Exotica Global Pvt. Ltd. vs Union of India

The Court: The intra Court appeal has been preferred questioning the legality of the dismissal of the writ application passed by Single Bench on 10-8-2012 Exotica Global Pvt. Ltd. Vs. Union of India and Others, pertaining to question whether recovery proceeding can be said to be a proceeding relating to adjudication as contemplated under Sections 127A and 127B of the Customs Act, 1962 (hereinafter referred to as the Act). Pendency of adjudication proceeding is necessary in order to approach the Settlement Commission. The settlement commission rejected the application filed for the purpose of the settlement vide order dated 13-4-2012 on the ground that the recovery proceeding cannot be said to be a proceeding as contemplated u/s 127A and 127B of the Act. The Single Bench has agreed with the decision of the settlement commission, hence the intra Court appeal.

Sri R.K. Chowdhury, learned Senior Counsel has submitted that definition of the proper officer as amended is wide and recovery proceeding is pending before the proper officer. Such proceeding has to be taken to be one pending before the adjudicating authority and he relied upon the definition of the adjudicating authority u/s 2(1) and also that of the proper officer defined in Section 2(34) of the Act. He has also submitted that a joint notice was given u/s 28 and when the notice was given for recovery by the same authority i.e. the adjudicating authority, even if the adjudication order has already been passed, it was so passed without observing the basic principle of granting of hearing hence could not be said to be an order of adjudication passed in the eye of law as such it has to be ignored. In any view of the matter, the recovery proceeding has to be taken to be the one pursuant to the order passed by the adjudicating authority as notice for both was common. The interpretation of Section 127A has to be made to cover proceedings where an order of adjudication has been passed by adjudicating authority and its execution is pending before the proper officer. It nonetheless remains the order of adjudicating authority pertaining to which an incumbent can approach the Settlement Commission within the purview of Sections 127A and 127B of the Customs Act.

Mr. N.C. Roy Chowdhury, learned Senior Counsel appearing on behalf of the Revenue has relied on Section 127B and Section 142 of the said Act. On a plain reading of the said Sections it is clear that the recovery proceedings are not adjudication proceedings. It is only before an order of adjudication was passed under provision of Section 28 the Settlement Commission can be approached. The provisions contained in Section 127A read with Section 127B make it clear that there is no room to accept the submissions raised by the appellant.

The "adjudicating authority" has been defined in Section 2(1) of the Act definition is quoted below:

2(1) "adjudicating authority" means any authority competent to pass any order or decision under this Act, but does not include the Board [Commissioner (Appeals)] or Appellate Tribunal.

The "proper officer" has been defined in Section 2(34) of the said Act same is quoted below:

2(34) "proper officer", in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the [Commissioner of Customs].

Section 127A(b) contains the definition of case in Chapter XIV-A dealing with the settlement of the cases. The "case" has been defined in Section 127A(b) of the Act read thus:

127A(b). "case" means any proceeding under this Act or any other Act for the levy, assessment and collection of customs duty, pending before an adjudicating authority on the date on which an application under sub-section (1) of section 127B is made:

Provided that when any proceeding is referred back in any appeal or revision, as the case may be, by any court, Appellate Tribunal or any other authority, to the adjudicating authority for a fresh adjudication or decision, as the case may be, then such proceeding shall not be deemed to be a proceeding pending within the meaning of this clause.

(emphasis applied by us)

Section 127B of the Act under which application for settlement of cases can be filed is quoted hereinbelow:

127B. Application for settlement of cases.--[(1) Any importer, exporter or any other person (hereinafter referred to as the applicant in this Chapter) may, in respect of a case, relating to him make an application, before adjudication to the Settlement Commission to have the case settled, in such form and in such manner as may be specified by rules and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits, short levy on account of misclassification, under-valuation or inapplicability of exemption notification but excluding the goods not included in the entry made under this Act and such application shall be disposed of in the manner hereinafter provided:

Provided that no such application shall be made unless-

(a) the applicant has filed a bill of entry, or a shipping bill, in respect of import or export of goods, as the case may be, and in relation to such bill of entry or shipping bill a show cause notice has been issued to him by the proper officer;

(b) the additional amount of duty accepted by the applicant in his application exceeds three lakh rupees; and

(c) the applicant has paid the additional amount of customs duty accepted by him along with interest due u/s 28AB:

Provided further that no application shall be entertained by the Settlement Commission under this sub-section in cases which are pending in the Appellate Tribunal or any court:

Provided also that no application under this sub-section shall be made in relation to goods to which section 123 applies or to goods in relation to which any offence under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) has been committed:

Provided also that no application under this sub-section shall be made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975 (51 of 1975).

