M/S Sanghvi Reconditioners Pvt vs Union Of India &Amp; Ors on 5 February, 2010

     IN THE SUPREME COURT OF INDIA

                  CIVIL APPELLATE JURISDICTION

                  CIVIL APPEAL NO. 1435 OF 2003

 M/S SANGHVI RECONDITIONERS PVT. -- APPELLANT LTD.

                             VERSUS

UNION OF INDIA & ORS. -- RESPONDENTS     JUDGMENT

   D.K. JAIN, J.:



1. This appeal, by special leave, is directed against the final  judgment and
order dated 23rd April, 2002 rendered by the High  Court of Judicature at Bombay
in Writ Petition No.633 of 2002,  whereby the High Court has dismissed the writ
petition, affirming  the decision of the Settlement Commission, Customs and
Central  Excise, Mumbai (hereinafter referred to as, "the Settlement
Commission").

 2. The facts, giving rise to the present appeal, may be summarised  thus:

 The appellant is an importer and ship repair unit registered with  the Director
General of Shipping, Government of India. On the basis  of the intelligence
gathered, premises of the appellant were searched  by the officers of the
Customs Commissionerate, Mumbai in  December, 1997, resulting in the recovery of
incriminating  documents. The investigations revealed that the appellant had
clandestinely availed of benefit of import duty Exemption Notification
No.211/83-Cus dated 23rd July, 1983, as amended, on the import of  multiple
consignments of engineering cargo as "Ship Spares". Based  on the
material collected in the course of investigations, two show  cause notices
dated 29th December, 1997 and 17th June, 1998, were  issued to the appellant,
demanding customs duty of Rs.3,12,030/-  and Rs.65,66,076/- respectively
(totalling Rs.68,78,106/-). Upon  consideration of the reply furnished by the
appellant, the  Commissioner of Customs (Preventive), Mumbai by his order dated
26th February, 1999 confirmed the demand of customs duty of     2

 Rs.68,78,106/-, besides penalty and interest under Section 28AB of  the Customs
Act, 1962 (for short "the Act").

3. Aggrieved, the appellant preferred an appeal to the erstwhile  Customs,
Excise and Gold (Control) Appellate Tribunal. However,  the said appeal was
withdrawn by the appellant on the ground that  they proposed to prefer an
application in terms of Section 127MA of  the Act before the Settlement
Commission, constituted under the Act  and have their case settled under Chapter
XIVA of the Act. The  appeal was permitted to be withdrawn. The appellant,
thereafter, on  17th October, 2000, filed an application under Section 127B of
the Act  with the Settlement Commission, disclosing and admitting a duty
liability of Rs.20,98,786/-.



4. On receiving the application, the Settlement Commission called  for the
statutory report from the Jurisdictional Commissioner in terms  of Section 127C
of the Act. In his report, it was submitted by the  Commissioner that out of 18
consignments, in respect of 10 imports,  the appellant had imported spare parts
of Caterpillars and while  clearing the cargo, they submitted transhipment
permit/shipping bills  to the Customs Authorities declaring the cargo as `ship
spares' meant   3

 for repairs of ocean going vessels. However, in the course of  investigation,
documents, viz., sales bills, account registers, etc.  retrieved from the
appellant, revealed the sale of these goods to one  M/s Mehta Earthmovers. In
fact, diversion of these goods was  admitted by the appellant during
investigation and they voluntarily  deposited Rs.15 lakhs towards duty liability
against these 10 imports.  As regards the 2nd show cause notice, the stand of
the Commissioner  was that one M/s Elektronik Lab, a partnership firm dealing in
sales  and servicing/maintenance of ship spares and navigation equipment,  had
placed purchase orders on the appellant for import of spare parts  to be fitted
on ocean going vessels, as they were not registered with  the Director General
of Shipping as a ship repair unit and were not  eligible for duty free imports
under the aforementioned Notification.  The appellant imported the spare parts
and sold the same to M/s  Elektronik Lab; in contravention of the exemption
notification.

