Bombay High Court (HC) chaired by Justice Nitin Jamdar and Justice Gauri Godse quashed the order of the settlement commission as there was no jurisdiction to grant immunity for liability of interest as per the amendment in the section 127H(1) of the Customs Act, 1962 was amended by the Finance Act, 2007.
Union of India through Commissioner of Customs (Import) filed a writ petition, challenging the order passed by the Settlement Commission granting immunity to Respondent towards the interest liability.
Respondent company Pratibha Construction Engineers & Contractors (India) Pvt. Ltd. carries out civil engineering projects. Respondent imported a Hot Mixing Plant with the promise that it would only be used to build national highways and would not be sold before the five-year importation period was up.
In relation to the avoidance of customs duty equivalent to Rs. 83,75,069, a show-cause notice was issued to the Respondent company under section 124 read with section 28 of the Customs Act indicating that the Petitioner had unduly availed the exemption.
The department received information that Respondent had claimed certain duty exemption benefits and funnelled them to another entity, leading to the show-cause notice. Additionally, in breach of the undertaking made to the Customs Department at the time of import, the Respondent disposed of the imported machine within five years of the importation.
The Respondent filed an application under section 127-B of the Customs Act for settlement of duty of Rs.83,75,069/- arising out of show-cause-notice.
The Respondent stated that interest under section 28AB of the Customs Act was not due and sought immunity in respect of the same.
The claim of Respondent in respect of interest liability was opposed by the Petitioner- Department.
Accordingly, the Settlement Commission granted complete immunity to Respondents from the liability of interest.
According to Pradeep Jetly, counsel for the petitioner-department, the order of the Settlement Commission lacks jurisdiction and also it completely ignores the change to section 127H(1) of the Customs Act. Furthermore, it was maintained that the ability to award interest-related immunity had been removed by the change in relevant provision.
The bench observed that the Section 127H of the Customs Act confers power on the Settlement Commission to grant immunity from prosecution and penalty and included “interest”. Thereafter section 127H(1) was amended by the Finance Act, 2007, the phrase “interest” has been deleted from section 127H(1).
The bench ruled that the impugned order of the Settlement Commission to the extent that it grants complete immunity to Respondent as regards interest, is quashed and set aside.
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