(1A) Notwithstanding anything contained in sub-section (1), where an application was made under sub-section (1) before the 1st day of June, 2007 but an order under sub-section (1) of Section 127C has not been made before the said date, the applicant shall within a period of thirty days from the 1st day of June, 2007 pay the accepted duty liability failing which his application shall be liable to be rejected.]

(2) Where any dutiable goods, books of account, other documents or any sale proceeds of the goods have been seized u/s 110, the applicant shall not be entitled to make an application under sub-section (1) before the expiry of one hundred and eighty days from the date of the seizure.

(3) Every application made under sub-section (1) shall be accompanied by such fees as may be specified by rules.

(4) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant.

(emphasis applied by us)

Section 142 has also been referred to. The same deals with the recovery of the sums due to the Government. Section 142 has been quoted below:

Recovery of sums due to Government.--(1) Where any sum payable by any person under this Act including the amount required to be paid to the credit of the Central Government u/s 28B is not paid, -

(a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or

(b) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the Assistant Commissioner of Customs or Deputy Commissioner of Customs or such other officer of customs; or (c) if the amount cannot be recovered from such person in the manner provided in clause (a) or clause (b) -

(i) the Assistant Commissioner of Customs or Deputy commissioner of Customs may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector on receipt of such certificate shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue; or

(ii) the proper officer may, on an authorization by a Commissioner of Customs and in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person:

Provided that where the person (hereinafter referred to as predecessor), by whom any sum payable under this Act including the amount required to be paid to the credit of the Central Government, u/s 28B is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by the proper officer, after obtaining written approval from the Commissioner of Customs, for the purposes of recovering the amount so payable by such predecessor at the time of such transfer or otherwise disposal or change.

(2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section.

A bare reading of the definition of adjudicating authority indicates that any authority competent to pass any order or decision under this Act is to be treated as adjudicating authority but does not include the Board [Commissioner (Appeals)] or Appellate Tribunal, as the case may be. Proper Officer has been defined separately in relation to any functions to be performed under the Act and there is specific assignment of those functions by the Board. The assignment of the functions by the Board is necessary to a proper officer. Any order or decision under this act to be passed by adjudicating authority has to be understood in the context it has been used and cannot include orders passed by proper officer in recovery proceeding when adjudication is over.

Section 28 deals with payment of duties and interest contemplated under sub-section (1) thereof. There is a distinction between adjudicating authority and the proper officer as defined in Section 2(1) and 2(34) of the Act respectively. Proper officer is the one who is assigned the functions under the Act.

The provisions contained in Section 127B clinches the issue with respect to the question whether the recovery proceedings pursuant to the order of adjudication which has been passed can be said to be covered for the purpose of enabling an incumbent to seek the benefit of the provisions contained in Section 127B. It is clearly mentioned in Section 127B that any importer, exporter or any other person in respect of a case relating to him may make an application, however, before "adjudication". Once adjudication has been made no application can be filed to avail benefit of the provisions contained in Section 127B(1). So, we need not confuse with respect to the submission based upon the definition of adjudicating authority as expression "adjudication" has been clearly used and an application u/s 127B(1) has to be filed before the adjudication is made.

The definition of ''case'' as defined in Sections 127A(b) also makes it clear that the proceeding must be pending before an adjudicating authority on the date on which an application under sub-section (1) of Section 127B is made. When both the provisions are read together it is apparent that there has to be pendency of the proceeding before the adjudicating authority and before adjudication an application u/s 127B(1) can be filed. The proceeding for recovery u/s 142 does not contemplate any adjudication order by adjudicating authority, such proceedings are before proper officer. The submission raised by the learned Counsel for the appellant cannot be accepted.

We find no merits in submission that as no opportunity of hearing was granted before order of adjudication was passed the order has to be ignored. Firstly it is apparent that notice was issued. Secondly once order of adjudication has been passed legality of such order cannot be adjudged by Settlement Commission and Settlement Commissioner is competent to entertain application before adjudication. Hence submission made has no legs to stand and is repelled.

In our opinion as no adjudication proceeding is pending in this case, in our view. Settlement Commission has rightly opined that provision of Section 127B of the Act cannot be invoked for the purpose of settlement of the dues. We find no infirmity in the order passed by the Single Judge affirming the decision of the Settlement Commission.

Resultantly the appeal being devoid of merits is hereby dismissed.

Stay application is also rejected. Urgent xerox certified copy of this order, if applied for, be supplied to the parties upon compliance with requisite formalities.