5. Taking into consideration the report of the Commissioner and  the case
records, the Settlement Commission, vide order dated 8th  February, 2001,
allowed the application of the appellant to be  proceeded with under sub-Section
(1) of Section 127C of the Act.     4

 The amount of additional duty determined to be payable under sub-  Section (3)
of said Section was duly paid by the appellant.

6. At the next hearing before the Settlement Commission, it was  asserted on
behalf of the appellant that they had fulfilled all the  conditions as
stipulated in Notification No.211/83 dated 23rd July,  1983 and that no spare
parts, so imported, were sold by them to M/s  Elektronik Lab. The stand of the
appellant was that they had installed  the imported equipment on the ocean going
vessels with the  assistance of M/s Elektronik Lab, who were the authorised
agents of  the foreign supplier, M/s Kelvin Hughes, in India from whom the
appellant had imported the goods. It was argued that the said  Notification did
not prohibit an importer from taking assistance of a  third party in the repair
of the ships. It was reiterated that all the "ship  spares" imported
by the appellant were fitted in the ocean going  vessels directly by them with
the assistance of M/s Elektronik Lab  and, therefore, all the conditions,
stipulated in the Notification, were  fulfilled. Apparently, the Settlement
Commission was not convinced  with the explanation offered by the appellant. On
the contrary, the  Settlement Commission felt that the appellant had
transferred/sold  the imported goods to M/s Elektronik Lab; as pleaded by the  5

 Commissioner. Accordingly, vide order dated 24th September, 2001,  the
Settlement Commission directed the Commissioner to submit his  final report
along with the relevant material to establish that the goods  imported by the
appellant were actually sold to M/s Elektronik Lab.

7. In his final report dated 27th September, 2001, the  Commissioner submitted
that the appellant had imported navigational  equipments, such as, Radar System,
SART, NATEX and EPIRB in  pursuance of the Purchase Orders placed by M/s
Elektronik Lab on  them; delivered the cargo on board the ships of M/s Dredging
Corporation, M/s Chowgule Steamships Ltd. and M/s Essar Coastal  Ltd. and the
purchaser, M/s Elektronik Lab, subsequently carried out  installation of the
said equipments on board the ships owned by the  above three shipping companies.
The stand of the Commissioner  was that since M/s Elektronik Lab, who had
purchased the imported  spare parts from the appellant for the purpose of
fitting on board the  ships of the said three shipping companies, was not
registered with  the Director General of Shipping, they were not eligible to
claim  benefit of exemption Notification, and, therefore, they routed the
imports through the appellant and further, since the "spare parts"
imported for carrying out repairs of the ships were not actually used  6

 by the appellant and had been sold to M/s Elektronik Lab; prior to its  usage
on ships, the appellant was also not entitled to the benefit of  duty exemption
under the said Notification. It was also pointed out  that the rates of the
spare parts charged by M/s Elektronik Lab to the  ship owners for the same items
were higher than those charged by  the appellant from them, which undisputedly
showed the value  addition.



8. Upon consideration of the information furnished by the  Commissioner,
particularly the fact that the appellant had given  details of the
"consignee" as the ship owners, without disclosing the  sale of
imported "spare parts" to M/s Elektronik Lab, the Settlement
Commission was satisfied that there was suppression of facts on the  part of the
appellant so as to avail of the benefit of duty exemption  fraudulently.
According to the Settlement Commission, the sale of  ship spares/navigational
equipments by the appellant to M/s  Elektronik Lab was an independent
transaction, distinct from the  subsequent sale by the latter to the ship
owners, which was in the  nature of home consumption. Finally, concluding that
the Revenue  had been able to produce documentary evidence showing sale of
imported "spare parts" by the appellant to M/s Elektronik Lab, who in
7

