M/s.Optigrab International v. Government of India & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 14-07-2009CORAMTHE HONOURABLE MR. JUSTICE N. PAUL VASANTHAKUMARWRIT PETITION NO.695 OF 2009M.P.No.1 of 2009M/s.Optigrab International,rep.by its Managing Partner N.RameshNo.3-475 & 476 II Street,Kazuragarden, Nilangarai,Chennai – 600 041.... PetitionerVs.1.Government of India,rep.by the Principal Secretary,Ministry of Finance,Directorate of Central Excise & Intelligence,Chennai Zonal Unit, C3, C Wing, Rajaji Bhawan,Besant Nagar, Chennai – 600 090.2.The Customs & Central Excise Settlement Commission,Additional Bench, II Floor,Narmada Block, Customs House,No.60, Rajaji Salai,Chennai – 600 001.... RespondentsWrit Petition filed under Article 226 of the Constitution ofIndia praying for the issuance of a Writ of Certiorarified Mandamuscalling for the records relating to the proceedings inNo.C.I.No.VIII/10/71/2008-SC dated 11.11.2008 on the file of thesecond respondent and quash the same and consequently direct thesecond respondent to consider the application of the petitioner andpass orders on merit.For Petitioner : Mr. S.SenthilnathanFor Respondents : Mr.S.Thirumavalavan,Senior Standing Counselfor Customs & Central ExciseO R D E RThe prayer in this writ petition is to quash the order passed bythe second respondent dated 11.11.2008 and direct the second https://hcservices.ecourts.gov.in/hcservices/ respondent to consider the application of the petitioner seekingsettlement by Settlement Commission, Customs and Central Excise.2.The facts necessary for disposal of the writ petition areas follows:(a)The petitioner firm is a leading export house for thepurpose of exports for the countries viz., Germany, Canada and otherEuropean countries. The firm has been allotted with Import ExportCode No.0497012880. The respondents have offered certain duty freeimport items for the purpose of importing in raw material stage forthe purpose of exporting the same after completing the manufacturingactivity.(b)Under Rule 19(2) of the Central Excise Rules, 2002, thepetitioner firm availed certain duty free import of cotton yarns andfabrics, without paying duty for such imports. Such imported cottonyarn and fabrics were supplied to different manufacturers inCoimbatore, Salem and other parts of Tamil Nadu. According to thepetitioner, due to oversight and inadvertance, certain finishedproducts were also received and the same were re-exported to variousoverseas buyers and availed duty drawback concession. (c)As per Rule 3 of the Customs and Central Excise DutyDrawback Rules, 1995, read with the notification issued thereunderthe import of duty free articles shall not be subjected to any dutydrawback concession and if the exporter is prohibited from claimingany duty drawback concession at the time of export of the consignmentfor which raw materials were imported under duty free import scheme.According to the petitioner, inadvertantly it availed duty drawbackconcession for the negligible quantity of raw materials and the samewas exported along with other consignments during 2003-2004 and thesame was brought to light only when the first respondent took actionand searched the office premises of the petitioner on 19.11.2004.Petitioner claims that the same was realised and a sum ofRs.10,35,585/- was paid on 8.12.2004.(d)The first respondent issued three show cause notices on9.9.2008 under section 124 of the Customs Act,1962, calling forexplanation from the petitioner as to why the payments made by thepetitioner shall not be appropriated for the violation of illegalclaim of duty drawback concession made during the year 2003-2004.The said different show cause notices were issued since thepetitioner exported from three different ports, namely Seaport,Chennai; Airport, Chennai; and Seaport, Tuticorin; though all theexports were made by the petitioner under single transaction.(e)The petitioner firm, instead of conducting the cases,expressed its intention of invoking Section 127 of the Customs Act,1962, and sought for amicable settlement before the secondrespondent. The condition precedent for invoking the jurisdiction ofthe second respondent as per section 127-B is that minimum dutypayable by the exporter shall not be less than Rs.3 lakhs and noappeal shall be pending before any court. The petitioner claims that https://hcservices.ecourts.gov.in/hcservices/ it is fully qualified to get the matter settled under section 127 andsubmitted an application on 3.10.2008.