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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
Dated this the 25th day of June, 2015
Present
THE HON’BLE MR JUSTICE VINEET SARAN
THE HON’BLE MR JUSTICE ARAVIND KUMAR
Writ Appeal 2527 / 2004 (T TAR)
Between 1 M/s C S India
# 135 & 137, Industrial Town
Rajajinagar, Bangalore 44
By its Partner – Mr Satish Goenka
56 yrs
2 Mr Satish Goenka, 56 yrs
Partner – M/s C S India Ltd # 86-D/1. II Stage, Yeshwanthpur Industrial Suburb, Bangalore 22
3 Mr M K Kulkarni, 45 yrs
Fabric Godown Incharge
M/s C S India
9/20, 8th Cross, Gorguntepalya
Yeshwathpur Sub-urb, II Stage
Bangalore 22
4 M/s Texport Overseas
# 86-D/1, II Stage
Yeshwanthpur Industrial Suburb
Bangalore 22 - by its partner
Mr Satish Goenka, 56 yrs
5 M/s Sameer Exports
# 86-D/1, II Stage
Yeshwanthpur Industrial Suburb
Bangalore 22 - by its Partner
Mr Satish Goenka, 56 yrs
6 Mr R K Chaturvedi, 40 yrs
Sr Manager – Finance & Accounts
Texport Group of Companies
# 86-D/1, II Stage
Yeshwanthpur Industrial Suburb
Bangalore 22
7 Mr S Kumar, 36 yrs
Proprietor – M/s Satish Textiles
# K-24/6, 4th Main, L N Pura
Bangalore 21
Appellants
(By Sri Uday Holla, Sr.Counsel a/w Sri Brijesh Patel, Adv.)
And
1 Additional Director General
Directorate of Central Excise Intelligence
Zonal Unit, Bangalore
2 Commissioner of Customs
Central Revenue Buildings
Queens Road, Bangalore
3 Customs & Central Excise Settlement
Commission, Additional Bench
Chennai
Respondents
(By Sri Jeevan J Neeralgi, Standing Adv.)
Writ Appeal is filed under S.4 of the Karnataka High Court Act, 1961 praying to set aside the order dated 13.4.2004 in WP 5463/2004 and to allow the writ petition.
Appeal coming on for hearing this day, Aravind Kumar J., delivered the following:
JUDGMENT
In this intra-court appeal, writ petitioners are calling in question the correctness and legality of the order dated 13.4.2004 passed in WP No.5463/2004 whereunder the writ petition filed by petitioners calling in question the order passed by the Settlement Commission on 21.8.2003 – Annexure E as well as order dated 19.9.2003 – Annexure J came to be dismissed by confirming the order of Settlement Commission which had dismissed the application filed under Section 127B of the Customs Act, 1962 as not maintainable.
Facts in brief which has lead to the filing of this appeal can be crystallized as under:
Petitioners were issued with a show cause notice dated 20.11.2002 – Annexure - A alleging certain violations of the provisions of the Customs Act, 1962 and demanding duty and interest thereon from the petitioner. Writ petitioners, before submitting reply to the show cause notice, approached the Settlement Commission by filing an application under Section 127B of the Customs Act, 1962 (for short ‘Act’) for adjudicating the said application. The Settlement Commission held that application is not maintainable in view of the third proviso to Section 123 of the Act and as such, dismissed the application as not maintainable. Aggrieved by this order, petitioners sought for review of the same by filing a miscellaneous application. On 19.9.2003, the Settlement Commission, after considering the rival contentions, held that it does not have power to review its own order and though petitioners were seeking for
recall of the order, in disguise it was an order seeking for review and as such, dismissed the miscellaneous application vide order dated 25.11.2003 – Annexure - J. Being aggrieved by these two orders, writ petition came to be filed in WP No.5463/2004. Learned Single Judge, after having noticed the contentions raised by the parties, has affirmed the order passed by the Settlement Commission and thereby rejected the writ petition reserving liberty to petitioners to file reply to the show cause notice and get the matter adjudicated. Hence, the present appeal.