 turn sold the same items to ship owners, the appellant could not claim  any
benefit under exemption Notification No.211/83, the Settlement  Commission
sustained the demand of duty of Rs.47,79,320/- in  respect of 8 consignments
sold by the appellant to M/s Elektronik  Lab. The Settlement Commission, thus,
confirmed the additional  customs duty of Rs.68,78,106/- demanded from the
appellant under  the order of adjudication by the Commissioner. Inter alia,
observing  that though the appellant had not made a full and true disclosure of
their duty liability but had cooperated with the Settlement  Commission, the
Settlement Commission waived penalty in excess of  Rs.18 lakhs and granted total
immunity to the appellant from  prosecution. The Settlement Commission also held
that since the  case of the appellant pertained to a period prior to April,
1995, when  Section 28AB of the Act was inserted by the Finance Act, 1996,
interest on delayed payment of duty could not be levied on the  appellant.



9. Being dissatisfied with the order passed by the Settlement  Commission, the
appellant took the matter to the High Court by  preferring the aforementioned
writ petition. Before the High Court, an  application was moved by the appellant
for amendment of the writ  8

 petition, seeking to urge an additional ground to the effect that some  of the
consignments of "spare parts" having been imported under the
procedure to be followed for "Transhipment" or for "warehoused
goods for exportation", no customs duty was payable by virtue of the
provisions contained in Sections 54 and 69 of the Act. Although, the  amendment
was allowed by the High Court in order to examine  whether the initial stand,
based on the exemption notification, could  go hand in hand with the case now
sought to be pleaded in the  amended petition, but, ultimately, the High Court
did not permit the  appellant to urge the additional ground relating to the
applicability of  Sections 54 and 69 of the Act. The High Court was of the view
that  since the ground now sought to be raised was in fact contradictory to  the
earlier stand, at this belated stage, a fresh ground could not be  entertained.
As stated above, the High Court has dismissed the writ  petition. Aggrieved by
the said decision, the appellant is before us in  this appeal.



10. Assailing the decisions of the Settlement Commission as also  of the High
Court, Mr. S.K. Bagaria, learned senior counsel appearing  on behalf of the
appellant, strenuously urged that the High Court  committed a serious illegality
in declining to entertain the additional  9

 ground regarding applicability of Sections 54 and 69 of the Act in  respect of
8 consignments in question, particularly when the point  raised was a pure
question of law going to the root of the matter and  did not involve any
investigation of facts. In support of the contention  that a pure question of
law can be raised for the first time even before  this Court, reliance was
placed on the decisions of this Court in  Tarini Kamal Pandit & Ors. Vs.
Prafulla Kumar Chatterjee (Dead)  by Legal Representatives1, Ajaib Singh Vs.
State of Punjab2,  Municipal Corporation of the City of Jabalpur Vs. State of
Madhya Pradesh & Anr.3, Collector of Central Excise,  Ahmedabad Vs. Pioma
Industries and Imperial Soda Factory4.  Relying on Jyotendrasinhji Vs. S.I.
Tripathi & Ors.5 and Paul  Industries (India) Vs. Union of India &
Ors.6, it was contended that  the finality clause contained in Section 127J of
the Act did not bar the  jurisdiction of the High Court under Article 226 of the
Constitution to  interfere with the order passed by the Settlement Commission
when it  was contrary to the provisions of the Act. It was urged that instead of
outrightly declining to go into the merits of the additional ground 1

    (1979) 3 SCC 280

2

  (2000) 4 SCC 510

3

  (1963) 2 SCR 135

4

  (1997) 10 SCC 400

5

  1993 Supp (3) SCC 389

6

  (2004) 13 SCC 340

 10

 raised, at best, the High Court could have given an opportunity to the  Revenue
to meet the stand of the appellant. It was also contended  that the expression
"clearance of the goods for home consumption"  under Section 47 of the
Act has a definite connotation and meaning  under the Act and the imported goods
can be cleared for home  consumption only when a bill of entry for home
consumption is filed; it  is assessed; duties assessed are paid and an order is
passed by the  proper officer for clearance of the goods for home consumption,
which is not the case here, as no bill of entry for home consumption  was filed.
Learned counsel was at pains to explain that the said  consignments were
correctly released for transhipment and re-export  and the conditions as
stipulated in Sections 54 and 69 of the Act  having been complied with, no
customs duty was leviable on the said  8 consignments. It was, thus, pleaded
that the matter deserved to be  remitted back to the High Court for
reconsideration on merits.