(f)On receipt of the said application, the second respondentraised certain queries on 28.10.2008 with regard to the compliance ofthe conditions contained in section 127-B of the Customs Act andinterest calculation. Seven days time was given to comply with thesaid discrepancies. The same was complied with on 3.11.2008 and on11.11.2008 the impugned order was passed holding that three showcause notices were issued by three adjudicating authorities in threedifferent commissionerate and therefore there are three cases and thesaid cases cannot be considerd as one. As per section 127-B of theCustoms Act, 1962, settlement application is maintainable if anadditional amount of duty exceeds Rs.3 lakhs and therefore theapplication seeking settlement of three disputes cannot be treated asone and the petition is not maintainable.(g)The said order is challenged in this writ petition on theground that division of various commissionerate are only for theeffective administration and collection of revenue. The three showcause notices are arising out of single export transaction and thesame has been paid instantaneously when the mistake was brought tolight and therefore the settlement application is maintainable,particularly when the import export code being common.3.The respondents have filed counter affidavit contendingthat show cause notices bearing SCN.No.82/2008, 83/2008 and 84/2008,all dated 9.9.2008 were issued by the Assistant Directors,Directorate General of Central Excise Intelligence, Chennai ZonalUnit, Chennai-90, to the petitioner demanding to show cause why theduty drawback amount of Rs.2,07,784, Rs.2,83,780 and Rs.1,42,021should not be recovered and reply was sought for by the respectiveAssistant Commissioner of Customs, viz., Assistant Commissioner ofCustoms, Seaport at Chennai; Assistant Commissioner of Customs,Seaport at Tuticorin; and Assistant Commissioner of Airport atChennai, based on the place of export, where the cause of actionarose. It is also stated in the counter affidavit that singlesettlement application was received on 28.10.2008 for all the threeshow cause notices. The said application is not maintainable as theamount demanded in each show cause notices are less than Rs.3 lakhs.As per section 127-B of the Customs Act, 1962, for maintaining anapplication for settlement, if a show cause notice has been issuedand admitted duty liability exceeds Rs.3 lakhs, which means for eachand every application, there should be a notice and the additionalduty liability should be more than Rs.3 lakhs. Taking the said standthe impugned order is justified by the respondents in the counteraffidvit.4.Heard the learned counsel for the petitioner as well asrespondents. https://hcservices.ecourts.gov.in/hcservices/

5.The point in issue is whether common settlement applicationfiled by the petitioner in respect of three show cause notices ismaintainable in terms of section 127-B of the Customs Act, 1962 ?6.Section 127-B of the Customs Act, 1962, reads as follows:"127-B. Application for settlement of cases.-(1) Any importer, exporter or any other person(hereinafter referred to as the applicant in thisChapter) may, in respect of a case, relating tohim make an application, before adjudication tothe Settlement Commission to have the casesettled, in such form and in such manner as may bespecified by rules, and containing a full and truedisclosure of his duty liability which has notbeen disclosed before the proper officer, themanner in which such liability has been incurred,the additional amount of customs duty accepted tobe payable by him and such other particulars asmay be specified by rules including theparticulars of such dutiable goods in respect ofwhich he admits short levy on account ofmisclassification, under-valuation orinapplicability of exemption notification butexcluding the goods not included in the entry madeunder this Act and such application shall bedisposed of in the manner hereinafter provided:Provided that no such application shall bemade unless,-(a)the applicant has filed a bill of entry,or a shipping bill, in respect of import or exportof such goods, as the case may be, and in relationto such bill of entry or shipping bill, a showcause notice has been issued to him by the properofficer;(b)the additional amount of duty acceptedby the applicant in his application exceeds threelakh rupees; and(c)the applicant has paid the additionalamount of customs duty accepted by him along withinterest due under section 28-AB:Provided further that no application shall beentertained by the Settlement Commission underthis sub-section in cases which are pending in theAppellate Tribunal or any Court:Provided also that no application under thissub-section shall be made in relation to goods towhich section 123 applies or to goods in relationto which any offence under the Narcotic Drugs and https://hcservices.ecourts.gov.in/hcservices/ Psychotropic Substances Act, 1985 (61 of 1985) hasbeen committed:Provided also that no application under thissub-section shall be made for the interpretationof the classification of the goods under theCustoms Tariff Act, 1975 (51 of 1975).