By TIOL News Service

NEW DELHI, NOV 17, 2016: AGAINST an order passed by the Commissioner of Customs ordering confiscation of goods, demanding customs duty and imposing penalties on the importer and company personnel, the importer had applied under the KVSS, 1998 for settlement of their case.

The declaration was accepted by the designated authority and the applicant paid the 50% duty amount of Rs.5,50,090/-. The case was settled.

In the meanwhile the employees of the company against whom penalties were imposedu/s 112 of the Customs Act, 1962 approached the High Court seeking extension of the benefits of settlement. This petition was filed in the year 1999.

It was urged that in terms of the scheme once the settlement is recorded with respect to the tax liability of the principal noticee, the question of further liability on the part of others, who may not play a permanent role, does not arise. Inasmuch as since the liability of the company i.e. first petitioner was satisfied, it would be highly inequitable if the respondent proceeded against the present petitioners who were mere employees. Reliance is placed upon para 2 of the clarification contained in the Commissioner of Central Excise and Customs, Trade Notice No. 35/1998 dated 30.11.1998.

The counsel for the department urged that unless an application is moved by all noticees, under the scheme, the settlement recorded in respect of one of them - may be even the principal person involved, would not inure any benefit to all others; that the revenue's rights to enforce liability independently are preserved. Reliance is placed upon paragraph 12 of Onkar S. Kanwar - 2002-TIOL-924-SC- MISC.

The High Court extracted paragraphs 12 to 14 of the apex court decision and observed -

++ From a bare reading what emerges is that the tax arrears of the Directors and officers of a company can be proceeded with independently, if they do not join it in making an application. This case, however, it is not tax arrears which are in dispute but the penalty which is wholly dependent upon the findings that led to the tax arrears in the part of other three petitioners.

++ Secondly, and more importantly, the Supreme Court clearly stated that object of the removal of difficulties order in respect of the scheme was to give benefit of settlement by the main parties to all other co-noticees.

Directing the respondents not to enforce any demand towards payment of penalty as against the three individual petitioners who were employees of the first petitioner at relevant time, the penalty order was quashed.

The Writ petition was allowed.

(See 2016-TIOL-2798-HC-DEL-CUS)