11. Mr. H.P. Rawal, learned Additional Solicitor General, appearing  on behalf
of the Revenue, on the other hand, supporting the decision  of the Settlement
Commission as also of the High Court strenuously  urged that having specifically
pleaded before the Commissioner of  Customs in adjudication proceedings and also
in the application   11

 before the Settlement Commission that there was no sale of the  imported
equipment to M/s Elektronik Lab and that they were brought  into the picture for
the purpose of installation and regular  maintenance of the said equipment and,
therefore, there was no  impediment in their availing of benefit under the
Exemption  Notification, the subsequent change in their stance that even sale of
these parts to M/s Elektronik Lab for the purpose of installation on  ocean
going vessels was not prohibited under the said Notification or  that 8
consignments were otherwise exempt from payment of  customs duty under Sections
54 and 69 of the Act, clearly shows that  even before the Settlement Commission,
the appellant had not made  a full and true disclosure of the duty liability
under the Act. It was  argued that the Settlement Commission having itself
recorded a  finding that the appellant had not made a full and true disclosure
of  their duty liability, their application ought to have been rejected by the
Settlement Commission on this ground alone. Referring to the  invoices raised by
the appellant on M/s Elektronik Lab, learned  counsel submitted that the
documents on record clearly establish that  the transactions between the
appellant and M/s Elektronik Lab were  purely trading transactions, which not
only show the untruthfulness of   12

 the appellant's initial stance but also prove the violation of the order
passed in favour of the appellant permitting re-export of the  consignments in
question. As regards the plea of the appellant that  these consignments were not
exigible to any duty in terms of  Sections 54 and 69 of the Act, learned counsel
submitted that apart  from the fact that it involved determination of disputed
questions of  fact, an application under Section 127B of the Act for
determination of  question whether an item is dutiable or not, was not
maintainable  before the Settlement Commission. In support of the proposition,
learned counsel relied on the decision of the Delhi High Court in  Commissioner
of C. Ex., Visakhapatnam Vs. True Woods Pvt.  Ltd.7 Relying heavily on the
decision of this Court in Union of India  Vs. Anil Chanana8 and a decision of
the Bombay High Court in C.I.T.  Mumbai City XIV, Mumbai Vs. The Income Tax
Settlement  Commission, Mumbai & Ors.9, wherein while explaining the concept
of compounding in terms of Rule 6 of the Customs (Compounding of  Offences)
Rules, 2005, which confers power on the compounding  authority to grant immunity
from prosecution to a person who has  made full and true disclosure of facts
relating to the case and has 7

  2006 (199) E.L.T. 388 (Delhi)

8

  2008 (222) E.L.T. 481 (S.C.)

9

  2000 (246) ITR 63 (Bom)

 13

 cooperated in the proceedings before him, it was held that  applications for
compounding ought to be disallowed if there are  demonstrable contradictions or
inconsistencies or incompleteness in  the case of the applicant, learned counsel
asserted that in the light  of the facts found by the Settlement Commission and
affirmed by the  High Court, the appellant does not deserve any further relief.

