Settlement Commission re-opens its doors to admit clandestine removal and smuggling cases

By TIOL News Service

NEW DELHI, FEB 26, 2010: THE Finance Act, 2007 had proved the death knell for the Settlement Commission for it closed its doors to the majority cases that occupied its hallowed portals, namely the cases concerning clandestine removal and smuggling.  Coupled with the deadline factor embedded in the sections of the cases having to be disposed within a mandatory period of nine months from the last day of the month in which the application was made, failing which the settlement proceedings were held to be abated, the Settlement Commission proceedings had come to a virtual standstill.

We had also expressed surprise at such a debarring clause in the provisions for the simple reason that the genesis of Settlement lay in the Wanchoo Committee report presented on 24th December, 1971 and whose essence is  –

"This however does not mean that the door for compromise with an errant taxpayer should forever remain closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be some room for compromise and settlement. A rigid attitude would not only inhibit a one time tax-evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigation resources of the Department in cases of doubtful benefit to revenue while needlessly proliferating litigation and holding up collections. We would therefore, suggest that there should be a provision in law for a settlement with a taxpayer at any stage of the proceedings."

Thankfully, the relevant provisions in section 32E, 32F of the CEA, 1944 and parallel provisions of section 127B and 127C of the Customs Act, 1962 have been sought to be amended by clauses 64, 65, 57 and 58 respectively of the Finance Bill, 2010 and this would allow even clandestine removal and smuggling cases to be covered under settlement.  Last but not the least, the mandatory period of nine months within which the application was required to be settled by the Settlement Commission has also been enlarged by giving the Commission the discretion to extend it for a further period not exceeding three months.

A similar provision has also been made under the Income Tax Act also. Section 245 A to D have been suitably amended

So, All izz well!