We have heard the learned advocates appearing for the parties namely Sri Udaya Holla, learned Senior counsel for the petitioners and Sri Jeevan J Neeralgi, learned panel counsel for the Revenue. Perused the case papers.
It is the contention of Sri Udaya Holla, learned Senior Counsel appearing on behalf of the writ petitioners that the Settlement Commission was not
justified in rejecting the application filed by the petitioner as not maintainable that too by relying upon the report of the DGCEI dated 7.8.2003 which report was not furnished to the petitioners and as such, impugned order being in violation of principles of natural justice, same is liable to be set aside and he prays for direction being issued to Settlement Commission to adjudicate the application on merits and in accordance with law. In support of his submission, learned counsel has relied upon the following cases:
• Union of India & Ors Vs Mohd. Ramzan Khan – (1991) 1 SCC 588
• Sona Builders Vs Union of India & Ors – (2001) 10 SCC 280
• State of Assan & Anr Vs Mahendra Kumar Das & Ors – 1970(1) SCC 709
• R Shamanna Vs State Bank of Mysore, Bangalore – ILR 2003 KAR 4467
• N Krishnan (Dead, by LRs) Vs Settlement Commission & Ors – 1989 (180) ITR 585
• Hazel Mercantile Ltd Vs Union of India – 2012 (285) ELT 352
5 Per contra, Sri Jeevan J Neeralgi, learned counsel appearing for the Revenue has supported the orders passed by the Settlement Commission as well as the order of learned Single Judge by contending that 3rd proviso to Section 127B of the Act is attracted and same would clearly indicate that in cases of goods being notified under Section 123 are the subject matter of an application before the Settlement Commission, such application would be outside the purview of adjudication by Settlement Commission and as such, it came to be rightly held by the Settlement Commission that application filed by petitioner for settlement was not maintainable for being entertained on merits and as such, he seeks for affirming the order passed by the learned Single Judge as well as the Settlement Commission. He would also contend that Miscellaneous
Application came to be filed by the petitioner to recall the order dated 21.08.2013 passed by the Settlement Commission and same was also dismissed rightly by arriving at a conclusion that it has no power to review its own order and for setting aside these two orders, writ petition was filed, which also came to be dismissed on the ground that “goods” imported by petitioner were notified under Section 123 of the Customs Act. He would elaborate his submission by contending that conclusion arrived at by the Settlement Commission as regards the subject “goods” being covered under Section 123 of the Act is in consonance with material evidence available on record and as such, learned Single Judge has rightly dismissed the writ petition. On these grounds, he prays for dismissal of the writ appeal. In support of his submission he has relied upon the following judgments: • Commissioner of Customs, Bangalore vs. A. Mahesh Raj- 2006 (195) E.L.T. 261 (Kar.)
• Yashavi Enterprises vs.
Cus. & C.EX. Settlement Commission, Chennai-2015 (315) E.L.T. 490 (Mad.)
• Platinum Exports vs. Union of India- 2010 (254) E.L.T. 275 (Bom.)
• Optigrab International vs. Government of India- 2010 (253) E.L.T. 722 (Mad.)
• Amrut Ornaments vs. Sett. Commission for Cus. & C.Ex- 2014 (305) E.L.T 365 (Bom.)
• Uttam Chand Sawal Chand Jain vs. Union of India- 2014 (299) E.L.T. 45 (Bom.)
• C.C (Imports-Seaport), Chennai-I vs. Rohan Anirudha Seolekar- 2013 (288) E.L.T. 353 (Mad.)
• Sanghvi Reconditioners Pvt. Ltd., vs. Union of India- 2010 (251) E.L.T. 3 (S.C)
• Ramasamy Suppiah Venugopal vs. Union of India-2009 (235) E.L.T. 595 (Bom.)