12. Before adverting to the merits of the issues raised on behalf of  the
parties, it would be appropriate to briefly notice the scheme of  Chapter XIVA
of the Act. The said Chapter was inserted in the Act by  the Finance Act, 1998
(Act 21 of 1998) with effect from 1st August,  1998, for setting up of Customs
and Central Excise Settlement  Commission on lines of similar Commission already
functioning under  the Income Tax Act, 1961 since its incarnation on the
recommendation of Justice Wanchoo Committee. The proceedings  under the Chapter
commence by an application being made under  Section 127B, relevant part whereof
reads thus:   "127B. Application for settlement of cases.- (1) Any
importer, exporter or any other person (hereinafter in this Chapter referred to
as the applicant) may, at any stage of a case relating to him, make an
application in such form and in such manner as may be specified by rules, and
containing a full and true disclosure of his duty liability   14

       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 or otherwise of goods, to the
Settlement Commission to have the case settled and such application shall be
disposed of in the manner hereinafter provided:........."



13. It is manifest from a bare reading of the provision that in the  application
filed under Section 127B, an applicant is required to make  a full and true
disclosure of his duty liability, which he had failed to  disclose before the
proper officer. He is also required to exhaustively  explain to the Settlement
Commission the manner in which such  liability has been incurred; the additional
amount of customs duty  accepted to be payable by him as also the price of such
dutiable  goods in respect of which he admits short levy on account of
misclassification or otherwise of goods. In other words, the applicant  is
supposed to make a clean breast of his affairs in regard to short  levy or non
payment of customs duty admitted to be payable by him.

14. Section 127C of the Act prescribes the procedure to be  followed by the
Settlement Commission on receipt of an application  under Section 127B of the
Act. The section mandates that on receipt  15

 of an application under Section 127B, the Settlement Commission  shall call for
a report from the Commissioner of Customs having  jurisdiction and on the basis
of the materials contained in such report  and having regard to the nature and
circumstances of the case or the  complexity of the investigation involved
therein, the Settlement  Commission may allow the application to be proceeded
with or reject  the application.



15. Section 127E empowers the Settlement Commission to reopen  the completed
proceedings in appropriate cases, while Section 127F  confers all the powers
upon the Settlement Commission, which are  vested in an officer of the Customs
under the Act. Section 127H  empowers the Settlement Commission to grant
immunity from penalty  and prosecution, with or without conditions, in cases
where it is  satisfied that the assessee has made a full and true disclosure of
his  duty liability. Under Section 127-I, the Settlement Commission can  send
back the matter to the proper officer where it finds that the  applicant is not
cooperating with it. Section 127J declares that every  order of settlement
passed under sub-Section (7) of Section 127C  shall be conclusive as to the
matters stated therein and no matter  covered by such order shall, save as
otherwise provided in Chapter  16

 XIVA, be reopened in any proceeding under the Act or under any  other law for
the time being in force.



16. To appreciate the rival submissions in this behalf, it would be  appropriate
at this juncture to refer to Exemption Notification  No.211/83 dated 23rd July,
1983. In so far as it is relevant for this  appeal, the Notification reads as
follows:

 "Exemption to capital goods, raw materials and consumables for repairs of
ocean-going vessels - In exercise of the powers conferred by sub-Section (1) of
Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being
satisfied that it is necessary in the public interest so to do, hereby exempts
capital goods, components, raw materials and consumables, when imported into
India for repairs of Ocean-going vessels by the ship repair unit registered with
the Director General of Shipping, Government of India, from the whole of the
duty of customs leviable thereon under the First Schedule to the Customs Tariff
Act, 1975 (51 of 1975), and from the whole of the additional duty leviable
thereon under Section 3 of the said Customs Tariff Act, subject to the following
conditions, namely:-

      (1) the importer shall maintain a proper account of import, use and
consumption of the capital goods, components, raw materials and

            consumables imported into India for the

            aforesaid purpose and shall submit such

            account periodically to the Collector of

            Customs in such form and in such manner as

            may be specified by the said Collector;

   17

       (2) the importer, by the execution of a bond in such form and for such
sum as may be

            specified by the Collector of Customs, binds

            himself to pay on demand an amount equal to

            the duty leviable:-

            (a) on goods which are capital goods, as

                  are not proved to the satisfaction of the

                  Collector of Customs to have been

                  installed or otherwise used for the

                  aforesaid purpose:

            (b) on goods which are components, raw

                  material and consumables, as are not

                  proved to the satisfaction of the

                  Collector of Customs to have been used

                  or consumed for the aforesaid purpose;

                  within a period of three months from the

                  date of importation thereof or within

                  such extended period as the Collector of

                  Customs, on being satisfied that there is

                  sufficient cause for not installing, using

                  or consuming them, as the case may

                  be, for the aforesaid purpose within the

                  said period, allow.

