH 5208.51, and 2381 meters of 100% Cotton woven fabrics of YODC of GSM 212.2 should not be reclassified under CTH 520943, 1114 meters of 100% Cotton woven corduroy fabrics of GSM 143.1 should not be reclassified under 5801.22, 669.8 meters of 100% Cotton woven dyed fabrics of GSM 227.6 meters should not reclassified under 5209.31, 524 meters of cotton/polyester fabrics should not be reclassified under 5210.59 and 310 meters of wool fabrics should not be reclassified under CTH 5111.11 and 188.9 meters of Cotton velvet fabrics should not be re classified under CTH 5801.25.

iii) The above 19425.1 meters of fabrics for which the claim of the importer for the benefit of Customs Notification 98 /2009 - Cus, dated 11/09/2009 for duty free clearance should not be denied for the fabrics which are not covered by the three DFIA licences for the DFIA debit sought to be made and correspondingly the duty of Rs.11,00,316- as per the work sheet enclosed as annexure to this notice should not be demanded in respect of the above goods.

iv) The entire goods of assessable value of Rs.30,92,433/- imported vide the above bill of entry should not be confiscated under Section 111(1), 111(m) read with Section 119 of the Customs Act, 1962, for mis-declaration of description, value and concealment of the undeclared goods.

e) In respect of the 21 past Bills of entry covered under the Category II and III the duty of Rs.1,79,07,126/- should not be demanded from them under Section 28(4) of the Customs Act, 1962 along with applicable interest in accordance with Section 28AA of the Customs Act, 1962 in respect of the past bills of entry pertaining to the years 2009, 2010, 2011 discussed in the preceding paragraphs.

f) In respect of the past 21 Bill of entry covered under the Category II and III, goods imported and cleared by the importer should not be held to be liable for confiscation under section 111(m) of the Customs Act, 1962,

g) Penalty should not be imposed under Sec 112(a) of the Customs Act, 1962, for rendering the goods imported vide the aforesaid four Bills of Entry namely 4990516 dated 21/10/2011, 4566636 dated 06/09/2011, 4547455 dated 05/09/2011 and 5987437 dated 13/02/2012 and the goods imported and cleared vide the 21 past Bills of Entry liable to confiscation under 111(m) of the Customs Act, 1962,

h) Penalty should not be imposed, under Sec 114A for willful mis-statement or suppression of facts in respect of the above said Bills of entry,

i) Penalty should not be imposed under Section Sec 114AA of the Customs Act, 1962, for furnishing forged/fabricated documents to clear the goods in the aforesaid Bills of Entry,

j) The Bank Gurantee of Rs.1 Crores furnished by the importer should not be enforced to appropriate the duty so demanded under Section 28(4) of the Customs Act, 1962 as above, and

k) The excess duty of Rs.1,81,427/- paid in excess at the time of provisional assessment in respect of the bills of entry no 4990516 dated 21/10/2011 and 4566636 dated 06/09/2011 should not adjusted against the duty so demanded under section 28(4) of the Customs Act, 1962 as above in respect of the past bills of entry pertaining to Category II and III.

4. After Show Cause Notice issued, the petitioner approached the 1st respondent Settlement Commission under Section 127B of the Customs Act, 1962 to settle the dispute. Before the 1st respondent Settlement Commission as against a proposed duty demand of Rs.2,10,10,983/-, the petitioner had admitted a liability of Rs.83,27,539/- and interest thereon of Rs.23,82,092/- totalling to Rs.1,07,09,631/-.

5. The petitioner claims to have paid the aforesaid amount before approaching the Settlement Commission. Before the Settlement Commission, the respondent had raised the preliminary objection regarding the maintainability of the application to settle the dispute in view of the 3rd proviso to Section 127B of the Customs Act, 1962. As per the said proviso, no application under Section 127B shall be made in relation to goods to which Section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 has been committed.