• Commissioner of Income Tax, Jalpaiguri vs. Om Prakash Mittal-2005 (184) E.L.T. 3 (S.C)
Having heard the learned advocates appearing for the parties and on perusal of entire case papers, we have bestowed our careful consideration to the rival
contentions raised at the bar. We are of the considered view that orders passed by the Settlement Commission as well as learned Single Judge do not call for interference for the reasons indicated herein below:
(a) Petitioner is a 100% Export Oriented Unit (for short ‘EOU’) with Customs Department for in-bond manufacturing activity and it is engaged in the manufacture and export of ready made garments. Certain imports of fabrics made wholly or mainly of synthetic yarn were cleared by availing exemption under the Customs notification No.53/97 dated 03.06.1997 and Central Excise notification No.1/95 dated 04.01.1995 as amended and applicable to a 100% EOU. (b) Based on the intelligence gathered by DGCEI that the applicant has diverted the fabric and other goods imported duty free for purposes other than manufacture of ready made garments for exports, simultaneous search operations was conducted on 23.05.2002 in different premises including the premises
of the companies belonging to the same group to which petitioner belongs. Seizure of the fabrics was made and further investigation was taken up. The DGCEI came to a conclusion that writ petitioner had clandestinely removed the imported fabrics which were bonded in their EOU, to the fabrics godown of the group companies and search removals were made under the cover of scribbling pad sheets. They also found that the writ petitioner had removed/disposed off the fabrics imported free of duty without obtaining permission and without following the customs procedures. On these amongst other grounds, show cause notice came to be issued demanding duty, for settlement of which, writ petitioner filed application under Section 127B of the Act before the Settlement Commission.
(c) The Settlement Commission after considering the submissions from both the sides has held that 3rd proviso to sub-section (1) of Section 127B of the Act is attracted since major portion of the duty demanded
relates to “Polyester Satin Fabrics”, “Polyester Taffeta Fabrics”, “100% Nylon Fabrics and Polyclass” which are goods notified under Section 123 of the Act, since these goods finds a place in the notification No.204-CUS dated 20.07.1984 which covers “Fabrics made wholly or mainly of synthetic yarn”. In that view of the matter, Settlement Commission arrived at a conclusion that no application can be made in relation to goods to which Section 123 applies even if such goods have been imported licitly by order dated 21.08.2003. Seeking recall of this order, a Miscellaneous Application was filed. The Settlement Commission rejected the said application for want of jurisdiction namely, on the ground that it has no power to review its order.
A bare reading of the statutory provision namely Section 127B of the Customs Act, 1962 would clearly indicate that an application under Section 127B before Settlement Commission would not be maintainable or in other words, such application cannot be filed by an
applicant before the Settlement Commission if it relates to goods to which Section 123 applies or to goods in relation to which any offence under the Narcotic Drugs & Psychotropic Substances Act, 1985 has been committed as per 3rd proviso. Reading of Section 123 of the Act would indicate that if the goods to which the section applies are seized under the Act by the Proper Officer on the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods would be on the person from whose possession such goods are seized. It is not in dispute that the goods which came to be imported by the writ petitioner was under the relevant EXIM policy that was prevailing then. Petitioner on such importation was required to export the goods and as such, mandatorily required to store the said goods in a bonded ware house . The records would also disclose that when the Proper Officer seized the said goods, it was not in the bonded ware house but outside such bonded ware house.
Be that as it may, the moot question which arises in this case is whether 3rd proviso to Section 127B of the Act is attracted or not? Goods in question, according to the petitioners, would comprise of both cotton as well as nylon and in support of the same, petitioners have heavily relied upon the Bill of Entries produced before the Settlement Commission. 100% nylon fabrics have been notified under Section 123 of the Act as per notification No.204 – CUS dated 20.7.1984 which covers ‘fabrics made wholly or mainly of synthetic yarn’. The Bill of Entries filed before the Settlement Commission would also indicate, mostly the fabrics are nylon / lycra apart from cotton fabrics. Writ petitioner was not able to demonstrate that the entire goods covered by the show cause notice, apart from the seized goods, consisted predominantly of cotton fabrics which was not covered by Section 123 of the Act. The Settlement Commission, on facts, has observed that most of the goods covered in the show cause notice are the ones to which Section 123 applies. As to whether
the said goods are cotton or nylon fabrics is a disputed question of fact and as such, this aspect cannot be gone into by the Settlement Commission. On the other hand, the Bills of Entry appended to the show cause notice issued to the petitioners would indicate that these are notified goods under Section 123 of the Act. It is because of this precise reason, Settlement Commission having taken note of the fact that goods in question would fall within the definition of goods as notified under Section 123 of the Act, has held that the 3rd proviso to sub-sec.(1) of Section 127B is attracted or in other words, same would come into play and as such, held that application is not maintainable. In that view of the matter, we are of the considered view that the application filed by the writ petitioners seeking for settlement of dispute before the Settlement Commission by invoking Section 127B of the Act, was not required to be entertained by the Settlement Commission and as long as the ingredients of Section 123 are attracted and
application of the petitioner would squarely fall within 3rd proviso of Section 127B of the Act.