                  ..................................................
.................................................."

17. It is clear from the language of the Notification that in order to  avail of
the benefit of exemption from whole of the duty of customs  leviable under the
Customs Tariff Act, 1975, twin conditions, viz., (1)  capital goods, components,
etc. are required for repairs of ocean  going vessels, and (2) the ship repair
unit should be registered with  the Director General of Shipping, Government of
India, are to be   18

 fulfilled. Both the conditions are cumulative and admit of no  exception. Being
the foundation for availing the benefits under the  notification, both the
conditions have to be strictly complied with.  Besides, under the Notification,
an importer is also required to  maintain a proper account of import, use and
consumption of the  capital goods, components, etc. imported for the aforesaid
purpose in  a prescribed form and failure to satisfy the Collector about their
installation or consumption for the said purpose makes the importer  liable to
pay an amount equal to the duty payable on such goods. It  is a settled position
in law that Exemption Notifications have to be  strictly construed. A person
claiming the benefit of exemption  notification, must show that he satisfies the
eligibility criteria. (See:  Kartar Rolling Mills Vs. Commissioner of Central
Excise, New  Delhi10, Eagle Flask Industries Ltd. Vs. Commissioner of Central
Excise, Pune11 and Msco. Pvt. Ltd. Vs. Union of India and Ors.12 )

18. With this background, we may now advert to the facts at hand  to examine if
the findings recorded by the Settlement Commission  and the view taken by the
High court in the judgment in appeal,   10

   (2006) 4 SCC 772

11

   2004 (171) E.L.T. 296 (S.C.)

12

   1985 (19) E.L.T. 15

 19

 holding that the appellant could not be permitted to urge additional  ground
was justified or hit by the contentions to the contrary raised on  behalf of the
appellant.



19. In so far as the first issue is concerned, we feel that it would be
expedient to extract the stand of the appellant before the Settlement
Commission, which is as follows:

 "During the hearing the learned Advocate of the applicant gave his written
submission. He argued that the applicant has fulfilled the conditions of
Notification No.211/83. All the end use bonds have been finalised. The
Commission asked the applicant whether he has sold the material to M/s
Elektronik Lab. The applicant submitted that he has not sold the goods to M/s
Elektronik Lab. He is the importer and he installed the equipment on the vessel
with the assistance of M/s Elektronik Lab. M/s Elektronik Lab is the authorised
agent in India of the foreign supplier M/s Kelvin Hughes from whom the applicant
imported the goods. He argued that the Notification does not say that the
imported cannot get the assistance from a third party. The Commission asked him
about his argument on the statement of Shri K.D. Motta, Manager of M/s Sanghvi
Reconditioners that the signature of representatives of M/s Shipping Corpn. of
India were forged by him. The applicant submitted that he is admitting it and he
is guilty of that. The Commission further asked him on not admitting the duty of
Rs.47,79,320/-. The applicant submitted that the ship spares were imported and
fitted in the ocean going vessels directly by him with the assistance of M/s
Elektronik Lab. and, therefore, he fulfilled the conditions of Notification
No.211/83. The Commission drew his attention to some of the invoices issued by
M/s Sanghvi Reconditioners to M/s Elektronik   20

       Lab which showed that the goods were cleared from Customs and delivered
to M/s Elektronik Lab. If it is so, it appears that the applicant has
transferred/sold the goods to M/s Elektronik Lab. To this query of the
Commission, the applicant submitted that it is only a language mistake and all
the bills do not show this and these invoices are issued only for collecting the
money."