6. It was the contention of the respondent that since the imported goods are notified under Section 123 of the Customs Act, it was not open for the petitioner to settle the case under Section 127B of the Act. The 1st respondent Settlement Commission however decided to reject the application filed by the petitioner on merits on the ground that the Settlement is a forum where an applicant should come with the spirit of surrender, disclosing the full facts and not in a spirit of contention. The operative portion of the order reads as under:

6.6. In as far as Category III is concerned, the jurisdictional Commissioner has stated that the goods were found to be cotton printed fabrics where as the export product itself was cotton processed fabrics pertaining to bills of entry No.217312/18.05.2009 and 70702/01.12.10 covered by para 13.1 & 13.2 of the SCN. The nature of misdeclaration is such that it could not be found out during the visual examination. She has further stated that as regards the other 3 bills of entry covered by category III of the SCN, the SCN has a clear findings as to how the applicant has mis-declared description of the goods so as to match wit the description of the goods in the import licences.

6.7 Thus, it is seen from the discussion supra, the applicant instead of admitting duty liability, has been shifting his stand every time so that no consensus has been arrived at between the applicant and the Revenue.

7. As far as the preliminary objection raised by the 1st respondent Settlement Commission referred to the decision of the Settlement Commission in its order in IN RE: IDRIS Y. PORBUNDERWALA, 2005 (186) E.L.T.356 (Sett.Comm.), wherein, in paragraph No. 28 (a), the issue was answered as follows:

28. From the aforesaid discussions and the cases cited and discussed above, we conclude that invocability of the provisions of Section 123 is an essential ingredient to determine the applicability of the said section to the seized goods so as to decide whether the mischief of the third proviso to sub-section (1) of the Section 127B of the Act would come into play. The issues referred to Special Bench for decision can be answered as below:

(a) Whether applications, per se, are barred in relation to goods which are listed under sub-section (2) of Section 123 or are notified under the said subsection?

Answer: The applications per se are not barred in relation to goods which are listed or notified under sub-section (2) of Section 123 of the Act.

(b) Whether applications are barred in respect of the above cited goods, only when the said goods are seized on reasonable belief that they are smuggled goods, in terms of sub-section (1) of aforesaid Section 123?

Answer: The applications may not get barred merely because the goods are seized on reasonable belief that they are smuggled goods under sub-section (1) of Section 123 of the Act. The Commission itself can also determine, whether there was justifiable ground for reasonable belief in the facts and circumstances of the case and whether the provisions of the said section are rightly invoked in the Show Cause Notice. Similarly, even if provisions of Section 123 are not invoked in a Show Cause Notice, the Commission can come to its own conclusion on the invocability of the Section to the instant case.

(c)...............

(d)...............

8. The learned counsel for the petitioner submits that the 1st respondent Customs, Central Excise & Service Tax Settlement Commission answered in aforesaid paragraph 6.6. He further submits that the 1st respondent Customs, Central Excise & Service Tax Settlement Commission erred in rejecting the application on the ground that the issue was the complex of fact and law raised by the rival parties. It should be adjudicated by the proper officer after appreciation of facts and evidence.

9. Opposing the Writ Petition, the learned counsel for the respondents submits that the 1st Settlement Commission has no jurisdiction and drew my attention to the decision of the Delhi High Court in Additional Commissioner of Customs Vs. Ram Niwas Verma, 2015 (323) E.L.T.424 (Del), wherein, the Court dealt with the situation arising under Section 123 of the Customs Act, 1962 and held as follows:

7. On a plain reading of the third proviso to Section 127B(1) of the said Act, it is evident that no application for settlement can be made if it relates to goods to which Section 123 applies. Section 123 subsection (2) specifically provides that the said Section applies to, inter alia, gold. It is, therefore, clear that when the two provisions are read together, no application under Section 127B(1) can be made in relation to gold. This case clearly pertains to gold. The respondent made an application, nevertheless, to the Settlement Commission which has entertained the same and has also rejected the plea raised by the Revenue that it did not have jurisdiction to entertain such an application. We agree with the submission made by the learned counsel for the Revenue that the Settlement Commission did not have the jurisdiction to entertain such an application as there was a complete bar provided in the third proviso to Section 127B(1) read with Section 123 of the said Act.