(1-A)Notwithstanding anything containedin sub-section (1), where an application was madeunder sub-section (1) before the 1st day of June,2007 but an order under sub-section (1) of section127-C has not been made before the said date, theapplicant shall within a period of thirty daysfrom the 1st day of June, 2007 pay the acceptedduty liability failing which his application shallbe liable to be rejected.(2)Where any dutiable goods, books ofaccount, other documents or any sale proceeds ofthe goods have been seized under section 110, theapplicant shall not be entitled to make anapplication under sub-section (1) before theexpiry of one hundred any eighty days from thedate of the seizure.(3)Every application made under sub-section(1) shall be accompanied by such fees as may bespecified by rules.(4)An application made under sub-section(1) shall not be allowed to be withdrawn by theapplicant."From the above section it is clear that the intention of thelegislature is that for a single show cause notice a settlementapplication can be filed, provided the additional amount of dutyaccepted by the applicant exceeds Rs.3 lakhs. The bill of entry ora shipping bill in respect of import or export of such goods as thecase may be issued by the proper officer, shall also be essential.7.Here in this case, admittedly as stated in the counteraffidavit, the duty drawback amount demanded in the show causenotices is less than Rs.3 lakhs i.e., Rs.2,09,784, Rs.2,83,780 andRs.1,42,021. Therefore the second respondent has rightly rejectedthe application seeking settlement in accordance with section 127-C,where the procedures to be followed on receipt of the applicationunder Section 127-B are contemplated. Section 127-C of the CustomsAct, 1962, reads as follows:"127-C. Procedure on receipt of anapplication under section 127-B.- (1)On receipt of an application undersection 127-B, the Settlement Commission shall,within seven days from the date of receipt of the https://hcservices.ecourts.gov.in/hcservices/ application, issue a notice to the applicant toexplain in writing as to why the application madeby him should be allowed to be proceeded with andafter taking into consideration the explanationprovided by the applicant, the SettlementCommission, shall, within a period of fourteendays from the date of the notice, by an order,allow the application to be proceeded with orreject the application, as the case may be, andthe proceedings before the Settlement Commissionshall abate on the date of rejection:Provided that where no notice has been issuedor no order has been passed within the aforesaidperiod by the Settlement Commission, theapplication shall be deemed to have been allowedto be proceeded with."By a reading of Section 127-C it is evident that on receipt ofapplication under section 127-B, the Settlement Commission shallwithin a period of 7 days issue notice to the applicant and within 14days from the date of notice, by an order, allow the application tobe proceeded with, or reject the application, as the case may be, andif it is not rejected, the application shall be deemed to have beenallowed to be proceeded with. 8.In the case on hand, the settlement application was filedby the petitioner on 22.10.2008 for three show cause notices. Noticewas issued on 28.10.2008 and the peitioner replied through itscounsel on 3.11.2008 and 10.11.2008 and the impugned order waspassed on 11.11.2008. The said order is in terms of section 127-Ci.e, rejecting the application for settlement, specifically for non-compliance of section 127-B(1)(b).9.The petitioner's contention that under a single code itexported goods in a calendar year and hence the same is to be treatedas single export, cannot be sustained, as the requirement as persection 127-B of the Customs Act, 1962, is to do export by a bill ofentry or shipping bill. Admittedly, bill of entry or shipping billwas issued by three authorities and three show cause notices areissued. Unless the amount mentioned in the show cause notice in acase exceeds Rs.3 lakhs, the Settlement Commission has nojurisdiction to entertain the settlement application under section127-B, under which the petitioner filed the settlement application. https://hcservices.ecourts.gov.in/hcservices/ There is no merit in the writ petition and the writ petition isdismissed. No costs. Connected M.P.No.1 of 2009 is also dismissed.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarvrTo1.The Principal Secretary, Ministry of Finance,Directorate of Central Excise & Intelligence,Chennai Zonal Unit, C3, C Wing, Rajaji Bhawan,Besant Nagar, Chennai – 600 090.2.The Customs & Central Excise Settlement Commission,Additional Bench, II Floor, Narmada Block, Customs House,No.60, Rajaji Salai, Chennai – 600 001.1 cc To Mr.S.Senthilnathan, Advocate, SR.30994.1 cc To Mr.S.Thirumavalavan, Advocate, SR.30983.W.P.No.695 of 2009VSV(CO)RVL 22.07.2009