20. It is evident from the afore-extracted paragraph that the  unequivocal stand
of the appellant was that the material imported by  them was installed/used for
repairs of ocean going vessels directly by  them with the assistance of M/s
Elektronik Lab, an authorised agent  in India of the foreign supplier from whom
the appellant had imported  the goods. It was pleaded that the Exemption
Notification did not bar  the importer getting assistance from a third party for
installation of the  equipment on the vessels. The appellant stood its ground
even when  they were confronted by the Settlement Commission with some
invoices, showing that the goods imported were got cleared from  Customs and
delivered to M/s Elektronik Lab. When the Settlement  Commission asked the
Revenue to submit further report to establish  their case that the goods
imported by the appellant were actually sold  by them to M/s Elektronik Lab, the
Revenue produced sale invoices  and delivery challans, showing sale of imported
cargo by the  appellant to M/s Elektronik Lab, who in turn, sold these goods to
the   21

 ship owners for which necessary documents, such as, bills were  raised. Taking
into consideration the documents on record and the  sale pattern of the goods
and not the value addition, the Settlement  Commission came to the conclusion
that in the first instance, the  goods in question were sold by the appellant to
M/s Elektronik Lab  and then by the latter to the ship owners under the cover of
their own  sales invoices and, therefore, the appellant was not entitled to duty
exemption under the said Notification. Similarly, M/s Elektronik Lab  were also
not eligible for duty exemption under the said Notification  because they were
not registered with the Director General of  Shipping, Government of India, as
required under the Exemption  Notification. As stated above, before the High
Court an unsuccessful  attempt was made to lay more emphasis on exemption from
payment  of customs duty on eight consignments in terms of Sections 54 and  69
of the Act and not under the Exemption Notification No.211/83-  CUS dated 23rd
July, 1983. Thus, there was a shift in the stand of the  appellant before the
High Court when sale of the imported  components by them to a third party stood
proved on the basis of  overwhelming documentary evidence on record,
disentitling them to  the benefit of the exemption notification. In the final
analysis, the High   22

 court came to the conclusion, and in our opinion correctly, that in the  light
of the material available on record, the order of the Settlement  Commission did
not suffer from any error warranting its interference.

21. In so far as the second issue with regard to the applicability of  Sections
54 and 69 of the Act is concerned, in our view, it was too  late in the day for
the appellant to raise such a plea. In the first  instance, if the appellant
felt that these 8 consignments were  intended for transhipment and were cleared
from the warehouse for  exportation and, therefore, no import duty was payable,
there was no  occasion for them to withdraw their appeal before the Tribunal and
prefer an application before the Settlement Commission, more so  when in respect
of the remaining consignment, they had accepted  and paid the customs duty. We
feel that when according to the  appellant, no customs duty was payable in
respect of the 8  consignments, then on the plain language of Section 127B of
the Act,  appellant's application before the Settlement Commission was not
maintainable. In our view, an application under Section 127B of the  Act would
be maintainable only if it discloses duty liability, which had  not been
disclosed to the proper officer. Obviously, a disclosure  contemplated by the
said Section is in the nature of voluntary   23

 disclosure of the concealed additional customs duty. Secondly,  indubitably,
such a plea was neither raised before the adjudicating  authority in response to
the show cause notices issued to the  appellant nor before the Tribunal as also
before the Settlement  Commission. Even before the High Court, in the original
writ petition,  such a plea was not raised and it was only by way of an
amendment  application, that an additional ground was sought to be raised.
Though it is true that there is no bar in the High court and for that  matter
this Court entertaining an additional ground, involving a pure  question of law,
but on facts at hand, in the light of the findings of the  Settlement
Commission, based on documentary evidence that the  goods in question imported
by the appellant were actually sold by  them to M/s Elektronik Lab, before these
were used for repair of  ocean going ships, it cannot be held that the
additional ground did not  involve any investigation into facts. Documents on
record show that  the bills of transhipment as also bills of export were filed
by the  appellant before the proper officer after the property in the said goods
had passed to M/s Elektronik Lab. It is clear that since M/s Elektronik  Lab.
was not registered with the Director General of Shipping, they  were not
eligible to avail of duty exemption under the said notification,   24