8. The learned counsel for the respondent sought to draw some support from a decision of this Court in the case of Commissioner of Customs v. Ashok Kumar Jain: 2013 (292) ELT 32 (Del) as also a subsequent decision of another Division Bench of this Court in Komal Jain v. Union of India: 2014 (304) ELT 675 (Del). In Ashok Kumar Jain (supra), the issue of Section 123 has not been considered at all. Insofar as the decision in Komal Jain (supra) is concerned, the Division Bench itself, in paragraph 21, observed that the issue with regard to the applicability of Section 123 of the Act by way of the third proviso to Section 127B was left open and it was for the Settlement Commission to examine the same, if such a point was raised, in accordance with law. In the present case, we find that the point with regard to the third proviso to Section 127B(1) read with Section 123 of the said Act had been specifically raised by the Revenue and the same has been considered by the Settlement Commission and has been rejected. We have already indicated above that the rejection by the Settlement Commission is not in accordance with law. A plain reading of the provisions clearly indicates that an application under Section 127B cannot be made in respect of, inter alia, gold, which is specifically an item to which Section 123 applies. We may point out that there is no question of examining the provisions of Section 123(1) as also its applicability because that is not the context of the third proviso to Section 127B(1). The said proviso only makes a reference to the goods to which Section 123 applies and not to Section 123 itself. We have already made it clear that the goods to which Section 123 applies includes gold, as specifically indicated in Section 123(2) of the said Act.

10. The learned counsel for the respondent also submits that the issue is also covered against the petitioner by decision of the Division Bench of the Karnataka High Court in C.S.India Vs. Additional Director General, DCEI, Bangalore, 2015 (325) E.L.T. 91 (kar.), wherein, the similar view was taken by the Court.

11.The learned counsel for the petitioner submits that to satisfy the requirement of the 3rd proviso under Section 127(B), the restrictions will apply only to where the goods are not only notified under Section 123 of the Customs Act, 1962, but also they should be smuggled goods. In this case, admittedly the goods were not smuggled and therefore, in absence of smuggling, 3rd proviso to Section 123 of the Customs Act, 1962 cannot be applied even though the imported goods are notified.

12. I have considered th

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e arguments advanced by the learned counsel for the petitioner and the learned standing counsel for the respondents. 13. The petitioner had originally admitted the liability of Rs.83,27,539/- and interest of Rs.23,82,092/-. However, during the course of hearing, the petitioner wanted to reduce the aforesaid amount to Rs.77,81,844/- and the proportionate interest to Rs.15,50,791/- vide their letter/submission dated 12.06.2015. The petitioner therefore wanted the 1st respondent to order refund of Rs.15,92,037/- along with interest of Rs.8,31,301/-. 14. It is evident that the petitioner has not clearly explained its stand. Instead the petitioner has changed its stand and thereby tried adjudication of dispute by the 1st respondent Settlement Commission which is not warranted. Since there is no clarity in the stand of the petitioner, the 1st respondent Settlement Commission was constrained to dismiss the application stating that the petitioner has raised the several contentious arguments which cannot be considered. 15. Since there is no scope for the second opportunity to settle the case before the 1st respondent Settlement Commissioner by filing fresh application, I am of the view that one more chance can be given to the petitioner to settle the case by accepting the amounts that was originally offered as admitted the liability by the petitioner. 16. I therefore set aside the impugned Final Notice dated 16.07.2015 and remit the case back to the 1st respondent Settlement Commission to pass a fresh order within a period of six months from the date of receipt of a copy of this order. The maintainability issue is also left open to be decided by the 1st respondent. The 2nd respondent may also file its objections before the 1st respondent Settlement Commission within a period of the thirty days from the date of receipt of a copy of this order, if any. 17. The Writ Petition stands disposed with the above observation. No cost. Consequently, connected Miscellaneous Petitions are closed.
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