9 Taking note of these aspects, learned Single Judge has rightly arrived at a conclusion that this would not be a case where the exercise of extraordinary jurisdiction by the writ Court was called for. Though Sri Udaya Holla, learned Senior counsel has made a valiant attempt to contend that unbridled power of this Court to set right the illegalities committed by the authorities would empower the appellate Court also to carry out such an exercise, though acceptable, we are not inclined to exercise said power inasmuch as, we do not find any error in the orders of the Settlement Commission and learned Single Judge for the simple reason that Settlement Commission, by impugned order dated 21.8.2003, has noticed that the goods in question as indicated in the show cause notice, are goods notified under Section 123 of the Customs Act as per the notification No.204-CUS dated 20.7.1984. It is no doubt
true that this Court, being the appellate Court and appeal proceedings being continuation of the original proceedings, has got ample power to set right the illegalities, if committed by statutory authorities. However, in the facts obtained in the present case as already noticed herein above, we are of the considered view that such illegality alleged is conspicuously absent for this Court to exercise such power. Merely because goods in question are exported under a Bill of Entry and as such 3rd proviso would be attracted only to goods imported illicitly or smuggled goods and thereby application filed by the petitioner before Settlement Commission ought to have been accepted by it would be erroneous, inasmuch as, even in cases of clandestine importation, there will be no Bill of Entry and even in such circumstances, an application for settlement cannot be filed since filing of Bill of Entry is a condition precedent to entertain an application before Settlement Commission as indicated in clause (a) of first proviso to sub-section (1) of Section 127B of the Act. Hence, even
in respect of an application filed in respect of goods to which Section 123 applies though imported through proper channel would not be a ground to entertain such application.
Sri Udaya Holla, learned Senior counsel has also contended that impugned order of Settlement Commission dated 21.08.2003 smacks of violation of principles of natural justice since the report of the DGCEI relied upon by the Commission was not furnished to the petitioner. We are of the considered view that was not the only material which was available before the Settlement Commission to arrive at a conclusion to hold that goods in question were notified goods. It has been noticed by the Settlement Commission that the goods in question would clearly fall within the definition of notified goods since under the description of the goods in question was in paramateria with the goods notified under the Customs notification dated 20.07.1984 issued under Section 123 of the Customs Act
. Hence, it has been held that the 3rd proviso to Section 127B of the Act is attracted to the facts and circumstances of the case. Hence, we are in complete agreement with the finding arrived at by the Settlement Commission which has been affirmed by the learned Single Judge.
It is an undisputed fact that the petitioners are yet to reply to the show cause notice. The dismissal of the application filed before the Settlement Commission as affirmed by the learned Single Judge which has been confirmed by us, would not prevent the writ petitioners to file reply to the said show cause notice and during the course of the adjudication proceedings, if the petitioners are able to establish that goods in question do not fall under the notification No.204-CUS dated 20.07.1984, it would be open to them to approach the Settlement Commission under Section 127B of the Act. In such an event, Settlement Commission shall adjudicate the
application without being influenced by any observations made in its earlier order or in this order. With these observations we proceed to pass the following: ORDER (i) Writ Appeal is hereby dismissed. (ii) Order passed in WP No.5463/2004 on 13.4.2004 is hereby affirmed.
(iii) Costs made easy. Ordered accordingly.
Sd/- Judge
Sd/-
Judge
An/sp