By TIOL News Service

MUMBAI, JAN 24, 2018: THE petitioners were importing television sets of various sizes and models manufactured by M/s. Sony, Malaysia.

At the time of import, the petitioners claimed the benefit of concessional rate/exemption from Basic Customs Duty under the Customs Tariff [Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India] Rules, 2009.

SCN dated 25.04.2016 was issued demanding differential duty of Rs. 370,56,79,329/- and interest against the petitioners with respect to both, finally assessed Bills of Entry as well as provisionally assessed Bills of Entry.

The petitioners claim that in order to show their bonafides, they deposited Rs.300,00,00,000/- prior to the issuance of the show cause notice itself. After the show cause notice was issued and duly received, the petitioners deposited Rs.70,56,79,329/- towards differential duty demanded and Rs.114,54,59,876/- towards interest payable on the differential duty demanded under Section 28AA of the Customs Act, 1962.

The petitioners then approached the Settlement Commission and sought settlement of the issues and disputes covered under the show cause notice.

The Commission on 02.03.2017 passed the following order of settlement –

"8.1  Customs Duty:  The differential Customs duty is settled at Rs.370,56,79,329/-. Applicant had deposited Rs.300.00 crores during investigation and paid the balance amount subsequently. The deposit of Rs.300.00 crores and balance amount paid subsequently are appropriated towards their duty liability. As the applicant has already paid the entire duty, no further liability subsists on this account. The duty settled herein includes differential duty of Rs.79,65,52,147/- payable by the applicant on the 187 Bills of Entry provisionally assessed which now stand finally assessed as proposed in the SCN.

8.2  Interest:  The applicant have deposited Rs.1,14,54,59,876/- towards interest which is directed to be appropriated. The Revenue is directed to verify the applicable interest on the settled amount and balance if any payable by the applicant, should be deposited by the applicant within 30 days of the receipt of this order.

8.3  Penalty:  (i) The Bench imposes a penalty of Rs.32,00,00,000/- (Rupees Thirtytwo crores only) on the applicant M/s Sony India P. Ltd. and grants immunity to them from penalty in excess of this amount.

(ii) The Bench imposes a penalty of Rs.50,00,000/- (Rupees Fifty lakhs only) on the coapplicant Shri K.Hibi and grants immunity to him from penalty in excess of this amount.

(iii) The Bench imposes a penalty of Rs.30,00,000/( Rupees Thirty lakhs only) on the coapplicant Shri Sanjay Bhargava and grants immunity to him from penalty in excess of this amount.

(iv) The Bench imposes a penalty of Rs.20,00,000/( Rupees Twenty lakhs only) on the coapplicant Shri Jiro Anagaki and grants immunity to him from penalty in excess of this amount.

The above penalties should be paid by the applicant/coapplicants within 30 days of receipt of this order.

8.4  Redemption Fine:  The goods valued at Rs.6016,56,43,121/- are held liable to confiscation. However, since the same are not available for confiscation, no redemption fine is imposed.

8.5  Prosecution:  Subject to payment of dues as adjudged above, full immunity from prosecution under Customs Act, 1962 is granted to the applicant/coapplicants so far as this case is concerned.”

It is the complaint of the petitioners that after this order was issued and duly implemented, the impugned communication dated 10.04.2017 has been received demanding interest on the differential duty of Rs.79,65,52,147/- on the provisionally assessed 187 bills of entry in terms of section 18(3) of the Customs Act, 1962.

The petitioners while challenging this communication on several grounds also places reliance on the decision in the case of  CEAT Limited vs. Commissioner of Central Excise & Customs, Nashik, =  2015-TIOL-397-HC-MUM-CX and submits that the Special Leave Petition filed by the Revenue challenging this judgment and order has also been dismissed by the Supreme Court.

The counsel for the Revenue submitted that the reliance placed on the decision (supra) is misplaced and, therefore, the petition should be dismissed. It is further submitted –

“…, the petitioners had not paid any interest on the differential duty of Rs.79,65,52,147/- arising out of the finalization of the provisionally assessed 187 Bills of Entry vide the impugned order of the Settlement Commission. Though the finalization comes under the order of the Settlement Commission, the payment of interest which is statutorily payable, was not done. That is how the communication was issued. The petitioners had responded to that communication by their reply dated 1st May, 2017. Thereafter, the Directorate of Revenue Intelligence communicated with the Settlement Commission on the issue and requested for a clarification in that regard. A communication was received from the office of the Settlement Commission on 19th June, 2017 , informing that there are provisions under Section 127C(9) read with Section 127K, Section 127J and 127H(2) of the Act, which are self explanatory, and appropriate action may be taken as deemed fit. It is in these circumstances, it is submitted that there is nothing erroneous or illegal about the communication. Once the language of the statute is clear, enunciating particularly the power to recover interest, then all the more, the Petition should not be entertained…”

The High Court in an extensive order adverted to the contents of the application made by the petitioner before the Settlement Commission, the findings and operative portion of the order of the Commission and observed -

“…The show cause notice was issued and that, as a whole, went for settlement before the Settlement Commission. The Revenue verified the contents of that application in the backdrop of the show cause notice and submitted its report. In that report, it communicated its agreement with the figures and calculations, albeit prima facie, but reserving a limited liberty. The Commission was allowed to proceed on these lines and even the Commission proceeded accordingly. Once the dispute or the issues were settled by the Commission in terms of the order and with the operative directions, which only granted or reserved a limited liberty in the Revenue, then, in the facts and circumstances of this case, we see no justification for the Revenue now demanding interest on the differential duty. Everything that was payable, including duty and interest, is subsumed in the order of the Commission. That is clear, according to us, and there was never any ambiguity or error noted in the same…”

The High Court adverted to the reply dated 19.06.2017 received from the Settlement Commission and observed -

“35. From the record, it is apparent that the Settlement Commission did not agree with this stand of the Revenue for, on 19th June, 2017, it communicated that the provisions of the Customs Act, particularly in relation to the powers of the Commission, are clear and self explanatory. The Revenue was told to take appropriate action at its end.”

It is further observed -

“36. It is in these circumstances that we do not see how the Revenue, when being in receipt of such communication from the Commission, could have pursued the action in terms of the impugned letter dated 10th April, 2017. The Revenue knew where it stands and in the scheme of the law. If it has not raised the contentions in the affidavit-in-reply or in the communication to the Settlement Commission during the proceedings or post its final order dated 2nd March, 2017, then, in the facts and circumstances of this case, it is alone to be blamed. It must blame itself if it has not conducted the proceedings before the Commission in the manner demanded by the statute or its report or its conduct of the proceedings was deficient in any manner. In the Petition challenging the impugned communication / letter dated 10th April, 2017 at the instance of the petitioner, the Revenue cannot call upon this Court to undertake an exercise which stands concluded by the final order of the Settlement Commission dated 2nd March, 2017. More so, when the said final order is not challenged by the Revenue in substantive proceedings.”

The impugned letter dated 10th April, 2017 was quashed and the Revenue was commanded not to act in furtherance thereof.

The Petition was allowed.

(See 2018-TIOL-145-HC-MUM-CUS)