 they entered into an arrangement with the appellant, a registered ship
repairing unit, to import the goods for repair of ocean going vessels  without
payment of import duty under the Exemption Notification.  Thus, the sole object
of the transactions was to avail of duty  exemption under the said notification.
Additionally, in order to claim  the benefit of the Exemption Notification, the
components,  consumables etc. had to be used by the importer himself for repair
of  the vessels and not through someone else, who incidentally was not  even
named in the shipping bills. Moreover, proper accounts of  imports, use and
consumption of such goods was to be maintained  by the importer, and in the
event of failure to render the account for  such consumption, the importer was
liable to pay the customs duty as  may be demanded by the Commissioner of
Customs. However, once  the imported goods were sold to a third party, the
appellant was  incapacitated from maintaining and rendering the account to the
Commissioner in terms of the notification. All these factors go to  show that
the additional ground sought to be raised before the High  Court was not only an
after thought, adjudication thereon did involve  investigation into facts and,
therefore, the decision of the High court  in not entertaining the additional
ground did not suffer from any   25

 infirmity.



22. We also find substance in the contention of learned counsel for  the Revenue
that having observed that the appellant had not made a  full and true
disclosure, their application should have been rejected  by the Settlement
Commission on that count itself and no relief  should have been granted to the
appellant. However, in view of the  fact that order dated 8th February, 2001
passed by the Settlement  Commission allowing the application of the appellant
to be proceeded  was not challenged by the Commissioner nor such a plea was
urged  by the Revenue before the High Court or in their reply to the present
appeal, we find it difficult to reject the application at this stage,  though,
having perused some of the documents available on record,  we are convinced that
the appellant had not made a full and true  disclosure of its affairs before the
Settlement Commission. Be that as  it may, we are of the opinion that having
opted to get their customs  duty liability settled by the Settlement Commission,
under Chapter  XIVA of the Act, the appellant cannot be permitted to dissect the
Settlement Commission's order with a view to accept what is  favourable to them
and reject what is not. As observed by Krishna     26

 Iyer, J. in CIT Vs. B.N. Bhattacharjee13, the recommendation of  Wanchoo
Committee was a compromise measure of a statutory  settlement machinery, where a
big evader could make a disclosure,  disgorge what the Commission fixes and thus
buy quittance for  himself and accelerate recovery of taxes in arrears by the
State,  although less than what may be fixed after long protracted litigation
and recovery proceedings. It is manifest from the procedure laid  down in
Section 127C of the Act that interim order under sub-Section  (1) of Section
127C as also the final order under sub-Section (7) of  the said Section are to
be made by the Settlement Commission after  examination of the reports of the
Commissioner of Customs or its  Commissioner (Investigation). Obviously, these
reports are  submitted on the disclosures made in the application under Section
127B of the Act and, therefore, the applicant cannot be permitted to  resile
from his pleadings in the application at any stage of  proceedings before the
Settlement Commission or set up a new case  before the higher Fora.



23. Having considered the rival submissions with reference to the  pleadings,
the provisions of Section 127B of the Act and exemption  13

     (1979) 4 SCC 121

                                                                           27

 notification No.211/83 dated 23rd July, 1983, we are of the opinion  that the
order of the Settlement Commission did not suffer from any  error, legal or
factual, and, therefore, the High Court was fully justified  in dismissing the
writ petition.



24. In view of the foregoing discussion, we see no merit in this  appeal. The
appeal is dismissed accordingly with costs, quantified at  Rs.50,000/-.

   ........................................J.

                                           (D.K. JAIN)

  ........................................J.

                                          (T.S. THAKUR)

NEW DELHI;

FEBRUARY 5, 2010

   28