By TIOL News Service

AHMEDABAD, JUNE 23, 2016: THE Petitioners challenge the order of Settlement Commission holding that it had no jurisdiction to entertain the applications. The goods involved are gold in one case and polyester fabrics in another case. The Settlement Commission vide the impugned order held that the provisions of Sec 123 are applicable to the goods in question and as per the third proviso to Section 127B, it had no jurisdiction in such cases.

The Petitioners contended that only if the conditions envisaged in sub-section (1) of Section 123 of the Act are fulfilled, in terms of 3rd proviso to Section 127B of the Act, the jurisdiction of the Settlement Commission would be ousted and not otherwise. They pointed out that the Special Bench of the Settlement Commission had interpreted the said proviso in case of Idris Y. Porbunderwala, by holding 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 Section 127B of the Act would come into play.

After hearing both sides, the High Court held:

++ In plain terms, 3rd proviso to sub-section (1) of Section 127B provides that no application for settlement shall be made in relation to goods to which Section 123 applies. To ascertain to which goods Section 123 applies, one may, therefore, have to peruse Section 123 very minutely. As noted, Section 123 carries title "burden of proof in certain cases". Sub-section (1) thereof provides that where any goods to which the section applies are seized in the reasonable belief that they are smuggled goods, the burden of proof that they are not smuggled goods would be on the person in possession of such goods or the person claiming to be the owner as the case may be as provided in Clauses-(a) and (b) to sub-section (1). In turn, sub-section (2) specifies the class of goods to which the section would apply. Section 123 thus is framed in two parts. Subsection (1) provides for the shifting of burden of proof and the conditions under which such eventuality to the class of goods to which the section applies, would arise. Sub-section (2) merely specifies the class of goods to which the section would apply. Thus, class of goods specified in sub-section (2) are those to which the section itself would apply and if the conditions set out in sub-section (1) of Section 123 are satisfied with respect to such goods, the eventualities of shifting of burden on the owner or person in possession of such goods would arise.

++ 3rd proviso to sub-section (1) of Section 127B incorporates by reference the applicability clause of Section 123. Incorporation by reference is a well-known legislative technique to avoid repetition of the same set of words in different sections of the same statute or sometimes even in different statutes. In essence, therefore, 3rd proviso to sub-section (1) of Section 127B incorporates the applicability clause of Section 123 for the ouster of the jurisdiction of the Settlement commission. It has nothing to do with the eventuality of shifting of burden of proof. It is perhaps because of this reason that the Settlement Commission in the Special Bench judgment in case of Idris Y. Porbunderwala used the expression "invocability of the provisions of Section 123". There is nothing in the 3rd proviso to subsection (1) to Section 127B which would indicate that it envisaged satisfaction of the conditions for invoking sub-section (1) of Section 123 before the jurisdiction of the Settlement Commission can be ousted. It only refers to the goods to which Section 123 applies. Applicability of Section 123 to the goods and the invocability of the principle of shifting of burden of proof are two independent and distinct issues.

++ Thus, the Settlement Commission correctly applied 3rd proviso to sub-section (1) of Section 127B of the Act. Petitions are therefore dismissed.

(See 2016-TIOL-1194-HC-AHM-CUS)