Leighton Contractors (India) Pvt. Ltd. vs Union of India

Rule, returnable forthwith. At the request of the counsel for the parties, the petition is taken up for final disposal. By this petition under Article 226 of the Constitution of India, the petitioners seek to challenge the order dated 28 September, 2012 passed by the Settlement Commission under the Customs Act, 1962 (the Act). By the impugned order dated 28 September, 2012, the Settlement Commission has rejected the application for settlement made by the petitioners for settling their dues under the Act inter alia holding that there was failure to make full and true disclosure and non-cooperation on the part of the petitioners. In the circumstances, the case was sent to the Commissioner of Customs for the purpose of adjudication.

Briefly the facts leading to this petition are :

(a) In December, 2006, the petitioners had imported a barge claiming the benefit of Notification No. 27/2002-Cus., dated 1 March, 2002. The Bill of Entry filed by the petitioners was provisionally assessed pending re-export of the barge. The value of the barge was disclosed at US $ 64,40,750 equivalent to assessable value of Rs. 29.24 crores. Subsequently the barge was re-exported on 17 August, 2007 and the customs duty on re-export came to be charged at Rs. 82.07 lakhs in terms of Notification No. 27/2002.

(b) Thereafter in the course of investigation, it was found that the value of the barge was in fact US $ 69,98,667 as the insured value of the barge. This led to issue of a show cause notice dated 17 February, 2012 demanding the differential customs duty of Rs. 25.94 lakhs along with interest thereon of Rs. 14.22 lakhs. The show cause notice also sought to adjust the amount of Rs. 39.64 lakhs being the amount of differential duty and interest voluntarily deposited by the petitioners during the course of investigation.

(c) The petitioners did not desire to contest the show cause notice dated 17 February, 2012 and therefore approached the Settlement Commission in terms of Chapter XIVA of the Act. In their application, the petitioners admitted short payment of duty on the enhanced value of the barge of US $ 69.98 lakhs and sought immunity from fine, penalty and prosecution.

(d) Before the Settlement Commission, the Commissioner of Customs also filed a report in terms of Section 127C of the Act praying that the case be decided on the basis of duty and interest as demanded in the show cause notice. However, the report submitted that no immunity from fine, penalty, interest and prosecution should be extended to the petitioners.

(e) During the course of proceedings before the Settlement Commission, the petitioners were asked by the Commission to produce the purchase invoice of the owner of the barge from whom the petitioners had taken the barge on lease. The petitioners did produce the commercial invoice dated 11 November, 2006 issued by the lessor of the vessel declaring the price of the barge at US $ 64.40 lakhs. However, the Settlement Commission was not satisfied with the same and insisted that the purchase invoice by the foreign exporter should be produced. The petitioners did not produce the same as it was their case that the amount demanded from them by the Customs Department in the show cause notice is not being contested by the petitioners or the Customs Department and case should be settled on the basis of the show cause notice dated 17 February, 2012. The Settlement Commission did not accept the same and was of the view that as the barge was owned by a related party, which had leased out the barge to them, the petitioners should have on their own declared the full value of the barge as purchased by the related party (lessor of the barge) in their application for settlement. In above circumstances, the Settlement Commission dismissed the petitioners'' application for settlement. This was on the ground that the petitioners had not made true and full disclosure nor cooperated with the Settlement Commission. Thus, restoring the show cause notice dated 17 February, 2012 to the Commissioner of Customs for the purpose of adjudication.

The grievance of the petitioners is that there was no occasion for the Settlement Commission to reject the application for settlement. This is on the ground that the entire duty and interest as demanded by the Customs in the show cause notice has been paid by them. Therefore, there was no occasion for the Settlement Commission to go beyond the dispute which existed between the Revenue and the petitioners and seek to enhance the value of the barge when the same is not even the case of the Customs Department as either made out in the show cause notice or in the report of the Commissioner of Customs before the Settlement Commission. In any view of the matter, Mr. Shah, learned counsel for the petitioners, submits that they have now been able to obtain the purchase invoice of the concerned barge dated 16 August, 2006 from the foreign lessor of the barge which shows the value of the vessel at US $ 17.50 lakhs. The same can now be considered by the Settlement Commission.

As against the above, Mr. Sharma, learned counsel for the Revenue, submits that the order of the Settlement Commission is a well-reasoned order and there is no reason why this Court should interfere with the order in exercise of judicial review. It is emphasised that in spite of repeated demands made by the Settlement Commission, the petitioners had not produced the purchase invoice dated 16 August, 2006 before the Commission. Therefore, on the facts before it, the Settlement Commission was justified in coming to the conclusion that there was no true and full disclosure made by the petitioners and that the petitioners had not cooperated with the Settlement Commission. Therefore, it is submitted that the petition be dismissed.

We have considered the submissions. It cannot be disputed that an applicant before the Settlement Commission is obliged to make a full and true disclosure in its application and also cooperate with the Commission. This is so as the basis of Chapter XIVA of the Act is meant for an assessee suffering from contriteness. Therefore, the proceeding before the Settlement Commission is not adversarial. However, in this case the petitioners proceeded on the basis that in law they were not required to produce the original purchase invoice of the lessor of the barge as the issue to be settled is a dispute between the Customs Department and the petitioners as formulated in the show cause notice. The petitioners having accepted the valuation made in the show cause notice and the report of the Commissioner of Customs made before the Settlement Commission, no interference in respect of valuation of the barge is called for. Besides, our attention has been invited to the decision in Hazel Mercantile Ltd. Vs. Union of India, wherein this Court has held that when the entire duty liability and interest as demanded in the show cause notice has been paid by the assessee, it is not possible for the Settlement Commission to conclude that the petitioners have not cooperated or not disclosed full and true facts in their application for settlement. However, it must be pointed out that in the facts existing in the above case, the Court held that the revenue was unable to point out what cooperation has not been extended.

In this case, we are of the view that as the invoice dated 16 August, 2006 has now been produced before us but not before the Settlement Commission on the petitioners'' advocate raising a legal issue that the same is not relevant for the purpose of settling the dispute. Thus, the entire issue was disposed of on an issue of law. We are of the view that the applicant is required to make a full and true disclosure and also cooperate with the Commission. However, as the petitioners have now provided the purchase invoice dated 16 August 2006, it would be appropriate for the Commission to consider the same and pass an order.

In view of the above, the impugned order dated 28 September, 2012 is set aside and the case is restored to the Settlement Commission. The Settlement Commission shall consider the invoice dated 16 August, 2006 and pass appropriate orders on the application made for settlement on all issues on the application filed by the petitioners. The petition is allowed in above terms with no order as to costs.